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Petrobras to exercise preferential pre-salt rights

Petrobras has said it will exercise its preferential right to take a minimum 30% stake in three pre-salt areas being auctioned this year.

A change last year means the company is no longer legally obliged to operate all new pre-salt contracts under the production-sharing agreement (PSA) regime with a minimum 30% stake. But a decree that came into effect on May 2 gave the company preferential rights over any pre-salt blocks it wanted. The decree was criticised at the time as anti-competitive by the Brazilian Oil Institute.

In the second pre-salt PSA round, which will offer blocks next to already-licensed fields, Petrobras has opted for the area next to the Sapinhoa field. In the third round, it will take shares in the Peroba and Alto do Cabo Frio Central areas.

“Petrobras decided to exercise its preferential right … with a minimum percentage of 30% in each area, focusing on maximising the value of its portfolio,” the company said in a statement. If the blocks go at minimum prices, Petrobras will pay 810 million reals (US$247 million) in bonus fees but said it had the money available despite having heavily reduced its spending plans since it was hit by a graft scandal.

“New planning priorities were established to provide funds to acquire these new exploratory areas, without affecting the metrics in the period covering the 2017-21 Business and Management Plan,” the company said.
The consensus is that the company has made the right move.

“They are good choices,” said Adriano Pires, founder of the Brazilian Infrastructure Centre consulting outfit in Rio de Janeiro. “It is saying to the market that it will concentrate its investments on the pre-salt. And despite financial problems it will not deny long-term strategic investments.”

Pires noted that Petrobras would now be obliged to operate these fields, and that its presence would likely reduce competition during the bid round as other companies will seek to enter its consortium rather than competing against it. This could reduce bonus fees bringing valuable income to the Brazilian government as it struggles to restore fiscal credibility.

“The tendency is that you won’t have competition, everyone will want to be in Petrobras consortium. The national treasury loses,” he said. But he added that “the company has to think about its long term survival.”