Petrobras and OGP return shallow water blocks

OREANDA-NEWS. July 16, 2015. Brazil's state-controlled Petrobras and embattled Brazilian independent OGP have returned eight shallow water blocks in the Espirito Santo and Para-Maranho basins to Brazilian oil regulator ANP

The companies returned the blocks after encountering problems obtaining environmental licenses from Brazilian federal environmental agency IBAMA. The agency had refused to grant drilling licenses for both basins on account of their proximity to protected regions.

Petrobras returned the ES-M-411, ES-M-436 and ES-M-437 blocks, part of the BM-ES-27 region of the Esp?rito Santo basin.

In 2005, the company and partner Shell paid around R60mn (\\$19.1mn) for the blocks during Brazil's 7th upstream licensing round. Brazilian mining giant Vale now has a 17.5pc interest in the blocks.

Petrobras held a 65pc operating interest in the blocks. Vale and Shell each held a 17.5pc stake.

OGP, formerly known as OGX, has returned its wholly-owned PAMA-M-407, PAMA-M-408, PAMA-M-443, PAMA-M-591 and PAMA-M-624 shallow water blocks.

In 2007, OGP paid around R10mn in signing bonuses for the blocks. At the time, OGP said the frontier basin had similar geological features as promising discoveries made on the continental shelf of Ghana in West Africa.

Blocks returned to the ANP may be included in future bid rounds.

Environmental licensing has been a constant issue for companies exploring in Brazil. The government's plans to kickstart shale exploration with a 2013 offer of onshore acreage, known as the 12th bid round, were thwarted by legal battles over environmental concerns. A handful of companies have been blocked from exploring for conventional resources in onshore acreage won during the 12th bid round.

Environmental licensing also remains a concern for some of the 266 blocks that will be offered in the 13th upstream licensing round, now planned for 7 October. The bid round covers acreage in onshore, shallow and deepwater blocks, some in frontier basins with few environmental licensing precendents.