Lula's coalition roiled by decision to block Petrobras' Amazon project

By Lisandra Paraguassu and Marta Nogueira

BRASILIA (Reuters) - A decision by Brazil's environmental regulator to block state-owned oil company Petrobras' Amazon oil project has exposed tensions in President Luiz Inacio Lula da Silva's coalition between green advocates and those prioritizing economic development.

Ibama, late on Wednesday, said it would block a request by state-run oil giant Petrobras to drill at the Amazon mouth near Amapá, in a much-awaited decision that followed a technical recommendation by Ibama experts to reject the project.

In a filing, Petrobras said it planned to file an appeal for Ibama to reconsider its ruling, saying it "strictly complied with all the requirements of the licensing process."

The decision by Ibama, which is overseen by Lula's environment minister, the globally recognized environmentalist Marina Silva, has riled some within the governing coalition.

Lula, who hails from the poor northeast, has staked his international reputation on reversing environmental back-sliding under his far-right predecessor former President Jair Bolsonaro. But he is also under pressure to deliver much-needed growth to poor, under-developed regions in the north and northeast, and wants state-owned Petrobras to be an engine of that growth.

Senator Randolfe Rodrigues, who represents the state of Amapa, said Ibama had taken a decision with major economic impact for the state without taking into account the views of the people of Amapa or its state government. Rodrigues is a senior Lula ally who ran his presidential campaign last year.

"We'll fight against this decision," Rodrigues wrote on Twitter, adding that "the people of Amapa want to have the right to be heard". He later announced he was departing his party, the center-left Sustainability Network, in light of the decision.

The Sustainability Network was founded in the early 2010s by Silva, the environment minister, who appointed Ibama head Rodrigo Agostinho.

Agostinho told GloboNews TV on Thursday that Petrobras would be allowed to file a new request to drill in the region, but noted that studies presented by the firm to date were not enough for the move to be cleared.

Petrobras' said in its filing that it was not giving up hope on its plans to develop an oil-rich region with potential reserves of up to 14 billion barrels of oil.

"The company remains committed to the development of the Brazilian Equatorial Margin," it said, adding it would "ensure the country's energy security."


Despite Petrobras' stated intentions, the ruling effectively ends all future development of the unexplored oil prospects at the mouth of the Amazon river, former Ibama boss Suely Araujo told Reuters.

Araujo said that even if Petrobras undertakes the deeper studies requested by Ibama, the final say would still rest with the regulator. "The decision is final," she said, adding she expected Lula to support Ibama's ruling.

Shares in Petrobras were down around 0.5% on Thursday.

Exploration rights in the area were auctioned in 2013, but oil majors BP and TotalEnergies pulled out due to the cost of the off-shore studies and difficulties in obtaining licenses for drilling, while Petrobras kept going.

Neither Lula's office, nor the environment ministry responded to requests for comment.

Environmental groups celebrated Ibama's decision.

In a statement, Greenpeace said Ibama had emphasized the need for "a fair energy transition, instead of insisting on yet another oil exploration frontier in the context of the climate crisis."

Ibama has "postponed the end of the world," environmental group Observatorio do Clima proclaimed.

(Reporting by Lisandra Paraguasu in Brasilia, Eduardo Simoes in Sao Paulo and Marta Nogueira in Rio de Janeiro; Editing by Steven Grattan and Aurora Ellis)