Just as Brazil is preparing to hold what could be a blockbuster US$50-billion oil auction in early November, an oil spill of still unknown origin on more than 200 beaches along Brazil’s northeastern coast is raising alarms due to the government having been so slow to react with the clean-up. Fears of the government being inadequate in its monitoring of environmental disasters as domestic oil production continues to grow could threaten the nation’s offshore boom.

Brazil’s Vice President has called the oil spill “unprecedented in the world”, and committed to sending 5,000 troops to help the worst affected areas.

Environmental organizations, politicians, and prosecutors have criticized the government for its poor handling of the oil spill along the beaches in the state of Bahia.

In some communities, residents have taken it upon themselves to clean up their beaches, tired of waiting on the official cleanup. Some of them, however, have gotten sick from exposure to the crude oil, whose origin remains unclear, Reuters reports.

According to Brazilian Mines and Energy Minister Bento Albuquerque, the oil spilled on the beaches is not of Brazilian origin, “so it has nothing to do with oil and gas activity in Brazil, nothing to do with oil and gas auctions.”

The chief executive of Brazilian state energy firm Petrobras, Roberto Castello Branco, said this week that the oil spill could be the worst “environmental attack” in the country’s history. Related: The Worst Oil Trades Ever Made

Samples from the crude at the beaches are being analyzed in the U.S., France, and Norway to determine the origin, while theories abound as to where the oil came from. Some experts say it’s from Venezuela, and some theories suggest that there has been an accident at sea with a ship with a tracker switched off, or from a ship-to-ship transfer, or from a leak from a shipwreck.

Meanwhile, Brazil’s government is confident that the oil spill will not affect the oil auctions.

In October and November, Brazil is holding three oil auctions for different areas under different regimes in its offshore basins.

The first auction, held on October 10, attracted major international oil companies, with Big Oil scooping up exploration blocks in the bid round that fetched a record total amount of signing bonuses. The transfer-of-rights (TOR) auction is slated for November 6 and the 6th production sharing round will take place on November 7.

By Tsvetana Paraskova for Oilprice.com

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