Marianna Parraga, Sabrina Valle

HOUSTON, (Reuters) – Latin America’s oil fields are once again in the limelight. Auctions will be held in Brazil and Guyana in order to draw bids from large oil companies despite a call worldwide to stop fossil fuel extraction.

Brazil will receive Friday bids for its offshore oil resources, which analysts believe are among the most valuable ever to come to market. Oil companies are now interested in countries outside the region with more flexible fiscal and bidding terms after a two-year hiatus.

Latin America was the main source for some of the most significant oil and gas discoveries this century. However, many governments delayed or cancelled auctions in 2019/2020 due to weak oil prices as well as falling demand caused by the coronavirus pandemic.

Development projects have returned to the forefront due to the recent rebound in energy prices and a feeling of urgency regarding removing oil and gas resources before the world switches over from fossil energy.

Andres Armijos (Latin America head at Welligence) said, “The past two years have proven to be difficult for this region.” “The message is that the time is running short,” says Andres Armijos, Latin America chief at energy consultancy Welligence.

The International Energy Agency, whose members are mostly rich oil-importing nations, said in May that investors should not fund https://reut.rs/3yu1vwe any new oil and gas projects if they want to achieve net zero emissions by 2050.

Rodolfo Saboia from Brazil, head of Brazil’s Oil Regulator, stated to Reuters that many companies wanted projects that would deliver quick returns and not the big oil deals of years past.

Seven Latin American countries seek to increase investment in the coming two years. They offer new blocks and push for tax and legal reforms that will give their producers greater returns.

Andre Fagundes, Vice President of Welligence said that the improved conditions for development in the region would continue to be key to luring bidders.

(Graphic: Latin America’s next bidding rounds, https://graphics.reuters.com/LATAM-OIL/AUCTIONS/dwpkrzngovm/chart.png)

Only for BIG PLAYERS

Eleven businesses include Exxon Mobil Equinor (NYSE:), Royal Dutch Shell, (LON:), and Corp (NYSE) have all registered to take part in Brazil’s auction.

The government hopes to receive almost $2B in licensing fees as well as a share of the production.

Brazil intends to expand its auctions in 2022 by adding to the system an area of offshore presalt oil where its most crude is now, and to a current system which offers many blocks.

However, some analysts believe that offshore oilfields may be up for sale for the first times in Brazil, Suriname or Guyana due to the large investment needed.

Exxon senior vice president of Exploration and New Ventures Mike Cousins announced last week that 10 billion barrels have been found off Guyana by a consortium.

Brazil’s Saboia stated that there will be some competition between countries but that each country has its strengths. The energy transition is going to take some time, and businesses want to ensure supply while they wait.

(Graphic: Brazil’s oil bidding rounds in the last decade, https://graphics.reuters.com/LATAM-OIL/AUCTIONS/lbpgnldrxvq/chart.png)

COMPETITION BUOYANT

Colombia kicked off the new auction wave earlier this year with its 2021 Round, which was a surprise success https://reut.rs/3dT0JQ2. The auction received 30 bids from both onshore and offshore block owners in December. It is now expected that it will be one step closer towards energy independence.

Colombia, following the 2001-2003 oil price crash, has implemented regulatory reforms and created ANH (the National Hydrocarbons Agency), as well as new contract models. At the World Petroleum Congress (WPC), Armando Zamora, President of ANH said that 660 contracts had been signed.

Days after Colombia accepted the bids, Trinidad and Tobago offered 17 deepwater blocks and announced two more oil auctions for exploration and production rights would be held next year in for onshore https://reut.rs/3dWt1t2 and shallow water areas.

Over the next two years, Ecuador will hold also a series of auctions https://reut.rs/3GNfccK to allocate oil blocks and look for a private operator for the nation’s largest state-owned refinery, hoping to land $19 billion in investments and to boost oil output.

There will be three Ecuadorian offshore blocks located in the Gulf of Guayaquil, which include the large Amistad oil field and mature Sacha oilfield. Additionally, five additional onshore areas as well the second phase of Intracampos.

Peru, meanwhile, is drafting legislation to revamp its royalty model https://reut.rs/3yAbXST for the oil industry and regulate the influence of energy projects over communities, which have created obstacles for foreign investment and oil rounds.

Eduardo Gonzalez, Energy Minister of Peru said that Peru is ready to provide a series of contracts for the North in oil and gas exploration.

Following the completion of new distribution lines projects, Brazil plans to boost production in Camisea and Aguaytia regions in Amazonia (NASDAQ 🙂 Rainforest.