Brazil's Amazon Mouth Drilling Licence Is a Bet on Oil Rents to Fund the Transition. The Bet Needs Conditions

On 20 October 2025 Brazil's environmental agency, Ibama, granted Petrobras an operating licence to drill an exploratory well in block FZA-M-59 in the Foz do Amazonas basin, part of Brazil's Equatorial Margin. The well lies in deep water off the state of Amapá, about 175 kilometres from the coast and around 500 kilometres from the mouth of the Amazon river. Drilling was due to start immediately and to last around five months. It is an exploration well to assess whether oil and gas exist in economic quantities.

There will be no production at this stage. The decision comes three weeks before Brazil hosts the COP30 climate conference in Belém, at the edge of the Amazon. Brazil's oil output has grown strongly over the past decade, driven by the pre-salt fields off Rio de Janeiro and São Paulo. Those fields will eventually decline, and Petrobras has argued that the Equatorial Margin, which runs along the northern coast, could be the next major frontier.

Petrobras says confirming oil in the Equatorial Margin could open an important energy frontier and help ensure a just, safe and sustainable transition. For Amapá, one of Brazil's poorer states, the prospect of oil revenue is politically powerful. Critics argue that opening a new oil frontier is incompatible with the goals of the Paris Agreement, which the International Energy Agency's net zero pathway has interpreted as requiring no new long-lead oil and gas fields. Our view is that both arguments contain truth, and that the decisive issue is timing.

If Brazil wants to argue that oil revenue will fund its transition, it should make that link concrete. Brazil's electricity system already draws the large majority of its power from renewable sources, mainly hydropower, with wind and solar growing fast in the north-east. The Foz do Amazonas licence is the result of a genuine regulatory process, not a political override, and exploration alone does not commit Brazil to production.