Oil companies cast a vote of confidence in Brazil's emerging oil industry yesterday, buying exploration licences and pledging billions of dollars in investment.
The tender had been billed as a key test of the investment climate under the left-wing government of President Luiz Inacio Lula da Silva. Investors had been concerned about government interventionism and unfavourable tax conditions.
"This round is a good example of the opportunities that exist for oil companies to grow in Brazil," said Mr John Haney, head of Shell Brasil, a unit of the Anglo-Dutch group.
"It is a success for the country and the participating companies."
By noon yesterday, companies had paid over R$650 million (€176 million) for more than 100 exploration licences throughout the country and offshore, albeit many with participation of Petrobras, the state-controlled oil company.
The energy ministry expects the bids to lead to total investment of up to $20 billion (€16.22 billion), though the exploration phase requires far less investment.
"The results exceeded our expectations," added Mr Sebastiao do Rego Barros, general director of the National Petroleum Agency, the industry regulator and host of the event.
Concerns last year that the government wanted to undermine regulatory agencies and intervene more actively in the industry appear to have eased. "The government stripped agencies of some policymaking powers but it also recognised the important role they can and should play," said Mr Paulo Kastrup Netto, a lawyer representing several oil companies.
Some investors say the government has tried to meet their demands in recent months. This year it extended a tax exemption on imported capital goods used in the industry from 2007 to 2020.
"The regulatory framework and tax situation have improved," said Mr Alessandro Novaes, partner in W Washington, one of several smaller, domestic companies that are increasing their participation in the oil industry.
Investors were attracted by oilfields considered to have higher potential than those previously offered. "There is a lot of interesting acreage," said Mr William Schneider, senior vice-president of the international division of Newfield, a Houston-based oil company.
Oil output has more than trebled since the mid 1980s to more than 1.6 million barrels per day and Brazil is expected to become self-sufficient within 2 years. - (Financial Times Service)
