Brazil Auctions Oil Blocks Under Environmental Dispute

Brazil’s oil industry watchdog has scheduled an auction for drilling rights in an area where environmental authorities have put up serious opposition to any drilling, Bloomberg has reported, noting Brazil’s state-owned energy major Petrobras has been unable to tap the resources in that area because of that opposition.

The tender, to take place on June 17, will include 173 blocks in northeastern and southern Brazil. Of this total, 47 blocks are located in the Fox do Amazonas area where Petrobras has been trying to drill for a couple of years only to have its wings clipped by the country’s environmental protection authority, Ibama.

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The Equatorial Margin offshore Brazil, which includes Foz do Amazonas, Pará-Maranhão, and Barreirinhas basins, is estimated to hold large oil and gas reserves and is believed to share geology similar to that of Guyana’s offshore, where Exxon is finding billions of barrels of oil and has developed and is developing half a dozen projects. Petrobras is appealing Ibama’s decision to not grant drilling rights. However, this decision may spook potential candidates for the blocks, according to a local analyst.

“The lack of authorization for Petrobras to drill in the Foz do Amazonas basin brings uncertainty and certainly affects the attractiveness of the auction,” Rivaldo Moreira Neto, director at consultancy A&M Infra, told Bloomberg.

Indigenous communities are also opposing oil and gas drilling in the area, and indigenous affairs agency Funai says that drilling would violate their rights and ask the environmental agency to consider all potential impacts of a drilling license. All this could make the tender quite challenging, even though President Lula da Silva has thrown his weight behind the drilling campaign of Petrobras and has pushed Ibama to approve it. Lula has argued that oil and gas revenues from the Amazon could go towards financing Brazil’s energy transition.

By Charles Kennedy for Oilprice.com

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