Brazil Oil Delays May Cause Industry Exodus, Maersk Oil Says

By Jeb Blount

Oct. 28 (Bloomberg) -- A lack of new Brazilian offshore exploration leases and delays defining rules for future rights sales may prompt foreign energy companies to leave the country, Jorg Pigaht, Maersk Oil's Brazil chief, said.

Annual auctions of offshore leases have been delayed, reduced, or blocked by legal challenges since 2006, and there is little chance of more offshore oil rights sales until at least 2010, Pigaht said in an interview at his Rio de Janeiro office.

Without new auctions, oil companies may be forced to sell their leases to invest in other countries, he said. Providers of oil equipment and services, such as seismic surveys and engineering, may have to cut staff or close, he said.

``There is a gap in the flow of areas to explore because Brazil has not been able to do much of anything on the auction front since 2006,'' he said. ``We don't see anything important this year or next. At some point, companies will have to shrink.''

Maersk Oil, which is owned by Copenhagen-based A.P. Moeller-Maersk A/S, the world's biggest shipowner, hopes to produce as much as 50,000 barrels of oil a day in Brazil within five years, he said.

Maersk Oil is exploring five concessions in Brazil, three as an operator with OGX Petroleo e Gas SA and two as a minority partner with Petrobras and Cia. Vale do Rio Doce.

``We are looking at 2011 as the deadline for deciding if our existing program justifies staying in Brazil,'' Pigaht said.

Tupi Found, Blocks Removed

Brazil's government removed many of the offshore oil exploration blocks from a November 2007 auction shortly after Petroleo Brasileiro SA, or Petrobras, Brazil's state-controlled oil company, announced the discovery of Tupi, a field with as much as 8 billion barrels of oil that is the largest discovery in the Americas in more than 30 years.

A government review of oil legislation will likely remove areas around Tupi from the decade-old auction system, Paulo Bernardo, Brazil's planning minister and a member of the committee reviewing the oil rules, said in an Oct. 16 interview.

The committee's report has been delayed by more than two months.

To contact the reporter on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net