Petrobras claims TOR assets, clears $9bn adjustment

Brazil's state-controlled Petrobras exercised its right of first refusal for a minimum 30pc stake in the Buzios and Itapu pre-salt fields, two of four areas to be auctioned on 28 October.

The upcoming bidding round covering acreage in the Santos basin pre-salt cluster known as the Transfer of Rights (TOR) is expected to attract R106.5bn ($27bn) in signing bonuses--potentially the biggest-ever upstream offer.

Petrobras will spend R20.9bn for the 30pc stakes in Buzios and Itapu, but may also increase its interest on the day of bidding. The company said it may also participate in bidding for the Atapu and Sepia blocks on the same terms as other bidders.

Petrobras has already installed four 150,000 b/d production units at Buzios, the biggest area in the TOR region. A fifth unit at Buzios originally planned for 2021 has been pushed back to 2022.

The company plans to add a production platform at Atapu in 2020, one at Sepia in 2021, and another at Itapu in 2023, based on its 2019-23 investment plan.

In 2010, the federal government directly awarded Petrobras 5bn boe in production rights from six Santos basin areas that make up the TOR region. The deal worth R75bn ($42bn at the time of the transaction) allowed Petrobras to raise around R120.25bn through a massive offering of common and preferred shares.

The volume of already-discovered oil and gas reserves to be offered has yet to be defined, but some estimates peg recoverable reserves as high as 15bn bl of oil equivalent (boe).

Yesterday, Petrobras' board approved an addendum to the 2010 contract that includes a reduction in local content requirements and a one-time payment of $9.058bn. The payment corresponds to a drop in oil prices since the 2014 declaration of commerciality for the TOR regions.

Approval is conditioned on the federal government finding a budgetary solution for the payment, an issue that is still being discussed by various agencies, and must occur before the production-sharing auction, Petrobras said.

Based on preliminary planning for the round, Petrobras will also be partially reimbursed by winning bidders for development costs. The company could receive upwards of $20bn from firms entering the coveted TOR area, according to some estimates.

Considered no-risk assets, the TOR auction has attracted interest from big companies that already have a deep pre-salt footprint in Brazil, such as Shell, Norway's Equinor, ExxonMobil and Chinese state-owned CNPC.

Political parties opposed to the auction have launched challenges to the contract revision and planned auction. Government officials remain optimistic the round will come off this year, making it the second pre-salt offer in 2019.