Business & Leadership

5th Production-Sharing Bidding Round Raises $1.75 billion

The 5th Bidding Round had all four of its blocks acquired and raised $1.75 billion in signing bonuses

© Agência Brasil

September was an intense period for the Brazilian oil and gas sector with both the 5th Pre-Salt Production-Sharing Bidding Round and Latin America’s largest oil and gas event, Rio Oil & Gas, taking place in the last week of the month.  


Under the slogan 'Energy to Transform', Rio Oil & Gas 2018 took place in Rio de Janeiro between the 24th and the 27th of September. Over four days, the event brought 34,200 visitors, 4,177 participants and 540 exhibitors from 31 countries together to discuss the future of the oil and gas sector. Speakers included such eminent figures as Márcio Félix (Brazilian Deputy Minister of Mines and Energy), Décio Oddone (Director General of the National Petroleum Agency – ANP), Ivan Monteiro (President of Petrobras), Stephen Greenlee (President of ExxonMobil Exploration Company and Vice-President of ExxonMobil Corporation) and Felipe Aberlaez (BP Latin America Regional President) all of whom discussed key sectoral issues. The event was organized by the Brazilian Petroleum, Gas and Biofuels Institute (IBP) and was sponsored by renowned companies including Petrobras, BP, Shell, Total, Santander, ExxonMobil, Chevron and WeWork.


In the closing stages of the event, CEOs from 14 market-leading companies – Petrobras, Shell, BP, Total, TechnipFMC, Chevron, Halliburton, Repsol Sinopec, Schlumberger, Equinor, Aker, BHGE, Ocyan and Siemens – announced the signing of a landmark agreement: The Pact for Integrity of the Oil, Gas and Biofuels Industry. According to Rafael Gomes, Executive Director of Governance and Compliance at Petrobras: “Our objective is to share best practices and promote ethics and integrity in the sector.” The agreement is an important step for the Brazilian oil and gas market as it strives to become increasingly transparent. The Pact for Integrity consists of 14 guidelines on ethical conduct, integrity, transparency, sustainability and corporate social responsibility which signatory companies are set to adopt.


Although the Pact for Integrity sets a national benchmark for transparency and compliance in the sector, September’s true highlight was the resounding success of the 5th Pre-Salt Production-Sharing Bidding Round. Held on the 28th of September by ANP, the round had its four blocks (Saturno, Titã, Pau-Brasil and Sudoeste de Tartaruga Verde) acquired, raising R$ 6.82 billion in signing bonuses and R$ 1 billion in planned investments in the exploration phase. Among those present were Wellington Moreira Franco (Minister of Mines and Energy), Márcio Félix and Décio Oddone. “This was the first production-sharing round with more than one block on offer to have 100% of its areas acquired” said Mr. Oddone, adding: "With today's goodwill, which averaged 170%, our expectation of raising royalties and taxes over the 35 years of the contracts rose from R$ 180 billion to R$ 240 billion. But the most important thing is to look at the total of the production sharing rounds since last year. The results of the 2nd to 5th rounds, considering the oil at $70 a barrel, will generate R$ 1.2 trillion in revenue for the Federal Government, states and municipalities, or about R$ 40 billion per year."


Since 2017, 18 companies have acquired 48 offshore areas and spent R$ 27.9 billion in the six auctions held by ANP, with additional bidding rounds planned until 2021 by the National Energy Policy Council (CNPE). In this latest round, Petrobras chose to be the operator with a 30% share of Sudoeste de Tartaruga Verde, a relatively timid performance when compared to the activity of international bidders. A total 12 companies, including China National Offshore Oil Corporation (CNOOC), participated in the 5th Round, with five of these becoming operators alongside Petrobras: BP, Equinor, ExxonMobil, Shell and Total. Colombian company, Ecopetrol, in a consortium with BP Energy and CNOOC, was finally able to enter the pre-salt market. Although Portugal’s Galp was absent in this round, after acquiring three areas last year, it will have the opportunity to participate in the 6th Round, scheduled for 2019.


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