A coral reef threatens to wipe out Brazil’s best prospect for oil production growth

Brazil’s state-controlled producer, Petrobras, is decommissioning its drillship in the Foz do Amazonas exploration block as its deployment near a reef habitat near the mouth of the Amazon has been blocked, creating a setback for Brazil’s chance of boosting oil production. Petrobras is challenging Brazil’s environmental agency’s decision to block drilling near the reef, a process that could take up to a year. The estimated six-month standoff has cost the company up to $200m, and Petrobras’ ability to increase its oil production is dwindling. The equatorial margin of northeastern Brazil, where the reef is located, is the primary target for exploration spending in the company’s five-year business plan. Petrobras has claimed that reserves in this region could be similar to those in Guyana’s north, where billions of dollars worth of oil have been discovered.

Petrobras has already sold the majority of its overseas exploration assets, as they expected that significant discoveries could still be made in the Santos and Campos basins, where nearly all its oil is produced. The equatorial margin was not seen as a significant area for exploration until after discouraging results in the traditional basins of southern Brazil known as the pre-salt region. Beyond the equatorial margin, Petrobras has few other cost-effective assets to exploit. Production is expected to decrease after 2030 if more oil is not discovered.

Tags: brazilian offshore industry,environmental protection,petrobras


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