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Total Could Miss Out On 14 Billion Barrel Brazilian Reserves

Total’s study on the environmental impact of drilling in one of the Amazon’s basins hit a roadblock on Tuesday when Brazilian regulator Ibama said it rejects the validity of the efforts.

The subject of the study is an area that could contain up to 14 billion barrels worth of oil reserves. Total has spent four years trying to validate the estimates to determine the commercial viability of a venture in the area, but the discovery of a sensitive coral reef near the blocks that would be up for tender has put the environmental approval process in limbo.

“At this point, the environmental licensing process is still underway,” a Total spokesperson said in an emailed statement to Reuters.

Ibama says it seeks additional information on how Total plans to keep the area’s wildlife safe from the polluting effects of oil extraction in the area.

“Oil dispersion modeling, for example, can leave no doubt about the potential impacts on the coral bank and marine biodiversity more broadly,” the regulator’s president said in a note. “In the face of Ibama having already carried out in this licensing process three repetitions of the application for completing the environmental study, if the entrepreneur does not meet the points demanded by the technical team once again, the licensing process will be filed.”

Related: Hurricane Harvey Causes Gasoline Price Spike

Positive news from Brazil’s energy sector suggests that the country is not dependent on the new reserves for its economic recovery. Petrobras has been struggling, besides its ballooning debt, with the weak price environment and a corruption scandal involving senior politicians, which led to the removal of President Dilma Rousseff. But the nationalized company’s new management has taken a radical approach in cutting costs and boosting revenues over the past few weeks.

This year could also mark the return of dividend payouts—which would be the first time since 2014—if Petrobras ends 2017 in the black. Chief executive Pedro Parente said, as quoted by Reuters, that “we really are keen to start paying dividends as fast as we can.”

By Zainab Calcuttawala for Oilprice.com

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