Brazil's Oil Permitting Could Soon Resume

Brazil's federal environment workers, represented by the union Ascema, have proposed a deal to end their strike that has hindered oil and gas project permits in the Amazon rainforest. The strike, initiated last month as the group demanded better wages and working conditions, saw a partial resolution as the union decided to forgo most of its demands except for a salary hike.

The strike has placed considerable strain on Brazil's environmental agency, Ibama, which is responsible for issuing licenses crucial for its oil industry. This slowdown has impacted Brazil's oil output, with industry group IBP noting a reduction of 200,000 barrels per day due to the lack of permits. Petrobras, Brazil's state-controlled oil firm, reported that operations in three of their oil fields have been affected by license delays.

Ascema's letter criticized President Luiz Inacio Lula da Silva's government for its handling of the negotiations, pointing out its perceived neglect and disrespect for the environmental workers.

Despite the proposed end to the strike, union leader Wallace Lopes has said that a broader work slowdown, which began in January, will continue.

This labor unrest comes as Brazil is trying to boost its oil production following a period of decline. Maintenance work on offshore platforms led to a 25% drop in production earlier this year, but output is now rebounding, with platforms returning to service and new projects coming online earlier than expected. However, the ongoing strike poses a significant risk to this recovery, potentially complicating Brazil's ability to meet its production targets and impacting the global oil market.

Brazil's liquids output is expected to grow this year by 110,000 bpd while supply growth from Brazil next year is forecast at 180,000 bpd, according to OPEC's estimates.

ByJulianne Geiger for Oilprice.com

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