RIO DE JANIERO—After putting to rest a nearly decade-long battle concerning local content for the oil and gas industry, operators in Brazil are facing another issue: obtaining environmental licensing from the Brazilian Institute of Environment and Renewable Natural Resources (Ibama).

The concerns are justifiable, considering the Equatorial Margin area is near one of the most diverse and delicate ecosystems in the world—the Amazon Forest. Exploratory activities in the region require great attention by the government and oil companies.

Producers are not allowed to start exploratory activities in leased areas without environmental clearance, according to Brazil’s environmental regulation.

While the concerns are not new, the environmental licensing delays are affecting the start of Equatorial Margin operations in areas acquired during the 11th licensing round in 2013.The area, which has an estimated 30 billion barrels of oil in situ located off Brazil’s northern coast, is seen as a new highly profitable E&P frontier.

Equatorial Margin operations are part of the government’s strategy to expand Brazil’s domestic oil and gas operations. Thirty operators won bids for 50 blocks in the area’s five basins—Foz do Amazonas, Pará-Maranhão, Barreirinhas, Ceará and Potiguar.

According to the Brazilian Institute of Petroleum’s (IBP) President Jose Camargo, the institution is working to help Brazil’s government develop a safer and a more efficient environmental licensing procedure for the oil industry.

“The IBP board is always in contact with the energy minister and Ibama in order to discuss the best ways to improve the licensing process. Brazil needs to establish legal safety with less subjective evaluation criteria and more predictability requirements. Thus, we are going to have more efficient and faster licensing procedures,” Camargo said.

However, the IBP president emphasized that delays in issuing licenses are making companies postpone investments in the country.

This is the case of French major Total. The company set out to have its exploration work in the Foz do Amazonas Basin finished by 2018; however, its exploratory deadline was extended to 2020 by Brazil’s oil regulator, ANP, while it awaits licensing.

Total, which acquired blocks FZA-M-57, FZA-M-86, FZA-M-88, FZA-M-125 and FZA-M-127, has already received some equipment needed for initial exploration work such as drill pipes, drillbits and containers. All the items ordered by the producer have been stored at the Belém port in the northern state of Pará, according to the producer‘s latest report.

Total also has a pending environment licensing in one block in the Ceará Basin.

Other majors, such as BP Plc (NYSE: BP), ExxonMobil Corp. (NYSE: XOM) and local independent producers, face similar problems.

To address operators’ concerns, Brazil’s National Energy Committee (CNPE), headed by Energy Minister José Coelho Filho, agreed Feb. 10 to extend the exploratory phase deadline for blocks acquired in the 11th licensing round.

In an official statement, Brazil’s environment regulator said new licensing procedures are being discussed among members of the CNPE and IBP in an effort to speed up the issuing process. Giving the oil and gas industry a priority status will be among the measures implemented. The new environmental licensing rules will be launched soon, according to Ibama.

Potential Frontier Region

ExxonMobil’s successful exploration campaign offshore Guyana, only 50 km away from the Foz do Amazonas Basin, has raised hopes for big discoveries in the region, despite the slow permitting process in the Brazilian Equatorial Margin.ExxonMobil’s play-opening Liza discovery, which was followed by the Payara discovery, on the Stabroek Block offshore Guyana is on the fast track. The fields are believed to hold more than 1 billion barrels of oil.

The potential for more discoveries is feasible, according to Brazilian independent operator Queiroz Galvao E&P’s (QGEP)Lincoln Guardado. The company operates blocks in the Foz do Amazonas and Pará-Maranhão basins, but has not obtained environmental licensing yet.

“Considering the recent findings in Guyana and Suriname, other operators might also achieve success in their exploratory activities,” Guardado told investors during a teleconference on the company’s third-quarter 2016 results.

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