Brazil's government attracted little interest in early rounds of its oil and gas exploration rights auction on Oct. 7 as companies declined to bet on an industry in turmoil and an economy in recession.
By midday Brazil had only sold 17 of 119 blocks offered. Companies made no bids at all for blocks offered in four of six basins, including areas in the prolific Campos Basin, Brazil's top producing region, and the offshore Camamu-Almada and Espirito Santo basins.
"The feeling is one of frustration," Aluizio Dos Santos, mayor of Campos, Brazil and president of the Organization of Oil Producing Municipalities, said on the sidelines of the auction in Rio de Janeiro.
Bidding has been dampened by the price of oil, down more than 50 percent since the last auction, which has slashed sector revenue and potential profits. Brazil's principal oil company, state-run Petroleo Brasileiro SA, is mired in a giant price-fixing, bribery and political kickback scandal and has so far not bid for any blocks.
With $130 billion in debt and a backlog of existing projects, Petrobras, as the company is known, has not said if it will bid. In all previous auctions Petrobras, alone or in a group, was responsible for at least half of sales.
Meanwhile, with Brazil's economy in deep recession, various industry groups and national politicians are seeking changes to auction and other oil rules they blame for holding back the industry and limiting investor interest.
"It has been worse than we expected," said a senior official at Brazil's ANP petroleum regulator, which is running the auction.
On Tuesday, Delcídio Amaral, a senator from Rousseff's ruling Workers' Party said the auction would be a litmus test for Brazil's oil industry.
A total of 36 companies from 17 countries - including Petrobras, ExxonMobil Corp, BP Plc and Royal Dutch Shell Plc - registered for the auction. None of the majors have bid so far. Only a handful of sold blocks were even contested.
A paucity of bids will likely increase pressure to change rules that boosted state control of the industry after giant offshore discoveries south of Rio de Janeiro in 2007.
The ANP and President Dilma Rousseff have resisted changes to national content rules and concession contracts that oil industry associations say raise costs and heighten political risk.
A total of 266 exploration and production blocks in 10 sedimentary basins are on offer.
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