Consortium wins Brazil deepwater oilfield auction Soldiers guarding the Rio hotel where Brazil's Libra oilfield is to be auctioned. Elsewhere in the oil sector the state has clawed back control, at a heavy cost A consortium led by Anglo-Dutch oil major Shell, France's Total and PetroChina and its sister company Cnooc, won the bid for Brazil's Libra deepwater oilfield in an auction on Monday. The group, which also includes Brazil's state-run oil company Petrobras, was the sole bidder in the auction, the first of the country's giant, so-called pre-salt discoveries to be sold under a new regulatory regime. "This is a turning point between the past and the future," said Edison Lobão, Brazil's oil minister, in a speech before the auction. With the discovery of the pre-salt fields we will more than double our certified oil reserves in Brazil. The auction of Libra, which will have an expected capacity of up to 1m barrels a day of oil equivalent, is a crucial test of the statist model of capitalism championed by the government of President Dilma Rousseff and her centre-left Workers" party. The participation of Shell and Total, which will each have a 20 per cent stake, is a more positive result than expected for Brazil, showing that the new regulatory regime, regarded as onerous by some, was able to attract private sector interest. The Chinese companies, which will have a 10 per cent stake each, were earlier expected to dominate the auction as part of their quest for energy security. "We will finally do what the people have always wanted so much, which is to turn Brazil into a developed country," said Mr Lobão, adding that the royalties from the reserves would be devoted to health and education. However, the auction has attracted fierce opposition from some protesters, who clashed outside the venue, a luxury hotel in Rio de Janeiro, with Brazilian federal security forces on Monday. A paramilitary unit of the federal police fired tear gas and rubber bullets at unionists and other protesters who tried to break through a security barrier near the hotel. At least six people were injured, newspaper Folha de S.Paulo reported, as the protesters decried Brazil's oil regulator, ANP, and Petrobras for pushing ahead with the sale. Cedro Silva, the president of one of Brazil's largest unions, said the group rejected the auction. "The decision of the government and ANP/Petrobras is a fire sale of our natural riches to foreign capital," he said. Ildo Sauer, a former director of gas and energy at Petrobras, filed a lawsuit seeking to block the sale. "Brazil is giving up its sovereignty - pre-salt has already been discovered, it doesn't need to be auctioned off," he said. The consortium promised a 41.65 per cent cut of "profit oil" from the field to the government to sell on its own account - the minimum required under the auction's rules. However, the low offer may have come as a relief to the government as it will put less financial strain on Petrobras, which must obey the same rules. Riding a wave of oil nationalism in 2007 following Petrobras's announcement of the discovery of the so-called "pre-salt" deepwater fields that include Libra, Brazil's Workers" party government switched from a concession-based system to a production-sharing arrangement. But private sector companies say the new regulatory system is heavily skewed towards the state, with Petrobras being made sole operator of the pre-salt discoveries with a mandatory 30 per cent stake in all ventures. The consortium will be expected to co-invest with Petrobras and share the burden of a signing bonus of R$15bn ($7bn), a sum considered steep by international standards. But while media attention has focused on the danger of a lack of interest from multinationals, Chris Garman of Eurasia Group, argues that this may in fact work in favour of the government. Mr Garman argued in a report that the government had been concerned that aggressive promises by the winning consortium could therefore hurt Petrobras, which is already strapped for cash because of a huge investment programme, fuel price subsidies and other problems. He said for this reason, as well as to attract more investment and speed up development of the pre-salt fields, Ms Rousseff would be likely to change the regulatory framework before the next auction to remove Petrobras's role as the sole operator. "Rousseff's administration is likely to eliminate Petrobras's obligation to be lead operator for all new exploration and production activity in the pre-salt province, but the timing of that decision will be influenced by Petrobras's operational challenges and partially by the result of today's auction," he said. Additional reporting by Thalita Carrico