UPDATE 2-Brazil oil sale attracts limited interest; Exxon, BP, BG pass
RIO DE JANEIRO, Sept 19 (Reuters) - Brazil's planned auction of its biggest-ever oil discovery attracted only a quarter of the interest expected by the government after many of the large, deep-pocketed oil companies with experience in the region declined to sign up for the sale.
With Exxon Mobil Corp., BP Plc, BG Group Plc , Chevron Corp and other investor-owned oil companies choosing to stay away, Asian state-owned companies, such as India's Oil & National Gas Co., Malaysia's Petroliam Nasional, or Petronas,, and China's CNOOC Ltd, dominate the list of 11 companies that agreed to pay the 2.05 million real ($931,818) registration fee.
Magda Chambriard, head of Brazilian petroleum regulator ANP, said on Thursday that she had expected "more than 40" companies to bid for Libra, which holds an estimated 8 billion to 12 billion barrels of oil, enough to supply all world oil demand for three to five months.
"This is a surprise, the area is extremely promising and there are not any opportunities in the world like this," said Paulo Roberto da Costa, an oil industry consultant and former head of refining at Petroleo Brasileiro SA, or Petrobras , Brazil's state-run oil company. "I expected a much larger number because of its potential."
The sale will be Brazil's first under a 2010 production-sharing law that sought to strengthen the Brazilian government's control over giant new offshore oil reserves.
With Brazil also finding it hard to attract private investment to highway, port, rail and airport projects, the lower-than-expected interest could revive criticism that the Workers' Party-led government of Dilma Rousseff is unsympathetic to investors' needs.
Rights to explore for and produce oil from the area will be given to the company or group that offers the largest share of output to Brazil's government for sale on its own account. Petrobras will also have to take a minimum 30 percent stake in any winning group, and the law requires that Petrobras run exploration and production in the area as Libra's operator.
Some suggest the new rules and Petrobras' slower-than-expected development of other giant fields nearby are to blame for the lukewarm interest. Others voiced concerns that the area might not be as promising as billed by the government.
"The fact that companies with important production in the area didn't even sign up for the auction says to me that not everyone is convinced that Libra will live up to its potential," said Wagner Freire, a Rio de Janeiro geologist, oil industry consultant and former head of geophysics at Petrobras.
"Exxon and the others staying out is also a comment on Petrobras," he added. "Strategically I don't think they want the trouble of dealing with Petrobras and the government. You can get good oil assets elsewhere without that."
WARNINGS COME TRUE
When the rules were changed in 2010, many oil industry experts said the production-sharing model would reduce interest in investing in Brazil's "subsalt" province, an area in the Campos and Santos basins where giant new fields were being discovered beneath thousands of meters of water, sub-sea rock and an ancient layer of salt.
After the rules were released for the Libra auction, more than 200 requests for changes were made and turned down by Chambriard, who said the area's size and potential meant that the government could charge almost whatever it wanted for the rights.
"Libra is beyond any possible comparison nowadays to other fields," she said during an August trip to Houston to promote the auction. "If companies participate, it is because they see potential value. This is the biggest auction in 30 to 40 years around the globe."
Brazil's government, which expects to get about $400 billion in royalties and other taxes from Libra over 30 years, sees the new rules, which apply to all new development in the Campos and Santos basins near Rio de Janeiro, as a way to gain more control over natural resources and finance improvements in health care and education. 1/8ID: nE5N0F70FG 3/8
Oil rights in the rest of Brazil will continue to be sold on a concession basis, where oil companies own all the output, but pay a royalty of at least 10 percent on everything produced.
According to an ANP source, the registered bidders include five state-led or state-owned oil companies: Petrobras, India's Oil & National Gas Co., Malaysia's Petronas, Colombia's Ecopetrol SA, China's CNOOC Ltd. and China National Petroleum Co.
A sixth state-owned company, China's Sinopec, will take part through its minority joint ventures with the Brazilian units of Spain's Repsol SA and Portugal's Galp Energia SGPS SA.
Non-state-owned companies are Japanese trading company Mitsui & Co., France's Total SA, and Anglo-Dutch oil company Royal Dutch Shell Plc.
Of the companies that have signed up, only three -- Repsol, Galp and Shell -- have production in areas close to Libra.
The source declined to be named because the list has not been made public yet.