海角大神

Brazil鈥檚 President Dilma Rousseff can鈥檛 seem to make anyone happy as she oversees the development of the nation鈥檚 massive oil fields.

While violent protesters decried this week鈥檚 auction of the Libra oil field to a consortium led by state-owned oil giant Petrobras with several Western European and Asian minority partners, energy analysts also criticized President Rousseff鈥檚 government for exerting a strong hand in the bidding process.聽Brazil demanded聽hefty upfront payments while retaining all development control and claiming the lion鈥檚 share of profits.

Now Rousseff, who is up for reelection next year, has a choice to make between the short-term economic benefits of opening up future fields to faster development聽and the potential political fallout from selling natural resources to foreign investors, says Christopher Garman, Latin America director for Washington-based political-risk research firm Eurasia Group.聽

鈥淎t the end of the day, this is one of the most important decisions for the next administration,鈥� Mr. Garman says. 鈥淒o you want to develop it quickly or slower? That鈥檚 what it boils down to.鈥�

For Brazil鈥檚 stuttering economy, maintaining the current pace of oil development could prevent the nation from becoming a net oil exporter in coming years. Continued reluctance to open up the nation's underwater reserves to foreign developers could also stall billions of dollars in oil revenue from being pumped back into much-needed infrastructure projects and social spending.聽

鈥淭he concern is, do you want to tie your boat to Petrobras?鈥澛�

If the government maintains Petrobras as lead developer on all oil fields, the already strained state-owned firm is likely to move slower and slower, falling short of oil production targets and delivery of the Libra field's estimated $1 trillion聽in public revenue. But if the government reduces the role of Petrobras in a bid to speed up development, public anger over the sale of natural resources could boil over in a repeat of recent violent grassroots demonstrations.聽

One bidder

The deepwater Libra oil prospect in the Santos Basin about 180聽miles off the coast of Rio de Janeiro is billed as one of the biggest oil discoveries this century, containing an estimated 8 billion to 12 billion barrels of oil. After discovery in 2007, the basin seemed certain to enrich Brazil and any industry partners who might help develop the presalt fields, so-called because they sit more than a mile below the ocean and under another 2.5 miles of earth and salt.聽

In the end, only one bidder showed up to the Oct. 21 auction. Offering the minimum amount of oil profits after production costs to the government permitted under the auction rules聽(41.65 percent), the winning consortium comprised Brazil鈥檚 Petrobras (40 percent), the Netherlands鈥� Royal Dutch Shell (20 percent), France鈥檚 Total (20聽percent), and China鈥檚 CNOOC (10聽percent) and CNPC (10聽percent).聽

The government mandated that Petrobras, which is majority-owned by the government and chaired by Finance Minister Guido Mantega, have at least a 30 percent ownership and full development rights. Royal Dutch Shell, Total, and the Chinese firms will sit on a committee overseeing the development of the field, but only Petrobras equipment and engineers will be used. About half of all supplies and equipment must be sourced locally from Brazil.

The requirement is on the surface good for Brazilian industry given the slowing economy, but arguably聽unfeasible聽for the local workforce. Analysts agree that聽development of the Libra field will leave Petrobras stretched thin, which will force the government to either take a time-out on bidding rounds for other fields while the firm ramps up capacity, or relinquish control to allow foreign investors who have the knowledge and manpower to more quickly develop the oil prospect.聽

鈥淧etrobras鈥檚 technological knowhow is as high as anyone in the industry,鈥� says Garman. 鈥淏ut the ministry has 13 additional areas that could be put up for building, and the current model is a decision to tie the development of the field to the financial constraints of one company.鈥�

Auction demonstration

As the auction took place inside a luxury beachside hotel in Rio de Janeiro, hundreds of demonstrators and union members clashed聽outside聽with paramilitary police. A former director of gas and energy at Petrobras filed a lawsuit seeking to block the sale due to what he saw as Brazil giving up its聽sovereignty聽over natural resources. Meanwhile, the oil workers' trade union said it rejected the auction, which comes amid their nationwide strike over requests for a 12 percent wage increase.聽

Bob Fryklund, a vice president at energy consulting firm IHS CERA and the head of global exploration and production analysis, says the Libra auction, while anticlimactic, was a success in attracting two major international oil companies that accepted the government鈥檚 demand for 80 percent of all proceeds from oil.聽鈥淭hey have a strong team working on this,鈥� Mr. Fryklund says.聽

But the absence of many potential bidders, including any US firm, has heightened concerns over the high costs and risks associated with developing the presalt fields, considered among the toughest areas to drill because of the extreme underwater pressures and brittle salt beds. The winning consortium is expected to spend an estimated $200 billion over the 35-year concession.聽In addition, Brazil required the winning bidder to make a $7 billion upfront payment to the treasury and set the bidding process so that between taxes and the government's production sharing split, Brazil would receive a minimum of 80 percent of proceeds from the oil.

While some have criticized the government鈥檚 share as too high, Fryklund says this isn't unique. The Iraqi government keeps in excess of 90 percent of proceeds 鈥� as a percentage of revenue per barrel 鈥� from its fields.