OIAPOQUE, Brazil, April 18 (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 River several hundred kilometers away. Foz

de Amazonas shares geology with the coast of nearby Guyana,

where Exxon 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 ( AMZN ) 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 ( AMZN )

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.