Rio de Janeiro — Brazilian federal environmental regulator IBAMA denied French oil company Total a license to drill in the environmentally sensitive Foz do Amazonas Basin, criticizing the company for failing to submit documents and complete impact studies despite several requests.
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IBAMA said in a statement late Friday that requests to drill in the FZA-M-57, FZA-M-86, FZA-M-88, FZA-M-125 and FZA-M-127 offshore blocks was denied "because of a series of technical problems identified throughout the licensing process."
Total plans to analyze IBAMA's decision and documents submitted during the licensing process before deciding on its next step, the company said in a statement Monday. Total purchased development rights to the five exploration and production concessions during Brazil's 11th bid round held in 2013.
The rejection complicates Brazil's efforts to develop the equatorial margin off the country's northern coast, which sits along the same geological trend that produced a series of oil discoveries made off the coast of Guyana by ExxonMobil. ExxonMobil's Liza discovery is estimated to hold more than 3 billion barrels of recoverable oil equivalent. The region is also considered an analog for oil fields and other finds made off the coast of West Africa, such as Jubilee.
The recent discovery of a previously unknown coral reef in the turbid waters of the Amazon River delta, however, has undermined attempts to drill in the region. The low-light area was previously thought inhospitable for corals, but environmental activists such as Greenpeace have since filed protests with IBAMA in an attempt to win a moratorium on drilling in the region.
BP and Brazilian independent oil and natural gas producer QGEP Participacoes are also seeking environmental licenses to drill in the region. Last year, IBAMA denied BP's request to drill a well in the FZA-M-59 block. IBAMA requested a complementary environmental study for the one-well campaign.
Brazilian independent Petro Rio also requested a license to carry out seismic studies at the FZA-M-539 block.
Despite the troubles, IBAMA has allowed other exploration activity to move forward. Earlier this year, IBAMA approved seismic survey company CGG's request to conduct a survey of the FZA-M-320 block that is 100% operated by Colombia's Ecopetrol.
The regulator is also working more closely with Brazil's National Petroleum Agency, or ANP, to clear exploration and production blocks in the equatorial margin for activity before they even go up for sale during the country's bid rounds. The ANP removed several blocks from the 15th bid round held in March after initial evaluations were delayed. ANP expects to get the relevant approvals and include the blocks in the 16th bid round scheduled to be held in the second half of 2019.
While IBAMA has been roundly criticized by the oil industry for the long time periods associated with environmental licensing approvals, the regulator noted that so far in 2018 it had approved 24 licenses to conduct seismic studies, 20 licenses to conduct drilling activities and 46 licenses to produce oil and gas.
The change in government after President-elect Jair Bolsonaro is sworn into power on January 1 is also expected to speed up the environmental licensing process. Bolsonaro has been a vocal critic of IBAMA's ability to impose severe fines on businesses and pledged to end the practice after he was elected.
Total's failure was not unexpected after IBAMA warned the company in 2017 that failure to adequately respond to the regulator's request for additional documentation and complementary environmental impact studies would result in rejection. The regulator made three separate requests for additional documents, IBAMA noted.
"The institute guaranteed Total every possible opportunity to complement and clarify the technical problems noted during the process," IBAMA said.
IBAMA President Suely Araujo noted in her rejection that "deep uncertainties" remained regarding the company's emergency action plan, which failed to address mitigation efforts to protect the newly discovered coral reef and other marine life as well as potential impacts on Brazil's neighbors in the event of a spill or accident. Araujo also called for additional studies to determine the extent and complexity of the reef.
The denial leaves Total stuck for the time being after nearly three years of discussions with IBAMA.
-- Jeff Fick, email@example.com
-- Edited by Annie Siebert, firstname.lastname@example.org