Brazil’s environmental authority has rejected Petrobras’s request to drill its first well at an offshore oil frontier known as the Equatorial Margin, delivering a major setback to the state-controlled oil company’s exploration plans.

Ibama, as the agency is known, highlighted the extreme social and environmental sensitivity of the biologically diverse region that is home to indigenous lands, mangroves, coral reefs and endangered species. It has been a controversial location for drilling and has drawn concern from Brazil’s environment minister, Marina Silva.

“There is no doubt that Petrobras was offered every opportunity to remedy critical points of its project, but it still presents worrying inconsistencies for safe operations in a new exploratory frontier of high social and environmental vulnerability,” the regulator’s president Rodrigo Agostinho said in the decision. Petrobras didn’t immediately respond to a request for comment.

Petroleo Brasileiro SA, as it is formally known, has had an oil rig on site since early December waiting for approval to drill at the FZA-M-59 block, costing it about $1 million a day. The Equatorial Margin has similar geology as nearby Guyana, where Exxon Mobil Corp. has found billions of barrels. Brazil’s Energy Minister Alexandre Silveira has called the area “the passport to the future of the North and Northeast regions of Brazil.”

Source: Bloomberg