Petrobras Makes "Plan B" in Case Amazon Drilling Permit Gets Rejected

Brazilian offshore oil giant Petrobras has made a "plan B" for using the rig it chartered to drill off the mouth of the Amazon, given the permitting headwinds it has encountered with the Brazilian Institute for the Environment and Renewable Natural Resources (Ibama).

Last month, a team of technical reviewers at the regulator recommended rejecting Petrobras' permit application for drilling in a promising lease block off the Amazon River's mouth (Foz do Amazonas). The scientific review found that Petrobras' studies for the impact of the project had "inconsistencies," even after a series of revisions. The team also pointed to "significant deficiencies" in wildlife protection plans for an area that has endangered species found nowhere else. In addition, the team reiterated a longstanding concern that Petrobras has not performed a broader study to examine the potential impacts of the operation on the broader region, outside of the immediate area of the drilling site. 

Conservationists and marine scientists note that most of Brazil's sensitive mangrove habitat can be found in this region, along with an expanse of deep-sea coral reefs which have only recently been discovered and are yet to be studied. The area is also known for strong, dynamic currents, which could carry a spill for long distances in a short timeframe. 

The final decision on permitting rests with Ibama President Rodrigo Agostinho, a political appointee. His counterpart at the Ministry of Mines and Energy, Alexandre Silveira, has put a top priority on drilling in this region, the last frontier for Brazil's oil industry. "We have a window of opportunity, we cannot miss the new pre-salt [offshore fields]," said Silveira in March. "We need to take advantage of the wealth of the Brazilian people that is underground."

Silveira's view is shared by another appointee, Petrobras CEO Jean Paul Prates. Prates has made drilling in the Equatorial Margin (Amazon) region one of his top priorities, noting that it would help sustain the oil and gas revenue that undergirds federal spending.

Ibama has not yet handed down a final decision, but if it is unfavorable to Petrobras, the company plans to move its chartered rig to a "Plan B" site in the Potiguar Basin, a top executive told Reuters on Monday. 

If Petrobras does abandon the area, it would be the third supermajor to do so. In 2020-21, BP and TotalEnergies both gave up on plans to drill in the same region because of environmental and permitting considerations.