Amazon Basin oil auction leaves legal and economic uncertainty
Brazil’s Federal Prosecution Office has filed a lawsuit to cancel sales of oil blocks in the Amazon Basin, as studies show climate failure is the only scenario where operations could be successful.
On June 17th, nine companies led by a consortium between Petrobras and ExxonMobil secured the rights to 34 of the 172 oil and gas exploration blocks auctioned by Brazil’s National Petroleum Agency (ANP). Most of them were located in the Amazon Basin, where Petrobas’ Block 59 is getting closer to obtaining a drilling license.
With a record R$989 million (US$180 million) raised, the bidding results got a mixed reaction. The Minister of Mines and Energy Alexandre Silveira — one of the loudest voices in support of expanding oil production — celebrated what he deemed proof that Brazil is “on the right track.” For environmental groups, with only 20% of the offered blocks claimed, the weak market uptake was a “half victory.”
Concession contracts are expected to be signed on November 28th, a week after the end of COP30. That is when, according to Nicole Oliveira, executive director at Arayara International Institute, the auction process will be final.
But a five-year temporary sales authorisation expired on June 18th, leaving the acquisition of 23 blocks legally void.
The authorisation filled in for environmental assessments in blocks that had none. It was signed two years prior to the 2022 ordinance that established the procedures, criteria and deadlines for such authorisations which, according to Oliveira, it failed to meet.
Days before the auction started, the Federal Prosecution Office filed a legal injunction demanding its suspension, citing non-compliance with socio-environmental rules. Alternatively, it called for the 47 blocks in the Amazon Basin not to be offered. With nothing having changed, a revised process now calls for a halt to subsequent proceedings.
“In violation of the ordinance, some of the blocks offered overlapped with conservation areas and Indigenous territories,” Oliveira told Gas Outlook. She also highlighted the absence of free, prior and informed consultations, legally granted to traditional communities affected by such projects.
In the past, the Arayara Institute filed similar lawsuits and sales contracts got judicially nullified. This time, however, Oliveira fears political interference might affect the outcome. Besides president Lula da Silva’s unwavering support, a recent survey has found 83% of Congress supports exploring for oil in the Amazon Basin.
Should the auction reach completion, companies would still need to go through IBAMA, Brazil’s environment agency, to get a drilling license. If Block 59 is any indication, besides decade-long processes, they are also to expect stark backlogs.
Betting on climate failure
Brazilian energy security was one of the main rationales behind the June 17th auction. Advocates argue that expanding oil exploration frontiers is necessary to replenish pre-salt’s declining reservoirs. But in 2025 alone, Petrobras has announced four newly-found deposits and most of the production it expects from the Amazon Basin is intended for export.
“Brazil has no strategic reserves for a future when oil will be increasingly scarce,” Oliveira said.
Government claims that revenues from new oil and gas would finance the country’s energy transition also don’t hold up. Blocks offered in the auction were made available through a concession regime, meaning that once the amount offered is payed, Brazil will have no part in the resources or the profit.
Since a 2017 law increased tax incentives for activities related to oil and gas, the country has also forfeited R$260 billion (US$ 48 billion) in potential revenue. In that same period, only 0,06% of the industry’s proceeds were allocated to energy transition projects.
“In reality, Brazil doesn’t have a transition plan,” Claudio Angelo, international policy coordinator at Observatório do Clima, told Gas Outlook. He and Oliveira say that the country is swimming against the current and carbonising its energy matrix. Since countries agreed to phase away from fossil fuels at COP28 in 2023, Brazil ranked third in new expansion projects.
“Petrobras, for one, has divested from renewables and returned to what it knows best: invest in oil,” Angelo says.
Brazil’s fossil fuel expansion plans could only prosper in a “dangerously overheated planet,” found a report by WWF-Brasil, the International Institute for Sustainable Development and the World Benchmarking Alliance.
In a world where global warming is limited to 1.5 degrees, as per the Paris Agreement, up to 56% of the country’s new production would result in financial loss. For Petrobras, that number could be as high as 85%, representing a deficit of up to US$35 billion.
“Oil companies are betting on the failure of climate policies, so they can go about their business as usual,” Angelo says.
An oily COP30?
Closeness to COP30 doesn’t seem to shake Brazil’s plans to expand fossil fuel exploration. The June 17th auction was held in Rio de Janeiro while leaders gathered at the Bonn Climate Change Conference to kick off negotiations for the November summit.
During the opening of the auction, ANP also announced the next bidding session. Scheduled for October, it will offer 13 blocks of the pre-salt — this time, under production sharing regimes.
From Bonn, Angelo called the whole episode a “double act of sabotage.” He said: “the Brazilian government is endangering everyone’s future, while also sabotaging its own diplomats and undermining the leadership of COP30’s presidency,” he said in a press conference.
Angelo told Gas Outlook that, while in Bonn, he witnessed questions over whether Brazil would advance the agenda of an energy transition away from fossil fuels. Still, the COP30 presidency reached breakthroughs in two priority topics: just energy transition and adaptation goals. The Global Stocktake, which deals with the timeline for phasing away from fossil fuels, was the one agenda they failed to advance.
For Angelo, Brazil passed its “first COP presidency test.” Most importantly, he says, the government’s pro-oil stance doesn’t seem to have contaminated the country’s diplomatic team, who still holds carte blanche to push for greater ambition.
(Writing by Amanda Magnani; editing by Sophie Davies)