Brazil tender flops as political storm blows in

OREANDA-NEWS. October 09, 2015. A three-pronged political battle that could unseat Brazilian president Dilma Rousseff escalated yesterday, hours after the government held an upstream licensing round in which more than 85pc of the blocks on offer attracted no bids.

Last evening, the Brazilian court of auditors TCU unanimously rejected Rousseff's 2014 fiscal accounts, a ruling the government had tried unsuccessfully to block. The TCU determined that Rousseff manipulated the books to whitewash the country's financial health ahead of last year's presidential election, in which she was narrowly re-elected for a second four-year term.

The decision could become the legal basis for an impeachment process for which the opposition has been clamoring for months. The accounts will now be sent to Brazil's rebellious congress, where Rousseff has lost support. The congressional budget committee is expected to announce next steps later today.

The situation in Brazil's congress has been complicated by bribery allegations against lower house president and Rousseff foe Eduardo Cunha, eroding his political weight.

The TCU vote follows a 6 October decision by Brazil's electoral body TSE to investigate allegations that Rousseff and vice president Michel Temer's 2014 electoral campaign received funds siphoned from Brazil's state-controlled Petrobras and other public-sector entities.

If proven, the allegations could invalidate last year's election results and require new elections within 90 days.

The political turmoil proved to be a bleak backdrop for the licensing round, at a time when sagging oil prices have already dampened the appetite of oil companies for exploration.

Even Petrobras, in the eye of the storm over systematic corruption, did not participate yesterday. The company said after the tender that it does not need new exploration assets.

The heavily indebted firm is reeling from a multi-billion-dollar kickback scheme that has gutted its 2015-19 investment plan.

Just a handful of foreign oil companies, most of which already have a presence in Brazil, picked up acreage, including France?s Engie, Latin American independent Geopark and Canada?s Alvopetro. Brazilian firms picked up the bulk of the 37 blocks that were awarded.

The sparse turnout could redouble congressional efforts to change rules governing the country?s sub-salt areas. There are multiple legislative proposals that would relieve Petrobras of its obligation to take a minimum 30pc stake in all sub-salt projects, a structure no longer seen as viable economically for the company.

If the rules are eased, foreign companies would be allowed to operate sub-salt developments, a prospect that could boost participation in Brazil?s next sub-salt round tentatively planned for 2017.

But any change to the rules, enacted in 2010 under Rousseff?s predecessor and mentor Lu?z In?cio da Silva, would run up against popular nationalist sentiment that deepened in the late 2000s when the country?s extensive sub-salt resources first came to light.