October 29, 2019 / 11:47 PM / 20 days ago

Repsol Sinopec balks at terms of Brazil's oil mega-auction

RIO DE JANEIRO (Reuters) - Repsol Sinopec Brasil considers the terms of the country’s huge “transfer-of-rights” oil auction next week unattractive, which is a main reason it is not among the 14 firms registered for a chance to bid, the firm’s top Brazil executive said on Tuesday.

Asked on the sidelines of Rio de Janeiro’s Offshore Technology Conference if the round was expensive, Repsol Sinopec Brasil’s CEO Mariano Ferrari said: “We’re not participating, which should give you the answer to that question.”

Fourteen firms are signed up for the chance to bid on the Nov. 6 transfer-of-rights auction, in which the government expects to rake in some 106.5 billion reais ($26.6 billion) in signing bonuses.

The fields represent the closest thing to a sure bet in the world of offshore oil production, as Brazilian state-run oil firm Petroleo Brasileiro SA, or Petrobras, has already done significant exploration work.

As a result, it is already known to hold billions of barrels of untapped crude, reducing so-called exploratory risk. The government is using that certainty to demand hefty signing bonuses and around a quarter of all output, reducing profit margins and turning off some firms.

Repsol Sinopec, a joint venture between Spain’s Repsol SA and China’s Sinopec Group, is set to participate in a separate bidding round on Nov. 7, in which the government expects to collect around $2 billion in signing bonuses.

Earlier in the day, Miguel Pereira, CEO of Galp Energia SGPS SA unit Petrogal, said the terms of the transfer-of-auction were “rather difficult.”

Reporting by Gram Slattery; Editing by Lisa Shumaker; Editing by Brad Haynes

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