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Shell Exec: Sale Of Brazil Oil Blocks Part Of Broad Review

THE WALL STREET JOURNAL

By Jeff Fick and Diana Kinch Of DOW JONES NEWSWIRES

RIO DE JANEIRO (Dow Jones)–Plans by Anglo-Dutch oil giant Royal Dutch Shell (RDSA, RDSA.LN) to sell the company’s stakes in four offshore oil blocks in Brazil is part of a broader portfolio review, and not a reaction to new oil laws, the new president of Shell’s local unit told Dow Jones Newswires in an exclusive interview Monday.

Andre Araujo, who took over as president of Shell do Brasil three weeks ago, said on the sidelines of the Rio Oil & Gas 2010 conference that despite the sale, Brazil remains “strategic” for the company.

Shell’s stake sale represents one of the few opportunities global oil companies would have to enter Brazil’s offshore oil frontier, where no new exploration and production concessions have been put up for bid by the government since the presalt oil discoveries were made in 2007.

Shell put up for sale its participation in four blocks: BS-4, BM-S-8, BM-S-45 and BM-ES-28. In addition to Shell, Chevron (CVX), Petrobras (PBR, PETR4.BR), Petrogal (GALP.LS) and Vale (VALE) also own stakes in the blocks.

“We’re in the early stages of discussions,” Araujo said, adding that the blocks have generated a lot of interest since being put up for sale. But just because Shell is bailing out of some blocks doesn’t mean that the company isn’t focused on Brazil.

Shell plans to drill up to 10 new wells over the next 18 to 24 months, Araujo said. While Araujo wouldn’t not put a price tag on Shell’s future investments, the company has spent $3 billion in Brazil over the past 10 years, including $600 million in 2009.

The company is one of the few foreign oil producers in Brazil, pumping 110,000 barrels a day from areas it operates, including the BC-10 block’s Parque das Conchas field and Bijupira Salema. Parque das Conchas pumped first oil last year.

Shell is also interested in participating in new auctions of exploration and production concessions, including presalt fields under new production-sharing agreements. Officials from Brazil’s National Petroleum Agency, or ANP, said they expect to hold an 11th round oil auction early in 2011, with the first auction of presalt blocks under the new production-sharing regime also taking place in the first half of the year.

Earlier Monday, a Mines and Energy Ministry official said that the government-held Libra prospect would be included in the first presalt auction. In addition, the official said that Libra held recoverable reserves of between 7 billion and 8 billion barrels of oil equivalent-making it possibly the world’s largest oil find in the past 20 years.

“In principle, we’re interested in Libra,” Araujo said. “But we have to see how attractive the new regulation will be. Hopefully, the new regulation will be attractive.”

Araujo noted that Shell has participated in all of Brazil’s offshore auctioning rounds, except the fifth and ninth rounds.

The executive also highlighted Shell’s heavy investment in Brazil’s biofuels sector as an indication of Brazil’s relevance in the company’s portfolio. Earlier this year, Shell teamed with local sugar giant Cosan SA (CSAN3.BR) in a $12 billion biofuels joint venture.

“Shell can play a role close to the Brazilian government in working to make ethanol a global commodity,” Araujo said.

Brazil’s heavy use of ethanol as a key fuel is close to Shell’s development philosophy, Araujo said.

“It’s sustainable,” the executive noted.

-By Jeff Fick, Dow Jones Newswires; 55-21-2586-6085; [email protected]

WSJ SOURCE ARTICLE

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