Some of the parcels disposed of were in the environmentally sensitive Foz do Amazonas Basin

WHAT Critics slam Brazil as it auctions off 34 oil and gas exploration tracts

WHY Brazil’s sustainability commitments are under scrutiny

WHAT NEXT Protests are certain when Brazil hosts the annual UN climate summit COP30 in November

Petrobras, ExxonMobil, Chevron and Shell, CNPC and Equinor were amongst the major oil companies winning tracts in Brazil’s latest offshore auction, which had become controversial.

Brazil's oil and gas regulator ANP auctioned off just 34 of 172 offshore hydrocarbon parcels presented to bidders on June 17, whilst designating the Equatorial Margin as the country's newest fossil fuel exploration territory.

The Equatorial Margin is considered by some to be sensitive ecologically and has become symbolic in the controversy surrounding the auction, especially in the same year that Brazil will host COP30 in Belém.

The bidding produced BRL989.26mn ($180mn) in execution premiums paid to Brazil’s federal government, accomplishing a 534.47% markup according to regulatory information, O Globo reported.

“This result proves that we are on the right path,” said Mines and Energy Minister Alexandre Silveira.

Brazil, the largest oil producer in Latin America, wants to top up diminishing oil reserves. The Equatorial Margin is seen by some as the as good a bet as the pre-salt region where current offshore production is centred, said Bloomberg.

Climate monitoring organisations had warned the auction contradicted the nation's environmental commitments by potentially increasing CO2 emissions substantially.

Petrobras commands

Nine qualified corporations submitted successful offers from 31 eligible entrants, with Brazil’s national oil company (NOC) Petrobras commanding the procedure by obtaining 13 parcels, principally through partnerships with US crude major Exxon.

Of 63 parcels positioned on the Equatorial Margin, 19 were acquired, all situated within the Foz do Amazonas Territory where 47 parcels were originally presented.

Petrobras has yet to be allowed by Ibama, the country’s environmental authority, to drill its first well in the Foz do Amazonas basin.

The NOC secured 10 blocks in the Foz do Amazonas Basin and three in Pelotas Basin in a 50:50 partnership with Exxon, half of which Petrobras will operate and half of which Exxon will operate.

No offers materialised for Potiguar Territory parcels.

The minimum capital forecast achieved BRL1.45bn, demonstrating a 33.47% markup compared with minimum exploratory schemes.

When the auction’s sale timetable was declared in February, more than 330 exploratory parcels were accessible, with the Mines and Energy Department projecting BRL444mn in execution premiums. The outcome more than doubled projections, though the department anticipated BRL3.2bn in minimum exploratory capital whilst securing just over half that figure.

"The outcome was exceptionally favourable and demonstrates investors' trust in Brazil's exploratory capabilities," declared Patricia Baran, ANP's acting director general.

In a statement, Petrobras’ CEO said the NOC had succeeded in winning the areas that it had established as priorities. “We are satisfied with the auction results. With these results and the continuity of our exploration activities, including in the Equatorial Margin and the Pelotas Basin, we remain optimistic about our chances of replacing oil reserves and ensuring Brazil's energy security,” said the CEO, Magda Chambriard.

Apart from Petrobras and ExxonMobil, seven other companies secured exploration rights. They were Chevron, CNPC, Shell, Equinor, Karoon, PetroGal and Dillianz.

Ibama and drilling licences

“Exxon and Chevron kept their course in investing in oil and gas while most of European companies diversified to renewables, and they are sticking to their strategy,” Marcelo de Assis, an oil consultant in Rio de Janeiro, told Bloomberg. “They are betting that Ibama will grant drilling licences to Petrobras, and that activists will not prevail in Brazilian courts.”

Foz do Amazonas represented 85% of total sale premiums, producing BRL844.3mn from 19 parcels granted to Petrobras, ExxonMobil, Chevron and Chinese enterprise CNPC. Supermajor Shell’s Brazilian subsidiary won exploration rights in four blocks in the Santos Basin.

Norway’s Equinor won the S-M-1617 block, Dillianz secured PRC-T-121, and a partnership between Chevron and CNPC wone nine tracts. For its part, Australia’s Karoon won six blocks, all in the Santos Basin.

"The standout was the Amazon estuary; indeed, it received the largest awards," confirmed Roberto Ardenghy, president of the Brazilian Institute of Oil and Gas.

Brazil’s green credentials?

The sale proceeded despite ecological resistance and judicial challenges from prosecutors and indigenous communities concerned about environmental consequences in the Amazon River mouth region, which was established as Brazil's primary new petroleum exploration zone.

The federal prosecutor’s office in the state of Pará, of which the COP30-hosting city of Belém is the capital, had endorsed a suspension of the auction.

According to climate institute Climainfo and the emissions tracking platform SEEG data, exploiting resources from all the concessions auctioned could generate more than 11bn tonnes of CO2 equivalent, surpassing agricultural sector emissions from the previous six years, Argus reported.

The environmentally fragile Foz do Amazonas offshore region, alongside six additional Amazon sedimentary basins – Parecis, Solimões, Amazonas, Parnaíba, Barreirinhas and Pará Maranhão – contain reserves totalling 69bn barrels of oil equivalent (boe).

Fossil fuel extraction from all these deposits could release 24bn tonnes of CO2 equivalent, approaching half of global 2023 emissions, according to the Fossil Fuel Treaty network, reported Argus.

Environmental advocates argue the auction highlights Brazil's conflicting stance regarding petroleum production and climate action.

Brazil as climate leader

Few G20 members have unveiled a national climate plan under the Paris climate agreement, but Brazil has. It intends to cut greenhouse gas (GHG) emissions by 59-67% lower than 2005 levels by the middle of next decade, which would be by 850mn-1.05bn tonnes of CO2 equivalent.

Yet President Luiz Inácio Lula da Silva has repeatedly endorsed hydrocarbon development – even challenging environmental authority Ibama over drilling permit delays – whilst simultaneously positioning Brazil as an example of climate leadership.

Just hours before the auction took place, climate campaigners were still hopeful Lula would backtrack and suspend it.

"Brazil now has the chance to lead by example by suspending the auction and showing the world that it is ready for a just, sustainable, and fossil-free future," Gisela Hurtado, senior campaigner at Stand.earth, said the day before the action.

Their attempt obviously failed.

In November, protests by Indigenous groups and environmentalists are certain at COP30, where there will be a race amongst attending countries to try and meet the Paris Agreement goal of a rise in temperature of no more than around 1.5 degrees Celsius above pre-industrial levels. The conference will also see an emphasis on getting richer countries to help poorer countries help prevent and cope with the climate crisis.