Unocal Buys Rights to Seek Oil Off Brazilian Coast

Unocal was a winning bidder in the second day of a historic Brazilian oil lease auction in which exploration rights were sold to foreign companies for the first time since the energy industry was nationalized in 1954.

Shortly before the auction closed Wednesday, Brazil had raised about $184 million from the sale of 20 leases. Companies are expected to invest $25 billion or more over the next 10 years in Brazilian oil.

As the lead partner in a venture with Texaco and YPF of Argentina, El Segundo-based Unocal posted the winning $18-million bid for rights to explore the so-called Espirito Santo Basin off Brazil’s Atlantic coast. Unocal will attempt to find and produce oil in waters 4,000 to 7,000 feet deep.

Exxon, Agip of Italy and British Petroleum also won leases in the two-day Brazil auction.

Analysts say that deep water reserves in Brazil and West Africa are the hottest oil exploration areas in the world. Rapidly improving seismic imaging techniques and drilling technology enable companies to exploit oil deposits as deep as a mile beneath the ocean’s surface.

“Discoveries in deep-water Brazil have been some of the largest, making it one of the focus areas in the entire world, so the fact that Unocal is in a block there is no great surprise,” said Prudential Securities senior oil analyst Steven Pfeifer.

The Unocal block “is one of the most promising areas offered,” Charles R. Williamson, Unocal executive vice president, said in a statement. A spokesman said that over the past year South America has become Unocal’s most important focus of oil and gas development.

Like other Latin countries before it, Brazil is giving deep-pocket private oil companies access to its once-protected resources in a bid to end its dependency on energy imports. Brazil lacks the capital to develop offshore deposits that could be three times its proven reserves of 7 billion barrels.

Although some blocks drew high bids, seven of the 27 blocks offered at auction had not sold near the end of Wednesday’s bidding. Some of the 38 companies that registered complained about unfair advantages enjoyed by Petroleo Brasileiro, or Petrobras, the state-controlled oil company. Petrobras is losing its monopoly in oil but is free to bid for oil leases.