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Brazil plagued by permitting problems

Delays in seismic and drilling permits for acreage awarded in 2013 licensing round run into years as stretched licensing agency struggles to cope

ENVIRONMENTAL permitting is emerging as the Achilles heel of Brazil’s ambitious licensing programme, amid persistent doubts about the capacity of federal agencies to provide the predictability expected by oil companies.

The permitting process for offshore activity such as shooting seismic or drilling wells is supposed to take between six months to a year, depending on the sensitivity of the area, but has been running into years rather than months, especially on frontier acreage off the northern coast of Brazil.

Licences in these areas were awarded in 2013 at Brazil’s eleventh licensing round, carrying drilling commitments amounting to 41 wells, but not one has been spudded.

The problem started with delays to most of the planned seismic acquisition campaigns and has continued with attempts to get drilling activity going.

One key factor has been the tendency of an under-resourced environmental licensing agency to make permitting conditional on operators carrying out a great deal of primary research, making up for an information gap found in many areas and on many topics.

Total’s efforts to start drilling in the Foz de Amazonas basin are emblematic. The French giant operates five blocks in Foz do Amazonas, with a 40% stake, partnered by Petrobras and BP.

Total has a nine-well commitment with market regulator ANP for the Foz do Amazonas basin, but this can be adjusted to seven wells if Total agrees to deepen its probes.

The French major was gung-ho about spudding its first well in the region in the current quarter, and lined up Ensco’s drillship DS-9 for the job.

The contract will cover the drilling of two firm wells in the northern equatorial margin play where subsea currents from the Amazon River and high- temperature, high-pressure drilling conditions are among the challenges.

The wells are in water depths of 1900 metres and 2700 metres respectively, with charter options for an additional two wells, Upstream understands.

Drilling equipment is on the ready at a base in Belem port in northern Para state, but the oil and gas licensing arm of Brazilian environmental agency IBAMA is yet to issue its initial on the permitting terms, leaving Total and its partners in limbo.

The uncertainty is such that one source told Upstream that Total is considering taking the rig to the Santos basin to drill two wells on the Lapa project, although this information has not been confirmed.

Those responsible for the permitting process are under increasing pressure to conclude this first permitting process from the 2013 round before 27 September, when Brazil is due to hold is 14th round for E&P concesssions.

“The 14th round includes interesting frontier acreage in places like the Pelotas and Sergipe-Alagoas basins, and there have been very positive moves in making the terms more attractive and more flexible, but it becomes harder to sell this if not a single drilling permit has been issued for equatorial margin blocks licensed in 2013,” said one oil company manager mulling participation.

Alexandre D’Avignon, the head of Ibama’s licensing arm for oil and gas exploration participated last week in a workshop hosted by the Brazilian Geophysical Society (SBGF) and told listeners that Ibama is open to initiatives such as building up a shared database with licensing authorities.

Oil industry leaders hope such initiatives will eventually hel them understand what is expected of them before they even bid.

But D'Avignon said the agency has been hampered by a lack of resources, with technically qualified staff currently handling about 40 licensing processes each.

D’Avignon told Upstream that the preliminary report for the closely-watched Total permit is “very close to being issued” although he stressed this report, essentially a recommendation, can include conditions and contingency elements. 

“This does not necessarily mean that a permit follows immediately,” he said.

D’Avignon stressed that spill modelling studies which cover the Total blocks showed some risk of contamination reaching the territorial waters of French Guiana. 

“A permit can be issued from the technical point of view, but there may also be some inter-governmental considerations here,” he said.

One industry insider said the Ibama stance on the international aspects of the Foz de Amazonas exploration was unnecessarily tough.

“They are looking at modelling based on worst-case scenarios, such as failure to do anything about a spill for 36 hours. 

In reality, Total has already brought so many contingency elements to its planning that this is nigh on impossible scenario,” said one source.

Total has also run into an international campaign against drilling in the Foz de Amazonas region, led by Greenpeace. 

British supermajor BP also operates blocks in the region, and will face its first public hearing on the matter in the Amazon region next month.