Government auctions oil areas under protests – 12/12/2023 – Market

The government auctions this Wednesday (13) more than 600 areas for oil exploration and production in the country, amid protests from environmental organizations and with ongoing serial lawsuits.

For the sector, it is a chance to unlock activity in the southern region of the country, which is not yet producing.

The Arayara International Institute claims to have organized an unparalleled mobilization against an auction of oil blocks in Brazil.

More than 400 pages of studies on socio-environmental impacts and eight lawsuits were filed, one of which was unprecedented by Brazilian standards: climate responsibility, which aims to punish for increased emissions.

The entity also estimates the presence of 300 protesters at the door of the Windsor Barra Hotel, in the city of Rio de Janeiro, including activists and representatives of affected areas such as indigenous people, quilombolas and fishermen from different parts of the country.

There will be two auctions, one for areas outside the pre-salt, with 603 blocks on offer, and one for pre-salt areas, with five blocks. The latter are contracted under the production sharing regime, which guarantees the government part of the oil produced in the event of discoveries.

The market expects some interest in the Pelotas basin, on the coast of Rio Grande do Sul, following giant oil discoveries in Namibia, an African country that has geological characteristics similar to those found in the south of the American continent.

The Pelotas basin is not a newcomer to ANP (National Petroleum, Gas and Biofuels Agency) auctions, but it currently does not have any active concession contracts. Petrobras explored the basin in different phases, but was unsuccessful. It drilled its last well there between April and May 2001 and found no oil.

On the equatorial margin, considered the country’s newest oil frontier, the ANP limited itself to offering blocks in the Potiguar basin, on the coast of Rio Grande do Norte, leaving out other basins, such as the mouth of the Amazon, the target of clashes between the areas government environmental and energy issues.

But there is no great enthusiasm in the market for the auction, with the expectation of disputes only between independent companies over smaller projects that are close to areas where they already have operations.

Eneva, for example, is identified as being interested in the Japiim field, in Amazonas, which is close to the Azulão field, purchased from Petrobras, from where the company extracts natural gas to supply thermal power in Roraima.

The absence of the state-owned company in the dispute for the pre-salt blocks is an indication of its low attractiveness. These areas had already been offered, without interested parties, and now the ANP has eased the conditions.

There is a perception that the great pre-salt prospects have already been awarded in previous auctions. In 2021, the then general director of the ANP, Décio Oddone, stated that the era of billion-dollar bonuses in oil auctions had come to an end.

“The known pre-salt areas have already been tendered and the companies have large portfolios in Brazil,” he said, in an interview with Sheetbefore the auction of two areas with bonuses of R$11 billion — in this Wednesday’s, the five areas have a combined bonus of R$351 million.

The Arayara International Institute is still trying to stop the offer in court. “We organized the largest demonstration ever seen at an ANP auction for a reason: the volume of blocks offered and the scope of the affected areas are unprecedented”, says Juliano Bueno de Araujo, director of the institute and the Oil and Gas Observatory.

“To give you an idea. Among the affected indigenous territories, two of them belong to isolated peoples, something that occurred in the history of the agency. This indigenous person has no idea what a gas pipeline or an oil tower is, and it could not be exposed to this type of risk.”

This Wednesday’s demonstration has the support of Apib (Articulation of Indigenous Peoples of Brazil). There will also be mobilization of quilombolas in their respective states, especially in Ceará, a very affected place.

Araujo recalls that President Luiz Inácio Lula da Silva (PT) made a campaign commitment to defending these communities. “There is dissatisfaction and even a feeling of betrayal among them,” he says.

The director of Arayara also highlights that the scenario of record emissions motivated the climate lawsuit. “It will be long and aims to identify the responsibilities of the ANP and the Brazilian government in relation to the emission of greenhouse gases, and the legal obligations of the agency and its general director”, he states.

The entity says that the offer of new oil exploration fields in Brazil on the closing day of COP28, which discusses solutions to the climate crisis, is a “bomb” of greenhouse gas emissions.

According to the NGO’s estimates, if the auction auctioned all the blocks, the total emissions generated from the exploration of the new areas would be greater than 1 GtCO2e (billion tons of carbon equivalent), a volume that corresponds to 43.5% of the current emissions of the country.

But this is not what normally happens in the ANP’s new auction model, which offers block sectors instead of isolated blocks — hence the high number of areas. In the last auction of this type, the market presented offers for 15% of the areas offered.