Brazil's IBAMA grants Petrobras permit to drill equatorial margin exploration oil well

The Brazilian Institute for the Environment and Renewable Natural Resources, or IBAMA, opened the country's environmentally sensitive equatorial margin to oil and natural gas exploration activity, granting state-led oil company Petrobras a permit to drill an exploration well in the FZA-M-59 block of the Foz do Amazonas Basin, Petrobras said Oct. 20.

"The drilling rig is located on site and the drilling is expected to start immediately, with a duration of five months," Petrobras said. "The company hopes to obtain geologic information and evaluate whether the area contains oil and gas deposits on an economic scale during this exploration survey. There will be no oil production during this phase."

The well will be drilled by the Ocyan-owned ODN-II drillship, also known as NS-42, according to Petrobras. The drilling rig arrived at the FZA-M-59 block offshore Amapa state on Aug. 18.

The much-anticipated environmental license will allow Petrobras to drill the first exploration well in the promising western portion of Brazil's equatorial margin since 2015. The so-called equatorial margin stretches along Brazil's northern coast from Amapa state in the west to Rio Grande do Norte state in the east, where Petrobras discovered oil in the Anhanga and Pitu Oeste wells in 2024.

Petrobras plans to spend $3.0 billion to drill 15 wells in the equatorial margin under the company's $111 billion investment plan 2025-2029. Petrobras holds 100% operating stakes in 16 blocks spread across the Barreirinhas, Ceara, Foz do Amazonas, Para-Maranhao and Potiguar Basins.

Brazil's equatorial margin is widely considered one of the country's last remaining offshore exploration frontiers, with geologists expecting to find similar oil and natural gas deposits as those found offshore neighboring Guyana and Suriname, government and industry officials said. The Foz do Amazonas Basin is located off the coast of Amapa state on Brazil's maritime border with French Guiana and along the same trend as major oil discoveries offshore neighboring Guyana and Suriname.

Latin America's biggest oil and natural gas producer needs to expand drilling because production from the subsalt frontier in the Campos and Santos Basins off the country's southeast coast is expected to peak in 2030 and then start to decline. Subsalt production sharing blocks sold at acreage sales held in 2017-2019 also have failed to yield any big discoveries, which means Brazil needs to make new discoveries to offset the declines or face returning to the ranks of net oil importers, according to government and industry officials.

"The company remains committed to the development of the Brazilian equatorial margin, recognizing the importance of new frontiers to ensure the country's energy security and the resources necessary for a fair energy transition," Petrobras said.

Environmental debate

Exploration in Brazil's equatorial margin has been at a virtual standstill since 2017, when the Great Amazon Reef System was discovered in the turbid waters at the mouth of the Amazon River. Environmental and indigenous groups have pressured the government and IBAMA to deny drilling permits in the region.

IBAMA rejected Petrobras' request for a permit in May 2023, which kicked off a years-long appeals process. IBAMA approved Petrobras' emergency response plan on Sept. 24, with the company submitting adjustments to the plan Sept. 26.

"Petrobras met all of the requirements established by IBAMA, fully complying with the environmental licensing process," Petrobras said.

Petrobras' progress laid out a road map for oil companies to follow to obtain permits in the region, resulting in renewed interest in the region at Brazil's fifth Open Acreage concession auction held in June, according to industry officials.

Chevron Corp. teamed with China National Petroleum Corp. to win nine offshore blocks in the Foz do Amazonas Basin, while Petrobras and ExxonMobil also claimed nine blocks in the basin. ExxonMobil's success in Guyana was a key factor in the partnership, according to Petrobras officials.

The Open Acreage auction represented the first major sale of offshore acreage in the equatorial margin since 2013, when Brazil held its 11th bid round. Many of the blocks in the region, however, were sold off or returned to the National Petroleum Agency, or ANP, for resale after IBAMA denied drilling permits. That led global heavyweights such as BP and TotalEnergies to exit the play.