A consortium, including Shell, Total, two Chinese firms, and Brazil's state-run petroleum company Petrobras, won the right to develop an offshore field that could hold up to 12 billion barrels, Brazil's government said Monday.
It was the first auction held under a new legal framework meant to give Petrobras and Brazil more control over its finds in recent years, oil buried deep under water and a formidable layer of salt, reserves that could hold 100 billion barrels.
The decision managed to discourage both critics, who say the rules will scare off potential investors, as well as leftist protesters who tried to stop the sale.
About 300 demonstrators calling for nationalisation of Brazil's oil industry clashed with police outside the hotel where the bidding took place before the auction Monday, with security officials firing tear gas and rubber bullets.
Pro-business critics contend that the law, which mandates that Petrobras be the sole operator of the finds and maintain a minimum 30 per cent stake in oil blocks, will scare off big private firms.
They also say it will slow investment in and development of the oil - as much as 100 billion barrels of it - that Brazil is counting on to catapult the country to developed-nation status and fund ambitious education and health programmes.
Government officials are already locked in arguments about how to share royalties that haven't surfaced, and the Navy is buying submarines to protect the fields.
There were only 11 participants in the auction and the winning bid by the consortium was the only one made, according to the government.
Petrobras holds a 40 per cent stake in the consortium. Shell and Total each account for 20 per cent and Chinese firms CNOOC and CNPC have 10 per cent each.
Adriano Pires, one of Brazil's top energy analysts, called the new rules "very interventionist" and said the auction was a disappointment even before it began because of the lack of interest. He chalked that up to the new rules that will make production expensive.
"We are talking about non-conventional oil located 6,000 to 7,000 metres deep," he said.
"The US$500 billion that will have to be invested over the next 12 to 15 years made companies conclude that the rate of return made participating in the auction unattractive."
The technological hurdles to reaching the riches are intensely challenging, even for Petrobras, considered a world leader in offshore development.
The deep-water reservoirs lie some 185 miles (300 kilometres) offshore in the Atlantic, more than a mile below the ocean's surface and under another 2.5 miles (4 kms) of earth and corrosive salt.
The salt beds can break loose and shear off piping, making it among the toughest substances to drill.
With a slowing economy and delays in producing that offshore oil, some say the Brazilian government will loosen rules to make them more business-friendly during the next auction in two to three years.
"Allowing international oil companies to develop the pre-salt side by side with Petrobras would kill two birds with one stone," Eurasia Group wrote in a research note.
"It would lead to a quicker pace of production in the pre-salt with more investments, and provide needed relief to Petrobras."
It added that "it isn't lost on government officials that the shale gas and tight oil technological revolution in North America has reduced Brazil's leverage to attract capital."