May 21, 2019 / 11:55 PM / 5 months ago

UPDATE 1-Brazil's Petrobras expresses interest in two areas in 'TOR' auction

(Adds fresh details from filing, background)

SAO PAULO, May 21 (Reuters) - Petroleo Brasileiro said on Tuesday it is interested in exercising its preferential right to tender in two areas in an auction of excess oil from the so-called “transfer of rights” (TOR) area, according to a company filing.

The Brazilian state-run company said it was interested in the Buzios and Itapu areas, based on a 30% stake with a chance to increase the holding on the day of the auction, which is expected in October. The auction could result in a signing bonus of nearly 21 billion reais ($5.20 billion), it said.

Petrobras, as the company is known, said that it could participate in auctions in two other areas, but on the same terms available to other potential bidders.

The news of Petrobras’ desire to enter the auction brings clarity to a long-awaited auction that is likely to lure some of the world’s top energy firms and which the government says could generate some 100 billion reais ($26 billion).

Petrobras has settled a long-running dispute about the TOR area, a roughly 2,800-square-km (1,080-square-mile) zone off the coast of southeastern Brazil where billions of barrels of oil are trapped beneath a layer of salt under the ocean floor.

Under the terms of the settlement, Brazil’s government will pay Petrobras $9.058 billion, paving the way for the auction, which grants access to prized assets in an oil-producing zone known as the pre-salt. The area has emerged as one of the world’s most promising conventional oil plays.

Petrobras and the government are still discussing how the auction winners will potentially partner with the state oil company, which is already producing at Buzios and has the right of first refusal to remain operator at the four fields.

Regardless of the final arrangement, winners of the auction will be required to compensate Petrobras for the infrastructure and exploratory work in which the company has already invested.

Among the companies with exploration and production assets adjacent or relatively close to the TOR area, offering potential cost savings, are Total SA, Royal Dutch Shell PLC , and China’s CNOOC Ltd and CNPC.

$1 = 4.0390 reais Reporting by Roberto Samora, Gabriel Stargardter Editing by Daniel Flynn and Grant McCool

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