Brazil struggles on Equatorial Margin

Environmental agencies and other market participants have clashed with Brazilian state-controlled Petrobras over its $2.9bn plan to explore the potentially hydrocarbon-rich Equatorial Margin off the northern coast.

The Equatorial Margin has drawn comparisons with recent discoveries that have lifted Guyana and Suriname into the hydrocarbon exploration spotlight. But while developments in those countries continue to grow and draw new investments, Brazil has struggled to explore the Equatorial Margin because of environmental restraints.

Mines and energy minister Alexandre Silveira called the Equatorial Margin a "passport to the future," with estimated investment potential of $50bn and possible oil revenues of $200bn.

But environment minister Marina Silva opposes developing the region. In May, environment watchdog Ibama denied state-controlled Petrobras' license request to explore block FZA-M-59, on the Foz do Amazonas basin of the Equatorial Margin.

There are five countries exploring their portions of the Equatorial Margin: Colombia, Trinidad Tobago, Guyana, Suriname and Brazil. A total of 193 fields have been drilled there since 2015, leading to 97 discoveries, according to Petrobras. The most significant discoveries were in Guyana and Suriname, but Colombia discovered eight natural gas fields in the margin's east — including one this month by Shell. Petrobras was involved in two of those discoveries in the Chuchupa gas field.

TotalEnergies and BP gave up their exploration blocks in the Brazilian section of the Equatorial Margin in 2020 after failing to receive environmental permits.

Ibama green lit Petrobras to explore two wells in the Potiguar basin in September, but there are still 36 other license requests in the watchdog's queue, including nine for the Amazonas basin — six by Petrobras, two by independent producer PetroRio and one by also independent Enauta.

Despite the delays, Petrobras chief executive Jean Paul Prates has not given up on the firm's expectations for the Amazon basin.

Brazil's urge to explore the area — despite President Luiz Inacio Lula da Silva pledge to lead a global green agenda — comes as output from the prolific pre-salt offshore region further to the south is set to decline. Production will peak in six years and will begin dropping substantially by 2029, according to the mines and energy ministry.

While neighboring countries lack a robust regulatory and environmental structure, the fields are close to the Brazilian coast.

"Some may say Brazil has the onus without the bonus to explore its potential reserves," a high-ranking executive in an oil and gas company said. "And because of the withdrawal of international investments, it is all in Petrobras hands. Does the company have the means and the will to keep going?"

By Betina Moura