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Brazil Raises Over $2 Billion From Ten Oil Majors In Exploration Rights Auction

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In an encouraging development for Brazil's offshore oil exploration and production (E&P) sector, a bevy of big industry names queued up for the latest rights on offer agreeing to fork up $2.2 billion.

On Thursday (October 10), the country's government confirmed that ten companies had agreed to pay the amount for drilling rights in 12 offshore oil blocks, with the country's pre-salt deposits, i.e. exploration prospects in which billions of barrels of oil are trapped beneath a layer of salt underneath the ocean bed, attracted the most attention.

France's Total lead the way, via a consortium that also has Malaysia's Petronas and Qatar Petroleum as participants, offering $1 billion for one pre-salt block alone. Total was confirmed as the operator of the block with a 40% stake.

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Other big ticket bids included one of $273 million by Petronas, and another of $500 million from a consortium including Brazil's Petrobras and BP. For Petronas, the move marks a significant uptick in regional presence by the Malaysian company having already purchased two oilfields from Petrobras for $1.29 billion in April.

Royal Dutch Shell , Wintershall, Chevron, ExxonMobil and Repsol also bagged minority stakes in several exploration blocks.

Following the auction, Brazil's Mines and Energy Minister Bento Albuquerque described the results as "well above expectations."

The development is likely to please policymakers as further pre-salt blocks will be up for auction via two more rounds scheduled for November 6 and 7, including a "transfer-of-rights" auction, which is forecast to fetch around $25 billion.

However, not all was plain sailing. Seven blocks received no bids after environmental litigation involving them was disclosed overnight, given their proximity to the ecologically sensitive Abrolhos archipelago.

Albuquerque also confirmed that twenty-four exploration blocks in marginal oil producing areas failed to attract a bidder. They will subsequently be placed in a new program the Brazilian government calls "permanent offer."

Overall, few appear to be complaining given the revealed takings from the auction have come at the upper end of most market expectations.

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