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26Fev2015Feb26,2015

Hurdles facing Brazil's first shale-gas concessions

I​n Brazil, court injunctions that cite environ- mental concerns about hydraulic fracturing,  or fracking, have temporarily barred domes-  tic and foreign companies from tapping shale gas in three of seven geological basins where concessions for such work have been leased.

Shale-gas concessionaires unaffected by the injunctions are unable to start work either, however. That's because the Brazilian govern- ment has yet to decide whether fracking proj- ects will be licensed by state environmental agencies or by Ibama, the permitting arm of the federal Environment Ministry. No fracking can proceed here until such licensing occurs.

In November 2013, Brazil's National Oil Agency (ANP) auctioned off concessions in 72 exploration blocks out of a total of 240 blocks that were offered. The 72 blocks, which include both conventional and unconventional gas deposits in seven onshore basins, fetched R$165.2 million (US$57 million). It was Brazil's first auction to include "unconventional" blocks—areas where development would involve fracking, the process in which water, sand and chemicals are pumped underground at high pressure to force the release of gas from shale formations.

At the ANP auction, the state oil company Petrobras, alone or in consortia, won 49 of the 72 concession blocks awarded. Eight domestic and four foreign companies, in consortia with Petrobras or bidding alone, also won concessions. The four foreign companies to win bids were GDF Suez of France, Petrominerales of Colombia, Trayectoria Oil & Gas of Panama, and Geopark of the Bermudas.

But since the auction, four federal court injunctions have suspended contracts award- ed for 47 of the concession areas—one in the Parnaíba Basin in northeastern Piauí state; 30 in the Recôncavo Basin in northeastern Bahia state; and 16 in the Paraná Basin, which runs through six states in southern and southeast- ern Brazil. The injunctions not only shelve the concession contracts, but also prohibit future ANP auctions for shale-gas exploration until the environmental impacts and risks of frack- ing in Brazil are sufficiently known. ANP has tried unsuccessfully to lift three of the injunc- tions and is expected to challenge the fourth and most recent one, issued in late January.

That injunction, granted by Federal Judge Ricardo Uberto Rodrigues at the request of the federal prosecutor's office, concerns five of 16 Paraná Basin blocks in São Paulo state. Citing the precautionary principle, Uberto Rodrigues ruled that the ANP held the auction "without sufficiently knowing the impacts of the activity [fracking] on the environment."

Risks named

Among the known fracking risks men- tioned  in  the  injunction  were:  leakage  of hydrocarbons, mainly ethane and methane, to the surface; increased possibility of seismic shocks; pollution of the water table, aquifers or rivers with chemicals used in the fracking; and the use of huge volumes of injected water. "All four injunctions in Brazil related to fracking, triggered by the ANP auction, show that courts nationwide are concerned about its environmental risks and the fact that ANP held the November 2013 auction without carefully analyzing its potential impact on the geology, water resources and biodiversity of each region where it sold concessions to conduct the activ- ity," Luis Roberto Gomes, the federal prosecu- tor in São Paulo state who filed the injunction request, told EcoAméricas.

In his injunction, Judge Uberto Rodrigues cited a technical report issued by an inter-min- isterial working group. The report concluded that "insufficient information is available to make a decision about the safety of fracking for shale gas in Brazil."

The ANP has yet to conduct studies on the safety of fracking here. But the ANP, as in other oil and gas auctions, asked Ibama and state environmental agencies to analyze which of the concession blocks that it planned to lease raised environmental issues. It then excluded blocks deemed environmentally sensitive—for the most part blocks that were located in pro- tected areas.

The ANP also issued an April 2014 reso- lution that recommended, but did not require, concessionaires comply with its operational security standards for fracking.

Green advocates are pushing hard for a public weighing of the environmental risks involved in hydraulic fracturing.

"Even if, as I suspect, no government agen- cy did an in-depth analysis of the environmen- tal risks of fracking in Brazil, studies [done]out- side of Brazil have shown [these] are numer- ous, especially the risk of polluting the water table, aquifers and rivers with water containing hundreds of unknown chemicals, many likely to be carcinogenic," says Thiago Almeida, a campaigner for Greenpeace in Brazil on uncon- ventional gas and oil issues. "Because the Guar- aní Aquifer [an enormous aquifer that stretches from southern Brazil into Argentina, Paraguay and Uruguay] is located in the Paraná Basin, the risk of contaminating it with [fracking] chemicals could have great and irreversible consequences."

​Presidential decree awaited

Although state environmental agencies currently license conventional gas exploration and production activities, a presidential decree on whether this will be the case with uncon- ventional deposits is expected to be issued in the coming months. Being drafted with help from the Environment Ministry and the Mines and Energy Ministry, the decree is expected to designate Ibama as the licensing agency.

Analysts here agree that the licensing of hydraulic fracturing presents a major regula- tory challenge for Brazil, regardless of how the jurisdictional question is decided.

"Environmental agencies in Brazil will need to adapt themselves in order to analyze fracking projects," says Rafael Feldmann, an environmental attorney with the São Paulo- based Mattos Filho Advogados law firm. "As far as we know, none of the competent agencies, including Ibama, has ever handled a project this environmentally sensitive."

A 2010 report by the U.S. Energy Infor- mation Administration (EIA) estimated that Brazil has the 10th largest reserves of techni- cally recoverable shale gas in the world, with 665 trillion cubic feet. The Brazilian Mines and Energy Ministry's latest 10-year energy-supply plan, covering the period 2014–2023, states that fracking will not begin in the country for another five to seven years, and by 2023 will account for only 10% of the natural gas pro- duced here. Currently 75% of the natural gas Brazil produces comes from conventional off- shore reservoirs, and 25% comes from conven- tional onshore reservoirs.​

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