Oil exploration in the Amazon has been going on for 30 years

The controversy over whether or not to explore for oil at the mouth of the Amazon River is the cause of the latest crisis in the government of Luiz Inácio Lula da Silva. But the production of hydrocarbons in the Amazon is nothing new: Petrobras has operated oil and gas wells in the jungle since 1986, without ever registering an oil spill accident or environmental contamination. But legal uncertainty is keeping investment away from the region.

Polo Urucu is located in the Solimões Basin, in Coari, in the heart of the Amazon. It has an area of ​​approximately 350 square kilometers, and is located 650 kilometers away from the capital, Manaus.

Urucu is the largest proven onshore oil and natural gas reserve in Brazil, with average monthly production, in the first quarter of 2020, of 106,353 barrels of oil equivalent per day, of which more than 16,000 are oil and 14,000 are gas.

The discovery of Urucu, almost 40 years ago, was also marked by the discussion on the best way to reconcile oil exploration activities in the region. Petrobras says that it is made with high technology, care for the preservation of the environment and respect for traditional communities that live in the area.

“We carefully recompose the vegetation cover removed in the well drilling process. After the installation of each well, there is only a small clearing open in the forest to house the equipment”, says the company on its website.

Oil had to go by ferry to the refinery in Manaus, but today it is transported in pipelines

At the beginning of the operations in Urucu, it took more than a week to transport the production, in small barges that went along the river to reach Coari. From there, production went on larger barges to the Isaac Sabbá Refinery, in Manaus.

Since 2009, Urucu has had a set of pipelines that allow production to flow. The Urucu-Coari-Manaus gas pipeline is 663 kilometers long and has the capacity to transport up to 5.5 million cubic meters per day of natural gas, from Coari to the capital of Amazonas.

The Urucu Complex was put up for sale by Petrobras in June 2020, as part of the company’s divestment policy, which decided to concentrate efforts and investments on offshore production, especially in the deepest layer of the pre-salt layer.

Environmental rules make it difficult to explore minerals in the Amazon

In addition to the great biodiversity, the Amazon has an enormous amount of mineral deposits. Some examples are: iron, manganese, aluminum, copper, zinc, nickel, chromium, titanium, phosphate, gold, silver, platinum, palladium, rhodium, tin, tungsten, niobium, tantalum, zirconium, rare earths, uranium and diamonds.

Many of these ores are essential for the market that explores advanced technologies, such as lasers, batteries, cell phones and microchips. But the exploitation of minerals in the region has always been seen with suspicion, which tries to prevent environmental devastation. Limits and criteria for the practice of mining, as well as acceptable limits for forest deforestation are not entirely clear. Its implementation varies according to the interpretation of each supervisory body and Justice.

That is, in theory, with modern equipment, advanced technology and legal support, mineral exploration can be carried out in a sustainable way, generating social and economic benefits to the regions where they take place. But, in practice, legal uncertainty and the bureaucracy involved in environmental licensing prevent the development of exploration operations.

Legal uncertainty drives away investments in the production of potash for fertilizers

One of the examples of how bureaucracy and legislation impede the development of the region is the exploitation of potassium, which is used as fertilizer. Currently, Brazil suffers from a strategic dependence on Russia to buy this type of input, which is necessary for agribusiness.

On February 23, the advice of the executive secretary of the Ministry of Agriculture stated in a document that the exploitation of potassium in the Amazon can supply the national market with up to 50% of its need for long-term consumption. But local production does not develop because of legal uncertainty.

At least one company tried to obtain a license to operate in the region. Potássio do Brasil started licensing with the Environmental Protection Institute of Amazonas (Ipaam). But the process is still pending in court and involves indigenous people in the region. The Federal Public Ministry considers that a prior license issued in 2015 is illegal and all licensing must be redone by Ibama.

Ibama prevented oil exploration in the “new pre-salt layer” near the Amazon

The crisis at the time is the arm wrestling match between the Ministry of the Environment, led by Marina Silva, and the Ministry of Mines and Energy, led by Alexandre Silveira, over oil exploration in the so-called Equatorial Margin – the region between Amapá and the Rio Grande do Norte which has great oil potential.

Petrobras’ Strategic Plan for the period from 2023 to 2027 foresees investments of US$ 2.9 billion (R$ 15 billion) in the region, with the drilling of 16 wells starting this year. But the company was surprised by the denial of environmental licensing by Ibama, which considered the operations risky.

The licensing process for the area has been dragging on since April 2014, having been initially opened by the company BP Energy do Brasil Ltda, which was trying to explore the block.

An environmental impact study was filed in March 2015 and three public hearings were held in November 2017 in the municipalities of Belém (PA), Oiapoque (AP) and Macapá (AP). In July 2020, British oil company BP withdrew from the project and informed Ibama that it would transfer exploratory rights and ownership of the environmental licensing process for offshore drilling in the block to Petrobras.

From then on, the licensing problem passed to the Brazilian company. The environmental institute stated that the oil company’s plan had worrying inconsistencies for safe operation in a new exploratory frontier of high socio-environmental vulnerability.

Ibama’s position on oil in the Amazon generated a crisis in the Lula government

Ibama’s refusal has divided the government. While the ministries of the Environment and of Mines and Energy disagree on the denial of licensing, President Lula himself declared that he finds it difficult for exploration to pose a problem for the Amazon. “If extracting oil from Foz do Amazonas, which is 530 kilometers from Amazonas, is on the high seas, if it presents a problem for Amazonas, it will certainly not be explored. But I find it difficult, because it is 530 kilometers from the Amazon, ”he said.

The drilling, as Lula pointed out, is located 540 kilometers from the mouth of the Amazon River, the equivalent of the distance between Rio de Janeiro and São Paulo. And 175 kilometers from the coast of Amapá.

The crisis also led to the departure of the leader of the government in Congress, Senator Randolfe Rodrigues, from the Sustainability Network, due to differences with Marina Silva. He is without a party but can join the PT.

During a hearing in the Chamber this week, the Minister of the Environment once again stated that environmental legislation must be complied with in Brazil.

“One could very well have done the study of the coverage area, but that is not what was done. And the law is to be fulfilled. Unfortunately, fossil fuels will continue to be part of the world’s energy matrix for some time, because many regions cannot make the transition overnight”.

But Marina’s victory was brief. When analyzing a provisional measure that deals with the structuring of ministries in the Lula government, the National Congress emptied the attributions of Marina’s Ministry of the Environment, with the president’s endorsement. Lula did not want to lose support from the Centrão legislators. Planalto is still trying to get around the crisis.

Petrobras appeals Ibama’s decision and says it will take care of the environment

Meanwhile, Petrobras announced, in a note, that it asked Ibama to reconsider the decision that denied the license to drill the exploratory well off the coast of Amapá.

The company guarantees that it has met beyond the requirements set forth in the legislation, and that it has fulfilled all the technical requirements for the project. Petrobras also said that “the emergency response structure proposed by the company is the largest in the country”.

The note from Petrobras also says that “the company will undertake to expand the fauna stabilization base in the municipality of Oiapoque, in Amapá. The unit will operate in conjunction with the Fauna Rehabilitation and Depetrolization Center (CRD), already built by Petrobras in Belém (PA). “Thus, in the remote possibility of an accident with a leak, assistance to the fauna can be carried out in both locations”, said the company.