Date: 2024-12-21 Page is: DBtxt003.php txt00021604
BRAZIL
OFFSHORE OIL
TotalEnergies and Shell Stand Out in Brazilian Oil Auction
Sweetened terms, high crude prices made fields more attractive
Brazil’s famed pre-salt region has driven growth since 2010
OFFSHORE OIL
TotalEnergies and Shell Stand Out in Brazilian Oil Auction
Sweetened terms, high crude prices made fields more attractive
Brazil’s famed pre-salt region has driven growth since 2010
The Carioca floating, production, storage and offloading vessel on its way to the Sepia offshore field.Photographer: Dado Galdieri/Bloomberg
Original article: https://www.bloomberg.com/news/articles/2021-12-17/totalenergies-shell-win-rights-to-brazil-s-offshore-oil-finds
Burgess COMMENTARY
The modern global economy requires a massive amount of energy to support its material consumption. The early industrial revolution was powered by coal. Later the energy came from petroleoum oil and gas. Both these fuels produce emissions that are a critical factor in the accumulation of greenhouse gases (GHGs) in the atmosphere which have been responsible for much of the climate change that the world is experiencing.
This was identified as a problem by scientists almost 50 years ago, but little has been done to change the trajectory of investment by GHG producing industries, including the global energy industry.
The world has an ongoing need for energy, and indeed more and more energy as world population grows, and especially if this population is to have a decent standard of living. In other words, more energy is going to be needed to support more consumption.
If the decision makers in the modern world refuse to change the core activities that support the economy and the society there will be catastrophic failure of the essential environment. Many things need to change but the sad reality is that optimizing for short-term profit pretty much ensures that everything will fail. This is difficult for most people to understand and accept ... but it horrifies me that seemingly intelligent people in power seem to have their brains in neutral and are determined to do nothing to set the stage for a future that works ... especially in the United States of America.
Peter Burgess
Sweetened terms, high crude prices made fields more attractive
Brazil’s famed pre-salt region has driven growth since 2010
By Mariana Durao and Peter Millard
December 17, 2021, 9:37 AM EST ... Updated on December 17, 2021, 4:09 PM EST
European supermajors TotalEnergies SE and Royal Dutch Shell Plc will join Brazil’s state-controlled oil giant at two key fields, marking the latest expansion in Latin America’s largest crude producer and an important victory for President Jair Bolsonaro.
TotalEnergies won stakes in both of the deepwater fields on offer Friday, and Shell was awarded a piece of the Atapu field. Both bids surpassed minimum requirements and market expectations. The French energy titan bid with Malaysia’s Petronas and Qatar Petroleum for the rights to Sepia by offering 37.43% of oil output that’s left over after accounting for extraction costs and taxes. Shell’s partners in the successful Atapu bid were TotalEnergies and Petrobras.
The auction marks a turnaround from just two years ago when international oil explorers shunned the sale, and a second failure would have been an embarrassment for the business-friendly Bolsonaro administration. Sweeter terms and higher oil prices enhanced the appeal of Brazil’s offshore oil trove which includes some of the world’s largest oil discoveries this century.
“I’d like to celebrate this process and the increase in the number of participants,” Economy Minister Paulo Guedes said during a press conference at the event. “More players means more investment and production.”
Petrobras already operates both fields and exercised its rights to a 30% stake in Sepia. Its new partners will have to compensate it for investments made to date and Petrobras won’t increase leverage to pay for the fields, Chief Financial Officer Rodrigo Araujo Alves said.
Petrobras’s partners at Atapu will pay it $3.2 billion by April 15, and the company is negotiating the timing of the Sepia payment, it said in a statement. It will pay a total bonus of 4.2 billion reais ($740 million) to the government in early 2022 for the stakes it acquired Friday.
“Eventually there may be some additional dividend distribution because there will be additional cash inflow in 2022,” Alves said.
Better clarity on what foreign drillers would have to pay Petrobras, as well as more competitive bidding procedures, helped turn the auction into a success relative to the 2019 debacle, Citigroup Inc. said in a note. Sepia and Atapu failed to attract buyers two years ago when Brazil was charging 70% more in signing bonuses.
Petrobras already produces oil in the area, eliminating most exploration risks. The company’s partner in a block that borders on Sepia is Portugal’s Galp Energia SGPS. Galp, Total, and Shell are its partners in a block that borders on Atapu. The pre-salt region has driven Brazil’s growth in recent years.
Crude from the sub-salt layer of rocks off Brazil’s coast has less sulfur than many grades, reducing the amount of pollution involved in converting it into gasoline. TotalEnergies described pre-salt barrels as low-emission reserves in a statement.
“The presence of not one but two European supermajors proves that the pre-salt is a long term investment play that has the necessary and sufficient conditions to continue producing through the energy transition,” said Schreiner Parker, an analyst at Rystad Energy AS.