Two of the eleven finalists to participate in Brazil’s controversial auction for its gigantic offshore Libra field have dropped out from making an individual bid, three days before the Oct. 21 bidding day, according to a representative of the Consulate General of Brazil in Houston.
Colombia’s national oil company, Ecopetrol SA, and India’s ONGC Videsh Limited declined to pay the more than $74 million guarantee deposit to the Brazilian government for their place at the table, according to Roberto Ardenghy, head of the consulate’s Trade Promotion Bureau.
While the companies will not compete for an individual share of ownership of Libra, a pre-salt field estimated to contain up to 12 billion barrels of oil, they could participate in a group consortium bid, Ardenghy said.
“This is quite common in bidding rounds,” he said. “When you are interested in having a minority position, why should you put a guarantee up front? It is not economically wise. You don’t need this to participate, if your strategy is just to be a member of a consortium.”
The bid has been controversial in Brazil, and thousands of Petrobras union workers went on strike on Thursday in protest of the participation of international companies, according to the Associated Press.
Ardenghy said that in Brazil, about 90 percent of all oil-related offers are consortiums, which allows several members to share the risk of a project.
The remaining individual participants in the auction include Total, Royal Dutch Shell, Petrobras and several Asian national companies. However, it is likely that the winning bid will be from a consortium of companies, said Geert Aalbers, director of corporate investigations Latin America for Control Risks, a global risk consultancy firm.
The Brazilian government is offering international companies a chance to participate as non-operators in production of the major reservoir, in exchange for a $6 billion plus upfront fee and agreement that Brazil’s national oil company Petrobras will be the operator and 30 percent owner of the project.
Under the terms of the proposed contract, all costs of production would be deducted from oil proceeds, and the remaining profit oil would be split between Petrobras, the winning bid and the Brazilian government.