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Brazil to woo big oil by offering 30% of Libra’s profits

By Peter Millard and Laurie Hays, Bloomberg

June 14, 2013 • Reprints

Big Reserves

Petrobras, as the world’s biggest producer in waters deeper than 1,000 feet is known, will operate the project and must compete as a bidder to get more than the 30% it automatically gets by law. Other competitors can form groups or bid individually for the remaining 70% on Oct. 22.

Petrobras fell 0.6% to 18.69 reais at 10:32 a.m. in Sao Paulo. The stock is down 4.4% this year, less than the 17% drop in Brazil’s benchmark index.

“You are actually buying into an actual, real physical asset which does have substantial reserves of oil,” Ruaraidh Montgomery, a senior analyst at oil and gas researcher Wood Mackenzie, said by phone from Houston. “A government take of 70% would be not unreasonable by any means.”

Brazil’s government will determine a signing bonus for the project and the competitors will win by pledging the largest amount of so-called profit barrels to the government.

Individual wells at Libra will pump as much as 30,000 barrels a day, in line with the most productive in Brazil, she said.

The regulator, known as ANP, doubled the reserves estimates at Libra to 8 to 12 billion barrels on May 23 after CGG Veritas, a geophysical services company, conducted a study of the first exploration well. ANP encountered a layer of oil 326 meters deep at the well and did imaging of the surrounding area. The previous estimate was 5 billion barrels.

Angola’s Take

Angola, which also produces in deep waters of the Atlantic, gets about a 70% take from oil projects, said Greg Priddy, an oil analyst at political consulting firm Eurasia Group. While companies in the U.S. Gulf of Mexico pay less than 50%, the prospects are smaller than in Brazil and are sold without previous drilling, he said.

“It’s certainly not a level people are going to be happy with, but its not prohibitive,” Priddy said by phone from Washington. “It’s not something I would see on the face of it as non-competitive.”

www.bloomberg.com

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Related Terms
oil 6597Oil 4707commodities 3439Energies 2981financials 2975Organization of Petroleum-Exporting Countries 1337Brazil 126Chevron Corp. 108oil field 107Petrobras 40oil discovery 36oil projects 28Wood Mackenzie 22Petroleo Brasileiro SA 20China Petrochemical Corp. 18imaging 14Eurasia Group 12energy consulting 7oil regulator 4IHS CERA 3Magda Chambriard 2CGG Veritas 1oil and gas researcher 1so-called profit oil 1oil auctions 1National Petroleum Agency 1Bob Fryklund 1Greg Priddy 1Ruaraidh Montgomery 1

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