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Brazil Auctions Libra Prospect To Petrobras, Shell, Total, CNPC And CNOOC For $7 Billion

|Includes:CEO, PBR, Royal Dutch Shell plc (RDS.A), TOT

Petrobras, the government designated operator along with Majors Shell and Total and Chinese NOCs CNPC and CNOOC have won the Libra pre-salt bidding round. Libra is the biggest new exploration award till date, globally. The Libra Block is located in Santos Basin, ~170 km off the coast of Rio de Janeiro, offshore Brazil. The block covers ~1,550 sq km in water depths of around 2,000m. The estimated recoverable resources of Libra discovery is 8-12 billion Bbl of oil.

Production Sharing Contract highlights:

  • Signature bonus of $7 billion to be paid in a single tranche
  • Subject to oil price and well productivity, 41.65% of profit oil is shared with the Federal Government
  • Tenure of 35 year
  • Exploration phase to last four years
  • Minimum exploratory program: 3D seismic for the whole block, 2 exploratory wells and 1 extended well test
  • Ownership structure: Petrobras (40%, operator), Shell (20%), Total (20%), CNPC (10%) and CNOOC (10%).

The Brazilian oil regulator ANP had permitted all 11 applicants - CNOOC, CNPC, Ecopetrol, Mitsui, ONGC Videsh (OVL), Petrogal, Petrobras, Petronas, Repsol-Sinopec, Shell and Total, to participate in the auction.

According to Bloomberg, the terms of the bid were eased to attract bidders. The auction was rumored to be delayed.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: RDS.A, TOT, CEO, PBR