US oil majors acquire blocks in Brazil’s Foz do Amazonas basin

Reuters) – Exxon Mobil and Chevron on Tuesday took their first steps toward exploring for oil in Brazil’s Foz do Amazonas basin, scooping up offshore blocks auctioned by the country in the promising but environmentally sensitive area.

The bids came as state-run Petrobras touted signs of breaking a stalemate on licensing in the offshore region near the mouth of the Amazon River, after years as the only oil firm working to overcome environmental concerns there.

The auction triggered backlash from Indigenous and environmental activists, who said oil exploration near that stretch of the Amazon coast threatens local ecosystems and traditional communities.

Two consortia involving Petrobras and Exxon Mobil secured 10 blocks in total, with the Brazilian firm acquiring five blocks as operator and the U.S. major taking the other five as operator.

A Chevron-led consortium, including China’s state-owned CNPC, acquired nine blocks.

Petrobras, Chevron, and Exxon Mobil shares were up more than 2% on Tuesday, also buoyed by higher oil prices.

The Foz do Amazonas basin is part of the Equatorial Margin, Brazil’s most promising frontier for oil exploration due to shared geology with nearby Guyana, where Exxon is developing huge fields.

Brazil’s Mines and Energy Minister Alexandre Silveira celebrated the auction results, calling oil exploration in the Foz do Amazonas region a “winning ticket” to reducing poverty in northern Brazil.

“The interest from the U.S. companies, Chevron and Exxon, which already operate in Guyana, demonstrates that our potential is gigantic,” Silveira said in a statement.

“The bid round was a success and showed the companies’ interest in exploring the Equatorial Margin even amidst uncertainty,” said Rystad Energy analyst Flavio Menten.

Brazil is set to collect 989 million reais ($181 million) in signing bonuses for a total of 34 blocks, also including areas in the Santos and Pelotas basins purchased by Shell, Equinor, Karoon and Dillianz.

LICENSING HURDLES

Foz do Amazonas’ blocks accounted for the bulk of the signing bonuses, totaling 844 million reais.

Petrobras has spent years seeking permits to drill in the area. A decision by environmental agency Ibama last month let it move a step closer to the goal, but came with an important caveat for future permits in the area.

CEO Magda Chambriard told Reuters this month she believes Petrobras will clear the last step to getting a permit to drill in the second half of July.

“Seeing more companies getting in, the majors, adds to the pressure for licenses to explore in the Equatorial Margin,” said a Petrobras executive, who was not authorized to speak on the record.

Silveira said he was sure Ibama would speed up the licensing process after the auction, which came as Indigenous and non-profit groups such as the Arayara Institute protested outside of the venue against what they called a “doomsday auction.”

“Drilling new wells will increase the risk of environmental disasters, worsen the climate crisis and deepen inequalities,” Greenpeace Brasil’s oceans coordinator, Mariana Andrade, said in a statement.

($1 = 5.4704 reais)