Commodities

Brazil’s plans to drill for oil in the Amazon hit stiff Indigenous resistance

Published

9 months ago

April 18, 2024

By Marta Nogueira and Fabio Teixeira

OIAPOQUE, Brazil (Reuters) – State-run energy firm Petrobras has hit growing resistance from Indigenous groups and government agencies to its premier exploration project, which would open the most promising part of Brazil’s northern coast to oil drilling.

Environmental agency Ibama denied Petrobras a license for exploratory drilling offshore in the Foz do Amazonas area last year, citing possible impacts on Indigenous groups and the sensitive coastal biome. But a Petrobras appeal for Ibama to reverse its decision has drawn powerful political backing.

President Luiz Inacio Lula da Silva said in September that Brazil should be able to “research” the region’s potential resources, given the national interest. Energy Minister Alexandre Silveira last week told journalists that it is “Brazil’s right to know the potential” of the offshore fields.

That has bolstered bullish rhetoric from Petrobras about its chances of getting a license to drill in the blocks off the coast of Amapa state.

“Get ready Amapa, because we are arriving,” Petrobras CEO Jean Paul Prates told local politicians and oil executives at an event last month promoting offshore exploration along the northern coast in an area known as Equatorial Margin. He called it “perhaps the last frontier of the oil era for Brazil.”

He has said he expects to start drilling in the second half of this year or sooner in the most promising part of the Equatorial Margin, named the Foz do Amazonas basin, for the mouth of the Amazon (NASDAQ:) River several hundred kilometers away. Foz de Amazonas shares geology with the coast of nearby Guyana, where Exxon (NYSE:) is developing huge fields.

Ibama chief Rodrigo Agostinho said in November that a decision would be made in early 2024, although labor disputes at the agency have since slowed the pace of environmental licensing.

Visits to four Indigenous villages, interviews with over a dozen local leaders, and previously unreported documents show organized opposition mounting to Petrobras’ attempt to reverse the halt on exploratory drilling.

Petrobras has drawn fresh government scrutiny. Indigenous affairs agency Funai asked Ibama regulators in December to run several more studies to assess impacts, according to a Dec. 11 government memo from Funai to Ibama obtained in a freedom of information request. The proposed studies would have to be done before Ibama can decide whether to accept the Petrobras appeal.

In July 2022, the Council of Chieftains of the Indigenous People of Oiapoque (CCPIO), an umbrella group representing more than 60 Indigenous villages in the area, asked federal prosecutors to get involved, denouncing an alleged violation of their rights.

Brazilian prosecutors have a mandate to protect Indigenous peoples, often taking their side in disputes with firms or federal and state governments. In September 2022 they recommended that Ibama not issue the license before a formal consultation of the local communities. Records from the prosecutors’ preliminary investigation, seen by Reuters, show that in December 2023, CCPIO asked them to broker a 13-month formal consultation with Petrobras about Indigenous views on the project.

The consultation process, along with studies proposed by Funai, would push a decision into 2025 when Brazil will host the COP30 climate change summit in the Amazon city of Belem, which could make it more politically difficult to approve drilling, a person close to CCPIO told Reuters.

Minutes from a June 2023 meeting between Petrobras, CCPIO leaders and prosecutors show the company offered to consult local communities about eventual commercial oil production in the area, if Ibama requests it, but did not commit to a consultation before drilling exploratory wells.

Asked about Indigenous leaders’ calls for immediate consultations, Petrobras told Reuters in a statement that the time for such requests has passed.

“The definition of whether or not it is necessary to consult indigenous peoples and/or traditional communities takes place at the initial stage of the environmental licensing process,” Petrobras said.

Ibama has not yet replied to the recommendation by Indigenous affairs agency Funai late last year for more assessments of the effects of Petrobras’ exploration plans, according to an April 3 Funai document seen by Reuters.

Both agencies did not reply to requests for comment by Reuters. CCPIO and prosecutors said a consultation must be made before Ibama issues a license to drill.

FAULT LINES The drilling standoff has created a fault line in Lula’s government, which is balancing his vows to protect the Amazon and its Indigenous people with the interests of Petrobras and political allies that stand to reap the benefits of a new oil-producing region.

Silveira, the energy minister, has said that a single Foz de Amazonas block off the coast of Amapa state could yield more than 5.6 billion barrels of oil, which would be the company’s biggest discovery in over a decade.

In its appeal to Ibama, the company said that exploration will have no negative impact on local communities.

“We ratify the understanding that there is no direct impact of the temporary activity of drilling a well 175 km from the coast on Indigenous communities,” Petrobras said.

Local people and some environmentalists warn that drilling could threaten coastal mangroves and vast wetlands rich with fish and plant life, while disrupting the lives of the 8,000 Indigenous people in Oiapoque, on Brazil’s far northern coast.

The CCPIO, the highest Indigenous authority in Oiapoque, is composed of more than 60 caciques, or chieftains, representing over 8,000 people. They do not oppose the search for oil per se, but invoke what they say is a right to prior consultation by Petrobras, with supervision from the federal prosecutors’ office and Funai.

The International Labor Organization convention 169, which Brazil signed, says that governments must consult Indigenous and tribal peoples through their representative institutions, whenever considering legislative or administrative measures that may affect them directly.

CHANGE AFOOT

The plans to drill are already changing Oiapoque. Waves of migrant workers have arrived looking for jobs in an oil industry that does not yet exist, state lawmaker Inacio Monteiro said.

Monteiro said he meets often with Indigenous constituents, talking to them about the benefits that Petrobras could bring to Oiapoque, including jobs, tax revenue and social programs.

Yet CCPIO and its allies have become increasingly vocal with their resistance as Petrobras garners support for its appeal, including at the COP28 climate summit in December, where Luene Karipuna told a panel that Petrobras and local politicians had tried to silence her people.

“Strategically, this prior consultation is our only safety net,” 25-year-old Karipuna, who is studying to be a teacher, said near her home in the Santa Izabel village, where marshes fill with seawater at certain times of the year.

When the rivers run low, tides bring in saltwater fish the villagers eat, but some interviewed by Reuters fear it could just as easily bring oil spills.

POLITICAL PRESSURE

Indigenous leaders said a full-court press from local politicians in support of Petrobras was on display at a May 2023 public hearing that Monteiro, the state lawmaker, called just days after Petrobras’ license was denied.

Amapa’s political powerbrokers, including key Lula allies, rallied within days at Oiapoque’s town hall for the hearing to promote Petrobras’ plans to drill.

At the event, one man in a white polo shirt and a feathered headdress, Ramon Karipuna told the crowd that Indigenous people were in favor of drilling, according to minutes of the meeting seen by Reuters.

Karipuna said he spoke for the coordinator of the CCPIO council of chieftains, who was absent for “health reasons.”

Petrobras later cited Karipuna’s endorsement in its appeal of the denied drilling license and described him as a “CCPIO representative.”

However, CCPIO coordinator Cacique Edmilson Oliveira told Reuters he was not sick that day. CCPIO had refused to take part in the hastily summoned event, according to a May 18 letter sent in response to Monteiro’s invitation to the hearing and seen by Reuters.

“This is very concerning. That’s why we are saying that we already feel threatened,” Oliveira said, accusing Petrobras of distorting the views of Indigenous leaders. “We never sat down and reached an agreement for approval.”

In a telephone interview, Karipuna confirmed he worked at the town hall and that he is not a member of CCPIO – even though Petrobras used his words as its main argument to Ibama that Indigenous representatives supported drilling. He also backed away from his comments in favor of drilling.

“To this day many people have doubts about this Petrobras business,” he said.

Asked about its mischaracterization of Karipuna, Petrobras cited the minutes of the May 2023 meeting, without elaborating.

Commodities

Precious metals, energy sectors seen gaining at least 10% in 2025 – Wells Fargo

Published

20 hours ago

January 12, 2025

Investing.com – Macroeconomic challenges facing commodities in the first three quarters of 2024 have reversed and become tailwinds entering the new year, according to analysts at Wells Fargo (NYSE:).

Elevated interest rates and broader economic uncertainties weighed on commodity prices over the January-to-September period last year, although that trend largely turned around in the fourth quarter, the analysts led by Mason Mendez said in a note to clients published on Monday.

Commodities in general delivered a modest performance in 2024, they said, with the Bloomberg Commodity Total (EPA:) Return Index clocking a 4.5% year-to-date increase as of Dec. 26.

“While supply conditions remained supportive of higher prices, commodity demand was held back by global economic headwinds,” the analysts wrote.

That tepid demand is seen improving in 2025, becoming a possible spark that ignites an uptick in commodity prices, they added. However, they flagged that the supply side “should not be forgotten.”

“After two years of lackluster commodity prices, many commodity producers have slowed production growth,” the analysts said. “This could become a particularly acute point in 2025 in the event that demand recovers at a stronger pace than most expect.”

They noted that new commodity output often lags demand “by months, and sometimes years.”

Among individual sectors, the analysts said they are most keen on precious metals, such as , and energy, with both expected to gain at least 10% in 2025. This would exceed the return the analysts expect from the mid-point of their 250-270 target range range for the broader Bloomberg Commodity Total Return Index.

Gold, in particular, experienced a turbulent end to 2024 due in part to caution around more Federal Reserve interest rate cuts, which contributed to an uptick in nominal and real bond yields that dented the appeal of non-yielding bullion.

Still, the yellow metal jumped by around 27% annually to close out the year at $2,625 per troy ounce, and the prospect of more Fed rate reductions — albeit at a possibly slower pace — could continue to boost its appeal, the Wells Fargo analysts said.

They set a target range for gold prices at $2,700-$2,800 per troy ounce this year.

Energy, meanwhile, is tipped to benefit from greater demand as global economic conditions improve, the analysts forecast. is tipped to be between $85-$95 a barrel, while crude is seen at $90-$100 per barrel. Oil prices dropped by around 3% in 2024, weighed down partly by a sluggish post-pandemic recovery in global demand.

Commodities

Energy, crude oil prices outlook for 2025, according to Raymond James

Published

20 hours ago

January 12, 2025

Investing.com — Raymond James analysts provided a cautious outlook for the energy sector in 2025.

Despite energy’s underperformance over the past two years, the midstream group emerged as a bright spot in 2024, with the Alerian/AMNA index surging 37% and Raymond (NS:) James’ midstream coverage group up 41%.

Geopolitical tensions, such as the ongoing conflict in Ukraine and recent Middle East confrontations, have had little impact on oil market fundamentals.

“Oil price volatility continues to be driven by rather old-fashioned supply and demand factors,” the analysts note.

They highlight mixed messages from OPEC and weak demand from China as key contributors to the current market uncertainty. Additionally, the strength of the U.S. dollar, particularly around the U.S. election, is also exerting downward pressure on oil prices.

Looking ahead, Raymond James forecasts West Texas Intermediate (WTI) crude to average $70 per barrel in 2025, slightly above the futures strip, with carrying a $5 premium.

In contrast, U.S. prices are expected to average $4 per Mcf, significantly higher than current futures prices.

A notable theme for 2025 is the continued impact of artificial intelligence (AI) on the energy sector.

“AI remains the number-one story in the energy sector,” Raymond James states. “Accommodating this incremental demand will take an all-of-the-above strategy: gas, renewables, and – in certain circumstances, and with very long lead times – nuclear as well.”

“The energy sector currently sits at only ~3% of S&P market cap, but investor sentiment still remains above pre-COVID levels. That being said, near-term uncertainty regarding the commodities (namely oil) has left investors with little conviction at the moment,” concluded the firm.

Commodities

US hits Russian oil with toughest sanctions yet in bid to give Ukraine, Trump leverage

Published

20 hours ago

January 12, 2025

By Timothy Gardner, Daphne Psaledakis, Nidhi Verma and Dmitry Zhdannikov

WASHINGTON/NEW DELHI/LONDON (Reuters) -U.S. President Joe Biden’s administration imposed its broadest package of sanctions so far targeting Russia’s oil and gas revenues on Friday, in an effort to give Kyiv and Donald Trump’s incoming team leverage to reach a deal for peace in Ukraine.

The move is meant to cut Russia’s revenues for continuing the war in Ukraine that has killed more than 12,300 civilians and reduced cities to rubble since Moscow invaded in February, 2022.

Ukrainian President Volodymyr Zelenskiy said in a post on X that the measures announced on Friday will “deliver a significant blow” to Moscow. “The less revenue Russia earns from oil … the sooner peace will be restored,” Zelenskiy added.

Daleep Singh, a top White House economic and national security adviser, said in a statement that the measures were the “most significant sanctions yet on Russia’s energy sector, by far the largest source of revenue for (President Vladimir) Putin’s war”.

The U.S. Treasury imposed sanctions on Gazprom (MCX:) Neft and Surgutneftegas, which explore for, produce and sell oil as well as 183 vessels that have shipped Russian oil, many of which are in the so-called shadow fleet of aging tankers operated by non-Western companies. The sanctions also include networks that trade the petroleum.

Many of those tankers have been used to ship oil to India and China as a price cap imposed by the Group of Seven countries in 2022 has shifted trade in Russian oil from Europe to Asia. Some tankers have shipped both Russian and Iranian oil.

The Treasury also rescinded a provision that had exempted the intermediation of energy payments from sanctions on Russian banks.

The sanctions should cost Russia billions of dollars per month if sufficiently enforced, another U.S. official told reporters in a call.

“There is not a step in the production and distribution chain that’s untouched and that gives us greater confidence that evasion is going to be even more costly for Russia,” the official said.

Gazprom Neft said the sanctions were unjustified and illegitimate and it will continue to operate.

U.S. ‘NO LONGER CONSTRAINED’ BY TIGHT OIL SUPPLY

The measures allow a wind-down period until March 12 for sanctioned entities to finish energy transactions.

Still, sources in Russian oil trade and Indian refining said the sanctions will cause severe disruption of Russian oil exports to its major buyers India and China.

Global oil prices jumped more than 3% ahead of the Treasury announcement, with nearing $80 a barrel, as a document mapping out the sanctions circulated among traders in Europe and Asia.

Geoffrey Pyatt, the U.S. assistant secretary for energy resources at the State Department, said there were new volumes of oil expected to come online this year from the U.S., Guyana, Canada and Brazil and possibly out of the Middle East will fill in for any lost Russian supply.

“We see ourselves as no longer constrained by tight supply in global markets the way we were when the price cap mechanism was unveiled,” Pyatt told Reuters.

The sanctions are part of a broader effort, as the Biden administration has furnished Ukraine with $64 billion in military aid since the invasion, including $500 million this week for air defense missiles and support equipment for fighter jets.

Friday’s move followed U.S. sanctions in November on banks including Gazprombank, Russia’s largest conduit to the global energy business, and earlier last year on dozens of tankers carrying Russian oil.

The Biden administration believes that November’s sanctions helped drive Russia’s rouble to its weakest level since the beginning of the invasion and pushed the Russian central bank to raise its policy rate to a record level of over 20%.

“We expect our direct targeting of the energy sector will aggravate these pressures on the Russian economy that have already pushed up inflation to almost 10% and reinforce a bleak economic outlook for 2025 and beyond,” one of the officials said.

REVERSAL WOULD INVOLVE CONGRESS

One of the Biden officials said it was “entirely” up to the President-elect Trump, a Republican, who takes office on Jan. 20, when and on what terms he might lift sanctions imposed during the Biden era.

But to do so he would have to notify Congress and give it the ability to take a vote of disapproval, he said. Many Republican members of Congress had urged Biden to impose Friday’s sanctions.

“Trump’s people can’t just come in and quietly lift everything that Biden just did. Congress would have to be involved,” said Jeremy Paner, a partner at the law firm Hughes Hubbard & Reed.

The return of Trump has sparked hope of a diplomatic resolution to end Moscow’s invasion but also fears in Kyiv that a quick peace could come at a high price for Ukraine.

Advisers to Trump have floated proposals that would effectively cede large parts of Ukraine to Russia for the foreseeable future.

The Trump transition team did not immediately respond to a request for comment about the new sanctions.

The military aid and oil sanctions “provide the next administration a considerable boost to their and Ukraine’s leverage in brokering a just and durable peace,” one of the officials said.