RIO DE JANEIRO/HOUSTON, Sept 28 (Reuters) – Exxon Mobil Corp’s big bet on Brazil’s offshore Campos basin shows its willingness to pay up to replenish its reserves and may pave the way for hefty bids in October auctions in the country’s rich pre-salt areas, analysts said.
Marking a return to Brazilian exploration after a five-year absence, Exxon took eight blocks in the coveted basin, one of Brazil’s most productive, at an auction on Wednesday. Six were taken in partnership with state-run Petroleo Brasileiro (Petrobras).
The auction’s record take included an Exxon bid of 2.24 billion reais ($704 million) for one block, Brazil’s highest-ever such bid.
That showed how oil companies that can afford significant overheads are willing to shell out for and develop high quality reserves in far-flung locations, despite oil prices that have roughly halved since 2014.
“If anyone can bring a low-cost approach to doing something as big and complex as that, it is probably Exxon Mobil,” said Brian Youngberg, an analyst at Edward Jones.
Youngberg said he also expects Exxon to be involved in October auctions of blocks in the adjoining pre-salt area, where hydrocarbons are trapped under layers of salt beneath the ocean floor.
Exxon did not immediately respond to a question about its potential participation in the October auctions.
Exxon, with a market value of around $350 billion, has spent heavily this year on oil and natural gas expansion projects to replenish its diminishing reserves, seeking to counteract concerns that it is falling behind peers in exploration and production.
Investments have included the Permian Basin in the United States, offshore Guyana, and Argentina’s Vaca Muerta shale play.
The Brazil deal is a “further sign of the company’s urgency to replenish its resources base,” analysts at Tudor, Pickering Holt & Co said on Thursday, adding that the Campos Basin deal was a bullish sign for Brazil’s pre-salt block auctions.
Wednesday’s record bid was around 5 times as much as the nearest one from Royal Dutch Shell and Repsol. Petrobras said it had information that some of the Campos blocks had high-potential pre-salt reserves.
Before the auction, Exxon was among the few oil majors without an exploration presence in Brazil’s recently discovered large offshore fields.
“For Exxon Mobil, a lack of presence in Brazil’s pre-salt has been arguably the biggest gap in its portfolio, especially now that Shell holds a dominant position in this prolific, relatively low-breakeven play,” Horacio Cuenca, a researcher at Wood Mackenzie, said in a client statement.
Exxon abandoned drilling efforts in the nearby Santos basin in 2012 following disappointing results.
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