Shell secures three pre-salt blocks contracts in Brazil

Royal Dutch Shell announced that Brazil awarded them and their partners with three, 35-year production sharing contracts for pre-salt blocks located in the Santos Basin, out of the eight blocks on offer. This is expected to contribute to the reestablishment of the oil and gas sector in Brazil.

The three blocks awarded include a block adjacent to Shell’s Gato do Mato field (Shell 80% operating, Total 20%), a now unitized area to the Sapinhoá field (Petrobras 45% operating, Shell 30%, Repsol 25%) and he new Alto de Cabo Frio – West block (Shell 55% operating, Qatar Petroleum 25%, CNOOC Limited 20%).

According to Shell’s announcement, the company will pay its share of the total signing bonuses, equating for all bids, of to approximately USD $100-million.

    Andy Brown, Upstream Director of Shell, noted: “We are very pleased to expand our number of operated fields in Brazil. These winning bids were submitted after our thorough evaluation and add strategic acreage to our already leading set of global deep-water growth options.”

Prior to these bidding results, Shell had previously stated plans for $10-billion investment into the early 2020s for its existing offshore developments in Brazil to support deep water as its Upstream growth priority. Shell first began working under a production sharing contract in Brazil in 2013 when it entered the Libra consortium, led by Petrobras.

According to ANP, Brazil’s offshore regulator, the Brazilian government made regultory changes which altered the business context and that led to the success of the bidding rounds.

Improvements in the legislation include the end of the mandatory participation of Petrobras as the sole operator in the pre-salt, which created opportunities for other companies.

According to the legislation, Petrobras has the preemptive right to act as operator in the pre-salt blocks. The company chose to be the operator in the unitizable block to Campo de Sapinhoá (Entorno de Sapinhoá), in the 2nd Round, and also in the blocks of Peroba and Alto de Cabo Frio-Central, in the 3rd Round. In the three blocks, the winning consortia were led by Petrobras.