“World’s biggest oil auction” flops, leaving Brazil in hot water

After three years of anticipation, the Brazilian government’s hopes to reduce its public debt went down the drain on Wednesday, as what was billed as the “world’s biggest oil auction” turned out to be a near no-show. Of the BRL 106.5 billion in revenue expected to be raised, the sale of only two of the four pre-salt oil fields on offer generated roughly BRL 70 billion, which must be shared with state-owned oil company Petrobras, as well as Brazil’s states and municipalities, leaving little left for the federal government.

The results could have been even worse if it hadn’t been for Petrobras. As the Brazilian state-owned oil company is facing an uphill battle to reduce its corporate debt, it wasn’t expected to have a large role in the auction. However, it surprisingly ended the auction with a 90 percent share in the Búzios oil field—the most valuable of all on offer—and the full control of the Itapu field. The remaining two received no bids. 

The only foreign companies to join the party were Chinese firms CNODC and CNOOC, both weighing in with the minimum share of 5 percent each, alongside Petrobras, on the Búzios field. Before Wednesday’s flop, there were signs that something was wrong. Last week, British giant BP, French multinational Total and Spanish-Chinese joint venture Repsol Sinopec all decided not to participate. In fact, of the 14 companies that applied, only seven showed up for the event. 

In spite of that, the president of the National Petroleum Agency (ANP), Décio Oddone, considered the auction a success. In his view, the lack of foreign participation “wasn’t a surprise, given the size of the auction not only in terms of the initial bid but also with huge investments foreseen,” he told news agency EPBR. However, he noted...