Home Business Brazil aims to auction transfer-of-rights oil areas in second half – minister

Brazil aims to auction transfer-of-rights oil areas in second half – minister

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The choice reserves, located in the offshore Santos basin, are part of the “transfer-of-rights” area that the government passed to Petrobras at a price that is still in dispute. Since 2014, negotiations to resolve the dispute have been contentious, with both parties claiming to be owed billions of dollars.

Brazil’s government aims to hold an oil and gas auction in the second half of this year for areas left over after it settles a disputed contract with state-controlled oil firm Petroleo Brasileiro SA , according to a senior official.

The choice reserves, located in the offshore Santos basin, are part of the “transfer-of-rights” area that the government passed to Petrobras at a price that is still in dispute. Since 2014, negotiations to resolve the dispute have been contentious, with both parties claiming to be owed billions of dollars.

A resolution is finally in sight, Mining and Energy Minister Fernando Coelho Filho said at an event last week, adding that the government could reach a deal within 40 days to pay Petrobras.

Asked about his comments, Isabela Rocha, head of investor relations at Petrobras, said on Thursday that a deal was possible in that time frame. Petrobras declined to elaborate on the progress of talks.

Resolving the spat would let the cash-strapped government, which is expected to be ousted in October elections, raise extra revenue to close a huge budget gap by selling the rights to billions of barrels of oil.

Authorities previously harbored concerns that election laws would bar them from holding an auction after June, when Brazil’s campaign season officially begins. However, Oil Secretary Marcio Felix said a more recent legal analysis show it was acceptable to hold an auction as voters head to the polls.

The prior legal assessment “was a more conservative analysis, to be further away (from elections). But there is no problem,” he told Reuters in an interview, adding that there was no more time in the first half of the year for an auction.

The area lies in Brazil’s pre-salt region, where billions of barrels of oil are buried under thousands of feet of salt beneath the ocean floor.

Two oil executives, who requested anonymity to discuss government plans, said an auction in the area would attract bids even bigger than those seen in prior pre-salt rounds because of top-quality geology and lack of risk.

The transfer-of-rights area was granted to Petrobras in 2010 to extract 5 billion barrels of oil and gas for a price based on oil prices then. However, the contract stipulated that costs, among other things, would be reviewed after the area was declared commercially viable in 2014. That has led to years of sparring, as oil prices have fluctuated.