Petrobras clings to frontier acreage abandoned by IOCs

Brazil's state-controlled Petrobras says it will assume BP's stakes in six deepwater exploration blocks in the environmentally sensitive Foz do Amazonas basin.

The transaction, whose value was not disclosed, will leave Petrobras with 100pc of the FZA-M-57, FZA-M-59, FZA-M-86, FZA-M-88, FZA-M-125 and FZA-M-127 blocks, pending regulatory approval.

BP did not immediately respond to a request for comment.

The UK company follows in the footsteps of Total, which sold its 40pc stake in five of the blocks to Petrobras last year. The French company decided to pull out after repeatedly failing to secure drilling licenses from environmental watchdog Ibama.

Petrobras already holds a 70pc operating stake in the FZA-M-59 block, BP the remaining 30pc interest.

The six blocks, all awarded during Brazil's 11th upstream licensing round in 2013, were part of a strategic push by the Brazilian government to move exploration spending beyond southeast basins. Estimated to hold as much as 125bn bl of in situ reserves, Foz do Amazonas was one of the most contested areas during the 11th round in part because it is believed to share geological characteristics with offshore discoveries in nearby Guyana and Suriname. ExxonMobil is currently developing Guyanese offshore acreage, with a production forecast of 750,000 b/d in 2026.

Reef barrier

Petrobras has earmarked around $1bn of its $55bn 2021-25 spending plan for exploration in the equatorial margin where Foz do Amazonas is located. Outgoing chief executive Roberto Castello Branco has said the area remains attractive, but exploration has been thwarted by environmental licensing hurdles.

A reef was confirmed in Foz do Amazonas in 2016, changing the dynamic for development.

While EU oil companies have grown especially averse to pursuing projects that run counter to their greening strategies, Petrobras is unlikely to walk away in the near term.

Brazil's northern region remains a strong support base for Brazilian president Jair Bolsonaro, who might seek to shore up local ties by directing investment there ahead of October 2022 elections.

The incoming Petrobras chief executive, former army general Joaquim Silva e Luna, will shape the course of the company's future investment, together with new managers to replace those who stepped down in response to his precipitous appointment by Bolsonaro in February. Silva e Luna is expected to assume the role following an extraordinary shareholders meeting on 12 April.

BP holds operating and working interests in a handful of pre-salt exploration blocks acquired between 2017-19, but the firm has been paring back its Brazilian presence. In November, Brazilian independent PetroRio agreed to acquire BP's 35.7pc operating stake in Wahoo and nearby Itaipu field, both in the Campos basin. Last month, PetroRio announced it had agreed to acquire Total's 28.6pc stake in Wahoo.

By Nathan Walters