Brazilian natural gas and oil producer QGEP Participacoes SA said on Friday it abandoned an offshore exploration block it owns with Brazil's sate-run oil company Petrobras after deciding continued exploration was not economically viable.
The returned block, known as CAL-M-312, is in the Camamu-Almada basin off Brazil's coast south of Salvador in Bahia state. QGEP owned 20 percent of the block and Petroleo Brasileiro SA, as Petrobras is formally known, owned 60 percent. The rest was owned by OP Energia Ltda.
Returned blocks go back to the Brazilian government.
QGEP, the country's No. 4 producer of natural gas, also pulled out of a "farm-in" agreement with Petrobras, which gave it rights to 30 percent of a block in Brazil's Campos Basin, home to nearly three-quarters of Brazil's output. Petrobras owns 100 percent of the block, known as BM-C-27.
Both announcements were made in a statement filed with Brazil's securities regulator. Petrobras did not immediately respond to a request for comment. OP Energia could not be reached after the end of business hours on Friday.
"An increase in costs related to increased risk in the project based on a reassessment of seismic data resulted in the project losing its relevance in our portfolio," QGEP said regarding the Campos Basin block.
The decision comes as a nearly 50 percent drop in the price of benchmark Brent crude oil since June has forced oil companies world wide to cut back investments and lay off employees.
Petrobras is also facing a price-fixing, bribery and political kick-back scandal that has delayed the release of its financial results and cut it off from debt markets. The company said in December that it plans to cut back investments this year under a $221 billion five-year investment plan. (Reporting by Jeb Blount and Marta Nogueira; Editing by Diane Craft)