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Exclusive-Brazil prepares new oil auction as trade war threatens budget, sources say
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Exclusive-Brazil prepares new oil auction as trade war threatens budget, sources say
Apr 10, 2025 7:21 AM

BRASILIA (Reuters) - Brazil's government is preparing an extra auction this year of stakes in offshore oil areas to boost revenue, a plan gaining steam amid falling oil prices and rising global trade uncertainty, said four people familiar with the matter.

Two of the sources, who spoke on condition of anonymity, said the auction will involve smaller, uncontracted parts of the pre-salt Tupi, Mero and Atapu fields, looking to raise around 20 billion reais ($3.4 billion) in a "worst case" scenario. Brazil's Finance Ministry and the Ministry of Mines and Energy did not immediately respond to requests for comment.

The momentum for the auction reflects growing concerns about Brazil's fiscal outlook as U.S. tariffs dim global economic prospects, sending oil prices to a four-year low under $60 a barrel on Wednesday.

Even after rebounding, Brent crude closed at $65.48, nearly 20% below the $80.79 average price assumed in Brazil's 2025 budget law. Higher oil prices typically benefit Brazil, boosting revenue from royalties, corporate income taxes on oil producers, and hefty dividends from state-run oil firm Petrobras. All four sources said the auction was seen as a way to offset potential revenue shortfalls due to factors beyond the government's control.

"It's crucial to have escape valves when revenue becomes more uncertain due to external shocks," one of the sources said. The government aims to hold the auction as soon as September, another source said. A draft bill will be sent to Congress "shortly," that source said, followed by the publication of a resolution by the National Energy Policy Council and the auction notice.

Congress is expected to back the revenue-raising measure, the same source added, as it would provide a more comfortable margin for congressional earmarks at the center of tense budget negotiations.

In June, Brazil's state-run Pre-Sal Petroleo is set to hold an auction for oil to be produced under sharing contracts in pre-salt oil fields. President Luiz Inacio Lula da Silva's government aims to erase the primary budget deficit in Latin America's largest economy this year. On Tuesday, Finance Minister Fernando Haddad said that if risks to the fiscal goal were identified, the government would take action to ensure the target is met.

($1 = 5.8217 reais)

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