Shell, Exxon win blocks in Brazil’s pre-salt oil auction

Oil majors Royal Dutch Shell and Exxon Mobil won blocks in Brazil’s coveted pre-salt oil region in an auction on Friday.

Shell was part of consortia that won two of the four blocks on offer in the first part of an eight block auction.

Exxon, in a consortium with Norway’s Statoil and Portugal’s Petrogal, won another. There were no bids for the fourth block.

Another four blocks will be auctioned later on Friday. The eight blocks on offer contain a total of more than 12 billion barrels of estimated oil reserves.

President Michel Temer’s government has enacted reforms to make the energy sector more attractive to foreign investment, and for the first time international oil firms will be allowed to operate fields in the region known as pre-salt.

Oil in the region is trapped under thousands of feet of salt beneath the ocean floor of Brazil’s deep Atlantic waters.

The quality of reserves and the reforms have made Brazil an important target for oil majors, even though they have had less appetite for capital-intensive mega projects since crude prices crashed in 2014.

Brazil has big hopes for the volume of oil the companies can pump from the blocks. Brazilian oil output could double to more than 5 million barrels per day (bpd) by 2027, compared with the 2.6 million bpd produced in August, regulator ANP said on Thursday.

Shell has said it is confident it can pump from the pre-salt fields at below $40 a barrel.

Exxon Mobil set the stage for its bids in this round in September, when the U.S. oil major won 10 blocks near the pre-salt in another auction.

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