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Oil Giants Unite in Offshore Gamble

June 16, 1999

RIO DE JANEIRO, Brazil (AP) _ In a $7.5 million gamble, five petroleum giants joined forces to search for oil in an unexplored offshore tract 125 miles from the mouth of the Amazon River.

British Petroleum, Exxon’s Brazilian subsidiary Esso, Shell, Petrobras and British Borneo on Wednesday snapped up the rights to explore an area of 8,730 square miles.

``The whole area is unproven for oil. But we see exciting possibilities there,″ said Steven Edrich, director of the Houston-based British-Borneo International. ``The group has the technology and the experience to succeed.″

The group was the sole bidder for the area on the second and last day of Brazil’s historic auction of 27 potentially oil-rich areas. The bidding marked the end of a 46-year monopoly over the Brazilian oil industry by federal petroleum company Petrobras.

Unocal also was a winner, leading a consortium that included Texaco and Argentina’s YPF. For $18.14 million, the group claimed a block off the coast of Espirito Santo state, just north of Rio de Janeiro.

It was the closest fight of the auction, with Unocal’s group just edging out a consortium led by Mobil, Exxon, Shell and Petrobras.

``The place is excellent,″ said Sergio Brandao, Unocal’s spokesman. ``It is largely under-explored and we believe it holds big oil deposits and natural gas. We may be talking of trillions of cubic feet of natural gas.″

The group, he said, would invest up to $10 billion over the next ten years if the search proves successful.

In association with the YPF, Italy’s ENI, whose aggressive bidding showed its appetite for the Brazilian market, paid $29.14 million to beat out three competitors for the rights to a block in the Santos basin.

On Tuesday, ENI picked up another block in the same area with an offer of $76.6 million, far above other bidders.

``Our interest is obvious: Brazil is Latin America’s biggest market. I have no doubts we will find oil,″ said Rocco Valentinetti, president of ENI’s oil division Agip do Brasil.

Earlier in the auction, Texaco and a consortium led by Amerada Hess won rights over two separate areas, while YPF with various partners picked up the rights to four sites.

``It is big operation, but we are ready for it,″ said Mateo Turic, YPF upstream manager. ``The prize is big and we are after it.″

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