Petrobras' Environmental Hurdles Lead to Oil Blocks Auction in Brazil

Petróleo Brasileiro S.A. – Petrobras’ PBR years-long disputes with the environmental authorities on drilling licenses recently led to an oil block auction, whereby Brazil’s oil regulator, ANP, will provide exploration rights in several offshore oil blocks.

The auction, which is scheduled to take place on June 17, will offer 172 blocks spanning both land and deep-water zones in northeastern and southern Brazil, including the Equatorial Margin — a region that could be key to Brazil’s energy future. The blocks across five sedimentary basins, including the deepwater Potiguar and Foz do Amazonas, located near the equator, will also be offered, which are considered to hold Brazil’s greatest potential for replenishing reserves and are projected to start declining by 2030.

Out of the 172 oil blocks, 47 are at the Foz do Amazonas, where Petrobras, currently carrying a Zacks Rank #3 (Hold),won the exploration deal in 2023 and since then, has been awaiting environmental clearance to drill its first well. These oil blocks are expected to contain the same potential as those in Suriname and Guyana, where Exxon Mobil found billions of barrels of oil. The delay in environmental clearance certainly reduces the attractiveness of these blocks for the auction.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Areas of Extreme Environmental Sensitivity

Certain environmental working groups have suggested dropping some Potiguar Basin oil blocks, like Atol das Rocas and the Fernando de Noronha archipelago as they are in places of extreme environmental sensitivity and ecosystem connectivity.

However, Brazil’s several ministries jointly allowed these sensitive areas to be offered for auction, even though this authorization expires just a day after the auction. This puts the Potiguar Basin at particular risk of exclusion from future rounds.

Global Energy Players Interested in Bidding

Despite the controversies, the auction has attracted interest from the industry’s big players. Thirty-one companies have registered themselves to bid for the upcoming auction, including Petrobras, Exxon Mobil Corporation XOM, Chevron Corporation CVX, BP p.l.c. BP,Shell and Equinor.

Exxon Mobil is a U.S.-based oil and gas giant that has a track record of optimal capital structure and Capex discipline across the commodity price cycle, making it a low-risk energy player producing industry-leading returns. XOM’s expected growth rate for earnings per share for the next year is 21.88%, which aligns favorably with the industry growth rate of 16.30%.

Houston, TX-based Chevron is one of the largest publicly traded oil and gas companiesthat participates in every aspect related to energy,from oil production to refining and marketing. CVX generates more than $200 billion in annual revenues and produces over three million barrels per day of oil equivalent. The Zacks Consensus Estimate for CVX’s 2025 earnings indicates 2.49% year-over-year growth.

BP, an integrated oil and gas company, is driven by its strategic shift toward traditional and renewable energy. BP plans to reduce debt and strengthen its balance sheet while prioritizing shareholder returns by generating proceeds from asset sales. XOM’s expected growth rate for earnings per share for the next year is 11.76%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research