Exxon, Chevron acquires blocks in Brazil's environmentally-sensitive Foz do Amazonas basin

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

This is the first time that a company other than Brazil's Petrobras has ventured into the biodiverse ecological area. The move has sparked a backlash among environmentalists, who claim it will increase the risks of contamination to water sources and ecosystems on which Brazilians and wildlife depend.

The plans by Chevron to partner with China's CNPC, Exxon and oil giant Petrobras in drilling for oil in Foz do Amazonas Basin, located just off the coast of Amazon rainforest are controversial because of its environmental importance. Permits have also been delayed due to delays.

Petrobras, Exxon Mobil and other companies formed two consortia to secure ten blocks. The Brazilian company acquired five blocks, as operator, whereas the U.S.-based giant bought the remaining five, as operator.

Chevron, in a joint venture with China's CNPC (state-owned), acquired a total nine blocks. Chevron was the operator.

This area is home to coral reefs, coastal Indigenous communities and is considered an oil frontier because it shares the same geology as nearby Guyana where Exxon Mobil has developed huge fields.

Brazil's Mines and Energy minister Alexandre Silveira celebrated the auction results, saying that exploration in Foz do Amazonas was a "winning Ticket" for reducing poverty in north Brazil.

Silveira stated in a press release that "the interest of U.S. Companies, Chevron, and Exxon which operate in Guyana already, shows our enormous potential."

HURDLES FOR LICENSING

Petrobras is seeking approval to drill in this area for a long time. The environmental agency Ibama made a decision last month that allowed it to move closer to its goal. However, the decision came with a caveat regarding future permits for the area.

Magda Chabriard, the Chief Executive of Petrobras, said earlier this month that she believed Petrobras would clear the final step in order to get a drilling permit during the second half July.

Petrobras said that the fact that more majors are joining the field, and more companies have been able to enter the market, will increase the pressure for the exploration license to be granted in the Equatorial margin. Foz do Amazonas forms part of a larger offshore region, in which Foz do Amazonas plays a significant role.

Silveira was confident that Ibama will speed up the licensing process after the auction. This happened while Indigenous organizations and nongovernmental organizations such as the Arayara Institute were protesting outside the auction venue to what they called a "doomsday" auction.

Mariana Andrade's statement, as oceans coordinator for Greenpeace Brasil, stated that drilling new wells would increase the risk of disasters and worsen climate change.

The Brazilian government will receive 989 million reais (about $180.79 million) as a signing bonus from the auction of 34 blocks. ($1 = $5.4704 reais). (Reporting and writing by Fabio Teixeira; editing by Aurora Ellis).

(source: Reuters)