Brazil seems to be facing tensions concerning oil exploitation, since Brazilian environmental protection agency, Ibama, proposed that the auction of oil exploration blocs near Abrolhos national park shouldn’t commence. Abrolhos national park is the richest area of marine biodiversity in the South Atlantic Ocean.
Concerning Ibama’s advice, Eduardo Bim, Ibama’s president, proposed that they should think over and recall their proposal, as he was informed by the executive-secretary of the Ministry of the Environment that the issue was of ‘strategic relevance’ and so wrote a report overruling his own staff and allowing the auction to go through.
According to what Manuela Andreoni, editor, reported in ‘China Dialogue Ocean’, this is yet another controversy in Brazil, as last November, voters elected president Jair Bolsonaro, a far-right politician who believes the nation has already done more than its fair share to protect the environment. Since coming into power, his team has undermined the Ministry of the Environment by slashing its budget and appointing as minister Ricardo Salles, a lawyer who appears to be more friendly to businesses that commit environmental irregularities than to his own staff.
Generally, Brazil seems to be at the centre of attention for those who wish to invest in Brazil’s oil sector, and more specifically, China has been one of the most prolific investors in Brazil’s oil sector, with nearly $40 billion directed to projects such as building pipelines and oil-for-loan contracts.
As Mrs Manuela Andreoni stated
Ibama is tasked with the approval of any oil blocs proposed for auction by the National Petroleum Agency (ANP). In this case, Ibama’s technical staff ruled against the inclusion of seven of the 36 blocs listed by ANP for an October auction.
In addition, the overruling of the decision was revealed in documents by the Associated Press and Brazilian newspaper O Estado de São Paulo last month.
The documents reveal that one Ibama study that backed the original decision warned of the potential for an oil spill in one of the blocs to destroy the Abrolhos park, even though the closest bloc is 300 kilometres away.
According to the editor, the exploration of Brazilian offshore oil blocs hasn’t been a goal in Brazil for Chinese companies until recently. The Brazilian investments started in 2010, following the country’s announcement of the discovery of huge oil deposits beneath a thick layer of salt crust on the ocean floor.
In light of the announcement, five years later, three companies with Chinese capital were already among the top 10 players in Brazil’s oil and gas production: Sinochem Petróleo, Repsol Sinopec and Petrogal Brasil.
However, the danger behind the investments is that after the auction, the companies that will be able to explore the blocks will still have to get an environmental permission from Ibama, where Ibama commented that it could refuse the permit, meaning loss of investment.
Rafael Schiozer, a professor of finance at Fundação Getúlio Vargas university, and a specialist in the oil industry commented
If it’s declared impracticable, it’s impracticable. The (company) that bought it is out of luck.
He continued that after Ibama’s possibility of declining offers, it would be no surprise if no investors were to bid for the blocs near Abrolhos.
Concluding, in December 2018, Ibama blocked a proposal by Total to drill for oil and gas at the mouth of the Amazon river.