Chapter 1097 Bidding


Chapter 1097 Bidding

The maximum work obligation is a key investment parameter often used by oil companies in multinational oil and gas exploration, and determines the basic sunk cost of the exploration block.

In layman’s terms, it means how much money an oil company will spend on block exploration after a successful bid.

And regardless of whether oil can be found or not, the money must be spent.

The localized procurement ratio is stipulated by the Brazilian Petroleum Regulatory Authority in order to solve local employment and promote the country’s economic development. During the exploration and development stages, oil companies must purchase equipment and services locally, that is, in Brazil. capital, as a proportion of total investment.

According to the regulations of the Brazilian Petroleum Regulatory Authority, the minimum localized procurement ratio in this round is 40%.

15% of it is in the exploration stage and 25% is in the development stage.

If an oil company fails to meet this ratio, even if the bid is successful, it will have to accept heavy penalties.

Roberto Murici said loudly after no offer superior to Shell appeared.

“I announce that it is the respected Shell Oil Company that has won the concession period of exploration for the next three years and the concession period of 35 years in the No. 1 oil block.”

Wow...

With the applause, Shell and the small and medium-sized oil companies that formed a bidding group with it cheered loudly.

Representatives from other oil companies around them also looked at them with envy.

Although Block 1 is not as high-profile as Block 2 and Block 6, it also belongs to the shallow sea area of ​​​​the Santos Basin, and there is great hope to find oil or natural gas.

“The franchise period given by the Brazilians this time is really long.” Andrew said.

Generally speaking, a 30-year concession period for an oil field is considered long, and most of them are around 25 years.

Xu Liang said with a smile: "We have never found a big oil field. If we don't extend the concession period, how can we attract oil giants to invest?"

Capitalists are not trustworthy men.

After Andrew nodded, "Boss, the bidding for Block 2 is about to begin."

In fact, Xu Liang had already noticed it without him reminding him.

The surrounding atmosphere also instantly became a bit depressing.

Block 2 is a hot spot.

"The next auction is block number two..."

The big screen in the middle flashed quickly.

Quotations from oil companies flashed by.

After about half a minute, everyone could clearly see it.

Statoil, signing fee of US$18 million, maximum obligated investment of US$60 million, 43% local procurement ratio.

However, this condition did not last long and was replaced by Repsol Oil Company.

Spain's largest oil company quoted a signing fee of US$20 million, a maximum obligated investment of US$63 million, and the same 43% localized procurement ratio.

Unfortunately, although Repsol is strong, it is still far behind the real multinational oil giants such as ExxonMobil, Shell, BP, Delta, and ChevronTexaco.

As the saying goes, a good girl never has to worry about getting married.

The weaker ChevronTexaco and Dowerda were eliminated one after another, followed closely by Shell.

In the end, only ExxonMobil and BP were left competing with each other.

“That’s it.”

Xu Liangdao.

"Boss, do you really want to join?" Andrew hesitated.

Now the price of the No. 2 oil block has been raised by these oil giants to an astonishing level of a signing fee of US$45 million and a maximum obligated investment of US$86 million.

As for localized procurement, everyone agreed not to add much.

BP’s quotation is only 1.5% higher than the Norwegian’s.

Everyone knows the level of Brazil’s domestic oil industry.

If the price quoted is too high, it will easily slow down the exploration progress and increase the cost.

Xu Liang nodded affirmatively, "Although there are some risks, after all, ExxonMobil and BP are still here."

Andrew responded and thought for a moment.

“Signing fee of US$22 million, maximum obligated investment of US$65 million, localized procurement ratio of 43%.”

The Unocal employee in charge of the bidding quickly entered his requirements into the computer, and soon revealed on the large central screen.

"Unocal..."

"Have you finally taken action?"

At this moment, whether they knew each other or not, almost everyone focused their attention on Xu Liang and the Unocal employees around him.

Unocal’s strength is only average among the oil giants.

But they have a super-rich boss with a net worth of more than 40 billion US dollars and the second-largest person in Forbes.

"There's something good to watch next." John Watson smiled.

Unlike his gloating, Exxon Mobil Chief Operating Officer Paul Stevenson and BP Oil Company Senior Vice President Devin Johnson frowned at the same time.

No one wants to see Cheng Yaojin come out halfway when they are getting closer and closer to the final goal.

"Devin, should we add more?"

"Add."

BP is bound to win the No. 2 oil block.

But the people at ExxonMobil beat them to it.

“Signing fee of US$23 million, maximum obligated investment of US$66 million, and local procurement ratio of 43%.” Based on Brazil’s current oil development status, this investment is actually already very high.

When everyone is competing, no one will be stupid enough to add millions at once.

"Boss, should we add more?" Andrew asked.

"Add, at least one more round. But this time add half a million dollars."

After Xu Liang disrupted the situation twice, BP still persisted until the end.

“Signing fee of US$30 million, maximum obligated investment of US$78 million, and local procurement ratio of 43.3%. Congratulations to BP Petroleum Company for winning the concession exploration period of Block 2 for the next three years and the concession for thirty-five years. Issue."

Devin Johnson finally showed a relieved smile.

Although the price was higher than previously expected, fortunately the results were quite satisfactory.

"It's not like his style to give up after only two rounds."

Looking at the tall back on the left front, John Watson frowned.

He couldn't figure out the other party's plan.

“I didn’t expect BP to persist until the end.”

Xu Liang smiled.

“Compared to Block 2, Block 6 is more popular.

This is what Exxon Mobil really wants to get.

By the way, Andrew.

What is the activation index of Brazil’s shallow offshore oil fields? ”

“3200 US dollars”

The activation index is a parameter used to measure the amount of investment required for a new oil well, usually expressed in dollars per barrel per day at stable production.

An activation index of US$3,200 means that the cost of digging an oil well with a daily output of 100 barrels is US$320,000.

An oil field with an annual output of 10 million barrels means a daily output of more than 27,000 barrels.

Calculated based on the activation index of Brazil’s offshore oil fields, it would require at least US$86.4 million.

If you include the US$30 million signing fee, it means that BP will have to pay at least US$116 million in huge cash before seeing the black gold flowing.

If political costs are included, the total cost for BP to acquire the No. 2 oil well is nearly US$120 million.

The latest international oil price is currently around US$70 per barrel.

The profit of oil companies is about 10~15%.

That is to say, for every barrel of oil sold, after deducting a series of necessary expenses such as income tax and mining tax from the Brazilian government, BP can obtain a net income of US$4 to US$6 per barrel.

In other words, with an annual output of 10 million barrels, it will take BP at least three years to recover its costs.

But offshore oil extraction is more troublesome than on land.

Assume BP can find oil in Block 2 within three years.

Usually within three years of starting construction, oil companies make little or no profit.

If everything goes well, you will get rich returns in the sixth or seventh year.

This means that it will take at least eight to nine years for BP to recover its costs.

If bank loan interest is calculated, this number will continue to extend further.

The most important thing is that if there is indeed oil in the No. 2 exploration area, its reserves must be at least 100 million barrels, otherwise it will be difficult for BP to recover its costs.

“It seems that BP people have concluded that there is at least one large oil field under Block 2 with reserves equal to or larger than Alma.”

After Andrew nodded, “Do you think What?"

"I'm not God." Xu Liang shrugged.

Next comes the bidding for block 3.

The consortium headed by Dauda won this block with a signing fee of US$18 million, a maximum obligated investment of US$65.3 million, and a local procurement ratio of 42.1%.

ChevronTexaco bid independently and won the exploration and development rights of Block 4 with a "signing fee of US$17.5 million, a maximum obligated investment of US$71 million, and a local procurement ratio of 42.2%."

Suncor Energy, EOG, Chesapeake Energy and Apache, four U.S. and Canadian oil companies combine.

With a signing fee of US$16.5 million, a maximum obligated investment of US$55 million, and a local procurement ratio of 41.2%, it won the exploration and development rights of Block 5.

"Next is the bidding for Block 6."

Roberto Murici's voice once again mobilized everyone's attention and passion.

"This is a well-known fat man. ...Andrew, we will participate in the whole process this time!"

"Participate in the whole process?"

"If you want people to believe it, no matter what Act a bit more like it.”

"Then when do we give up?"

"Put it off as far as possible. It depends on the situation, and we can just run away." Xu Liang said.

The competition in Block 6 was extremely fierce. The price rose alternately and then slowed down after a full minute.

A consortium of small and medium-sized companies was the first to be eliminated.

The fattest meat is naturally the prey of international oil giants.

The prices of the six major companies, ExxonMobil, BP, Delta, ChevronTexaco, Shell, and Unocal, rose alternately and soon set a new bidding record.

(End of this chapter)

Previous Details Next