Brazil one step closer to expanding oil frontiers ahead of COP30

Less than six months ahead of COP30, Brazil’s environment agency IBAMA has allowed energy major Petrobras to get one step closer to exploring for oil and gas in the Amazon Basin.

The government agency accepted the company’s latest environmental plan for research in Block-59, about 160 km off the country’s eastern coast, also known as the Equatorial Margin. Final license for drilling is contingent on the outcome of ​​a simulated accidental oil spill, yet to be scheduled.

The assessment came after months of intense pressure from Petrobras, parliamentarians and even president Lula da Silva himself. As COP30 approaches, so increases the fear that the controversy will spill over into the event. Even the COP30 president, André Correa do Lago, said “it wouldn’t be good to have this debate in the middle of COP.” Dubbed the “Amazon COP,” COP30 will take place in the Brazilian city of Belem from November 10th-21st.

“The attempt to detach the two is a strong indicator the project isn’t a good thing,” André Guimarães, executive director of the Amazon Environmental Research Institute (IPAM), told Gas Outlook.

The dispatch that approved Petrobras’ plan contradicts previous rejections dating as early as 2023 and was received by environment officials in the government with “deep outrage and protest” and called a “severe institutional setback.”

Petrobras stated that the company “has been diligently complying with all the requirements and procedures established by regulatory, licensing, and oversight bodies.”

“In reality, the original arguments for rejecting the company’s request haven’t been overcome,” Suely Araújo, climate policy coordinator at the Observatório do Clima, an NGO, and former IBAMA president, told Gas Outlook. In 2018, as president of the agency, Araújo denied licenses for five blocks contiguous to Block-59, all located in one of the most biodiverse places on Earth.   

The region is notorious for its strong maritime currents, which could carry oil spills to international waters in a matter of hours, hindering relief. “There are no multilateral agreements to coordinate adequate responses,” Araújo said.   

In what previous IBAMA assessments called “best case scenario,” it would take Petrobras over ten hours to transport oiled wildlife to a stabilisation base. In the past, the company abandoned a well in the region, as one of its drilling rigs got dragged and tilted by the currents.

For observers, licensing Block-59 would fast-track the opening of new oil frontiers. IBAMA’s decision was just in time to entice companies to bid in the upcoming June 17th oil and gas auction. The Brazilian National Petroleum Agency (ANP) rushed to market the 172 blocks before the 18th, when a temporary authorisation to offer the 47 blocks located in the Amazon Basin expires.

“Brazil is signaling to the world that it’s relaxing its climate and environmental commitments,” Juliano Bueno, technical director at Arayara International Institute, told Gas Outlook. “But that creates legal uncertainty for companies that have to comply with their own domestic environmental regulations,” he adds.

The country’s environmental protections are under further threat as the draft law dubbed  the “devastation bill” advances in Congress. The text approved in the Senate on Wednesday (21/05) simplifies the rules for environmental licensing, establishing a ‘self-licensing’ mechanism and the possibility of approving projects that might cause ‘significant environmental degradation’, as long as they are considered strategic for the country. The decision over what constitutes a strategic project will be up to a political council, which in turn will be a criteria to prioritise their analysis.

A note published by the Ministry of Environment and Climate Change said the bill “represents a significant dismantling of the existing regulatory framework on the subject and poses a risk to environmental and social security in the country,” and that it “violates the principle of non-regression in environmental law.”

Strategic investment or climate setback?

“Even in the most ambitious global decarbonization scenarios, hydrocarbons will continue to play a significant role in global energy at least until 2050,” the Brazilian Energy Research Office told Gas Outlook in a written statement. “To ensure the country’s energy security, there is an urgent need for new exploratory efforts, especially in new frontiers, like the Equatorial Margin,” it continues.

An investigation by independent outlet InfoAmazonia disputes this. It found that if the country meets its climate targets, proven oil reserves should last until at least 2039, with no need for either importing or opening new frontiers.

Petrobras plans to invest U$3 billion dollars over the next five years to drill 15 new wells in the Amazon Basin, with most of the new production intended for export. In 2024 alone, nearly half of the 4 million barrels produced daily was sold abroad. “If internal demand increases, there’s the very simple solution of reducing exportation,” said Araújo.

Those who defend expanding oil frontiers to the Amazon Basin justify it as a source of revenue to finance the energy transition, in spite of uncertainty over its very existence in the region, the time it would take for production to become profitable, and the lack of concrete plans to invest in renewables.

For Araújo, while revenue from current oil production could, and should, be used to finance  the energy transition, it makes no sense to open new frontiers, especially as the International Energy Agency recommends halting the development of new oil and gas fields, if the world is to reach net zero by 2050.

“Opening new frontiers to finance energy transition delays addressing the problem while making it worse and harder to solve,” Araújo said.

She also challenges the economic validity of expanding fossil fuels when demand is expected to plummet after 2030, a scenario aggravated by the fall-out from U.S. President Donald Trump’s tariffs, which have already resulted in oil market surplus.   

But for Vitor Sousa, a fuel market analyst at investment platform Genial Investimentos, oil and gas will remain a lucrative investment in the foreseeable future. “A price decline in the decades to come is already taken into account in present project proposals,” he told Gas Outlook. “Even as renewables bite a larger share of the energy market, electrification isn’t moving fast enough for fossils to become obsolete — or even unprofitable — anytime soon.”

“It is hard to deny that oil operations have benefits,” Guimarães said. “They create jobs, stimulate the local economy and generate royalties. But they don’t increase quality of life.”

Guimarães, Araújo and Bueno all compare the discourse about exploring the Amazon Basin with that about the pre-salt discovery two decades ago: at their own times, both were painted as a silver bullet to solve social problems. Instead, experts agree, what experience has shown is that riches end up concentrated and inequality skyrockets.

Understanding that vulnerable states and cities need the financial resources that could come from oil royalties, an initiative that Guimarães was part of proposed the creation of a “green royalties” fiduciary fund. He admits that creating the U$20 billion fund wouldn’t be nearly as simple as drilling for oil. “But we wanted to show that there are fair and sustainable alternatives that don’t rely on fossil fuel profits,” he said. 

According to The Guardian, COP30 is set to be one of the most consequential climate summits of the past years. After three years of the climate talks being held in countries under authoritarian regimes, one of the key points of expectation for COP30 lies with civil society, projected to play a more central role at this year’s summit. 

As the host of COP30, Brazil will have to address all that Baku’s summit last year was unable to achieve and reach new, more ambitious targets under the Paris Agreement, all whilst navigating a complex geopolitical context of growing climate denialism and low trust in multilateralism, in a world where average temperature increases exceeded 1.5°C for the first time.

(Writing by Amanda Magnani; editing by Sophie Davies)