After a hiatus of four years, Brazil re-launched pre-salt auctions in 2017, turning the attention of international oil companies back to the country's rich deepwater oil and gas reserves.
"Organizing a bid round is technically complex, especially when considering Brazil's current methodology," says Edmar de Almeida, head of research in oil and gas and government policy at the Federal University of Rio de Janeiro (UFRJ). "However, from the market's point of view, the auctions are extremely viable. They were very competitive and attracted lots of interest. In the case of pre-salt, there is no doubt great demand on the international market."
The demand is so great because of the quality and quantity of the resources in place, the infrastructure and deepwater knowhow Brazil has been able to develop over the past two decades, and new regulations that have made it easier to work in Brazil's oil business.
Indeed, thanks to the pre-salt - a giant offshore deposit that could hold up to 50 billion barrels of oil in an area deep beneath a layer of salt at the bottom of the Atlantic Ocean - Brazil has surpassed both Mexico and Venezuela to become the biggest oil producer in Latin America. Brazil could also well become one of the largest producers of crude oil over the course of the upcoming decade, a quite remarkable achievment given the Lava Jato scandal has its roots in the state oil company, Petrobras.
This report focuses on the development of pre-salt in Brazil, considering the results of the rounds held in 2017 and the upcoming pre-salt auction, scheduled for June 2018. It also looks at regulatory changes and the potential for political risk given the upcoming election in October.