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Abstract

AAPG Bulletin, V. 92, No. 10 (October 2008), P. 1293-1314.

Copyright copy2008. The American Association of Petroleum Geologists. All rights reserved.

DOI:10.1306/06040808065

A method to estimate block values through competitive bidding

Ricardo Furtado,1 Saul B. Suslick,2 Monica R. Rodriguez3

1Center for Petroleum Studies, State University of Campinas (UNICAMP), P.O. Box 6052, Cidade Universitaria “Zeferino Vaz”, Campinas, SP, Brazil 13083-920; [email protected]
2Institute of Geosciences and Center for Petroleum Studies, State University of Campinas (UNICAMP), P.O. Box 6152, Cidade Universitaria “Zeferino Vaz”, Campinas, SP, Brazil 13083-870; [email protected]
3Exploration and Production, Petrobras, Av. Republica do Chile, 65, Rio de Janeiro, RJ, Brazil 20031-912; [email protected]

ABSTRACT

The bidding process is a mechanism that has been widely used by different countries to optimally distribute their oil exploratory acreages. One of the big challenges for both companies and government agencies is the estimation of the block values. Considering that the bid value is by and large a fraction of the estimated unknown reserve, the objective of this article is to reach a set of proxies of unknown values of the blocks through the successful bids. The estimation value of the block is calculated through a stochastic simulation of bid fractions using a compound probability distribution. The model was tested and validated using the public data available from the Brazilian seven licensing rounds. For these competitive bids, areas widespread in 22 sedimentary basins were offered to more than 50 oil companies that retained 610 blocks, paying $1.4 billion as a cash bonus. The model output was restricted to the Campos Basin because it is one of the most attractive areas for oil and gas opportunities, concentrating approximately 80% of the Brazilian national oil production with a supply of 1.8 million bbl/day. The simulation model indicated that this approach can be used as an auxiliary decision framework by oil companies for new investments and bidding strategies as well as by the regulatory agency to evaluate bid performance in different world regions and geological settings possessing similar competitive bidding schemes.

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