Oil Firms: Slow Environmental Licensing Blocking Investment

Brazil's largest oil industry group IBP has cited environmental licensing as one of the key hindrances to investments, IBP president Joao de Lucca said in conference with Sao Paulo state industry leaders.

"This is a critical issue that becomes even more so when the global oil industry is heated up and suppliers' capacities are all taken up by orders," he said.

IBP represent 222 companies, including oil companies operating in Brazil, as well as equipment and services suppliers.

Demand is high for equipment such a ships, drill bits and cables. Licensing delays put companies at risk of missing deadlines established in contracts with Brazil's hydrocarbons regulator ANP.

"Sometimes we have to bring equipment from the Gulf of Mexico to Brazil," said Lucca.

ANP awards exploration licenses that range from 4-8 years, with project development running for the same time frame. There are currently some 56 oil companies operating in Brazil, most of which have been awarded exploration licenses since 1999 with authorization to explore 559 blocks in total.

Companies have to obtain separate environmental license for each block. Some oil companies complain the time it takes to authorize seismic studies and exploratory drillings can take several months. For development projects, licensing takes longer.


Brazil's federal energy company Petrobras (NYSE: PBR) is the most active in Brazil, with exploration licenses for 418 blocks.

Petrobras' CEO Jose Gabrielli agreed with Lucca's comments, though he said how oil companies have to mitigate damage to the environment.

"Licensing becomes a problem when we have tight schedules and the deadlines for licensing are not certain," he said. "This makes it difficult to speed up projects."

Echoing the complaints against environmental authorities, US Chamber of Commerce environment commission president Sergio Raposo called for "more rationality" in the licensing process for power projects.


Ibama, however, claims it is simply doing its job and that the licensing process is improving.

"Ibama doesn't do anything different from licensing agents in environmentally sensitive regions like Alaska or Florida," Ibama licensing department head Luiz Kunz said in an interview.

"We had difficulties in licensing some projects in very sensitive areas, but that does not affect oil E&P in the country," he said. "We have to be just as careful in licensing projects as authorities in other countries."

However, Kunz pointed out the licensing process has been improving as the government invests to revamp technology and improve the hiring of new staff.

At the start of 2003, Ibama had less than 10 employees in the licensing department, outsourcing the rest. It now has 136 employees working in the department.

"You can see the improvement of these measures in terms of total number of licenses that have been granted in recent years," Kunz said.

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