Interesting reading from Bloomberg.
BP Plc (BP/), Europe’s second-largest oil company by market value, will take a stake in two blocks off Brazil’s northeastern coast as producers bet the area may hold similar reserves to those found in Western Africa.
BP received authorization to take 40 percent in the BM-BAR- 3 and BM-BAR-5 blocks in the Barreirinhas basin from Petroleo Brasileiro SA (PETR4), the Brazilian oil regulator said on its website. The agency, known as ANP, didn’t disclose terms of the deal.
Oil companies are betting that an area known as the equatorial margin off the coasts of northeastern Brazil, Guyana, Suriname and French Guiana hold similar reserves to those found on the opposite side of the Atlantic. Repsol YPF SA (REP) is among companies that announced finds off Sierra Leone this month.
“It’s one of the hottest trends in the business at the moment,” Bob Fryklund, vice president of energy consulting and research firm IHS CERA Upstream Research, said in a telephone interview from Rio de Janeiro. “People are marching up and down the coasts to figure out where those fan-shaped deposits are.”
BP plans to increase oil production in Brazil after paying $3.2 billion to buy nine exploration licenses from Devon Energy Corp. (DVN) last year. BP received approval from the ANP in January to acquire a 40 percent stake from Petrobras in the BM-CE-1 block in the Ceara basin, also in deep waters off northeastern Brazil.
Petrobras, as the state-controlled producer is known, is selling assets in Brazil and abroad to help finance $224 billion of spending, the largest investment plan in the oil industry.
Farm In
In these types of transactions, known as farm in, the buyer usually agrees to pay for a portion of previous exploration expenses and part of upcoming drilling costs, Fryklund said. He estimates BP agreed to pay about $100 million to Petrobras.
A spokeswoman at the ANP, who can’t be named under agency policy, declined to comment further on the deal. A press official at BP in Rio de Janeiro did not respond to an e-mail seeking comment and could not be reached by telephone. Petrobras declined to comment.
BP, Statoil ASA, Ophir Energy Plc and Soco International Plc are among explorers seeking to profit from as many as 75 billion barrels of untapped oil off Western African countries including the Republic of Congo, Namibia and Gabon.