By Jeff Fick, Paul Kiernan and Luciana Magalhaes
RIO DE JANEIRO--Brazil sold the rights Monday to develop a huge
oil field to a consortium of five companies in a boost to the
government's state-heavy strategy for developing its newfound oil
wealth.
The sole bidder at the auction was a consortium made up of many
flavors. It included two private-sector firms, Royal Dutch Shell
PLC and Total SA; two Asian state-owned companies, CNOOC Ltd. and
China National Petroleum Corp.; and Brazil's state-owned Petroleo
Brasileiro SA, or Petrobras, which, as determined by new
legislation, will lead the consortium's operations.
The companies will be responsible for providing the financial
muscle to develop Libra, a huge oil reserve that lies deep below
the Atlantic Ocean seabed off Brazil's southeast coast. The field
is estimated to contain between eight billion and 12 billion
barrels of oil, and the government has proclaimed it could generate
$1 trillion in public revenue over 30 years.
The consortium's bid was to give 41.95% of the oil production
from Libra to the government, the minimum amount set by the state
before the auction.
Critics argue that the lack of any more bidders reduced
competition and detracted from the auction's success.
Magda Chambriard, director of Brazil's oil regulator, the
National Petroleum Agency, called the auction a success, as five of
the top 10 oil companies in the world will now develop the field.
Ms. Chambriard said it was "hard to be sad" with the outcome. There
was a degree of competition in the creation of the consortium, she
said.
This is the first field to be developed under new legislation
that put Petrobras in charge of developing Libra. Petrobras' new
partners will mostly be required to put up the money, although they
will also have some say in the field's development program.
The challenges are enormous in terms of the scale of the
operation, the exploration work still to be done and the
environmental risks of operating in the harsh conditions. The
winning consortium will have to spend an estimated $200 billion
over 35 years to pump oil out of a reservoir buried under the thick
layer of salt beneath deep Atlantic waters.
"We look forward to applying Shell's global deep-water
experience and technology, to support the profitable development of
this exciting opportunity," said Peter Voser, chief executive of
Royal Dutch Shell, in a statement.
All told, 10 foreign companies and Petrobras had registered for
the auction. Many large foreign companies had stayed away, which
analysts attributed to the prominent role that will be played by
the Brazilian state in development of the oil field. Around 80% of
the total proceeds from the field will go to the Brazilian
government, according to the ANP.
As oil industry executives gathered in the calm atmosphere of
the upscale beachfront hotel in the Barra da Tijuca district where
the auction was held, a few hundred protesters gathered earlier in
the day a few blocks away to try to halt the proceedings. The
demonstrators see the sale as relinquishing control over the
country's oil wealth, and the activists, which included labor
unions and student groups, waved flags and shouted slogans.
The protest quickly escalated into a confrontation in which the
police fired tear gas and rubber bullets, while some protesters
threw rocks. Many peaceful protestors then left, although around 80
people remained, according to the defense ministry, taunting the
cordon set up by police and army troops two blocks from the
hotel.
They set small trash fires and at one point overturned a car and
set it ablaze. A fire engine moved in to extinguish the fire and
the car was removed.
About one block behind the first cordon was a second, more
fortified security barrier. Two trucks with water cannons idled
behind police lines and just a hundred yards or so off the beach,
two Navy patrol boats bobbed up and down in the surf.
"All this is because we don't want to hand over our oil," said
Silvio Sinedino, 62, president of the Association of Petrobras'
Engineers. "They don't have any arguments, they just have
bullets."
Protests have been a regular feature in Brazil since June, when
millions of Brazilians turned out onto the streets to protest a
variety of social problems. While protests have died down in much
of the country, they have remained a frequent, often violent,
occurrence in Rio de Janeiro.
The government has said that a large part of the oil wealth will
be set aside for a special fund that will invest in education and
health care, two of the protesters' biggest concerns.
Standing at the barricade, Vitor Zanon, 21, said he would stay
all day to try to stop the auction, and that he considers the day a
chance for Brazilians to show their political power. The government
wants to sell the field "at gunpoint" without considering what
people think, he said.
--Matthew Cowley in Sao Paulo contributed to this article.
Write to Jeff Fick at jeff.fick@wsj.com, Paul Kiernan at
paul.kiernan@wsj.com and Luciana Magalhaes at
luciana.magalhaes@wsj.com