Anger over “frontier oil”

Far from the Gulf of Mexico, environmental campaigners are accusing energy companies of destroying land and livelihoods in the search for increasingly scarce resources. Richard Wachman and Jon Stibbs report.

The eyes of the world are on BP after the April disaster that left massive amounts of oil spewing into the Gulf of Mexico. But campaigners accuse Big Oil of an appalling track record elsewhere in the world, saying it leaves a trail of devastation in its wake.

From Nigeria to Kazakhstan in Central Asia, and Colombia and Ecuador in South America, the oil majors stand accused of a blatant disregard for local communities and the environments in which they operate.

With demand for energy expected to surge as industrialisation accelerates in China, India and Brazil, critics say oil companies are taking ever-increasing risks to cash in on yet another bonanza.

Two other factors ensure the dash for oil continues apace. One is growing concern in the developed world that, at some point in the next 30 years, demand could outstrip supply. That means governments are under pressure to make it easier for firms to look for oil in inhospitable areas, whether in deep water off the United States or in the tar sands of Canada.

Secondly, western governments want to reduce their dependence on unstable regimes in the Middle East, which partly explains the recent US move to lift restrictions on drilling in Alaska.

All this could change if the world made a determined attempt to invest more heavily in renewable energy sources, but international initiatives take time. In the interim, the oil majors face a barrage of criticism from environmental and human-rights campaigners in places thousands of kilometres away from BP’s sunken Deepwater Horizon rig.

Nigeria is a case in point. People who live in the Niger Delta have had to withstand huge oil spills for decades. Farmers allege that spills from Shell pipelines have contaminated their land and fishing ponds, and have destroyed their livelihoods. They want Shell to clean up the mess and compensate them for lost earnings. Shell argues that the ruptures to its supply lines are, in the main, the result of sabotage, and that any damages claims should be heard in the Nigerian courts.

The Anglo-Dutch oil giant is by far the biggest oil firm operating in the delta – where, in March 2008, it was estimated that at least 2,000 sites required treatment because of oil pollution. Independent oil and environmental experts estimate that between nine million and 13 million barrels of oil have been spilled in the delta area during the past 50 years – equivalent to an Exxon Valdez disaster every 12 months.

Kate Allen of Amnesty International says: “The result of oil exploration, extraction and spills is that many people in the Niger Delta have to drink, cook with, and wash in polluted water; they have to eat contaminated fish – if they are lucky enough to still be able to find fish – and farm on spoiled land.”

She adds: “After oil spills, the air reeks of pollutants. Many [people] have been driven into poverty, and because they can’t make Shell accountable for its actions, there is enormous distrust between the group and local people.”

A spokesman for Greenpeace says: “Shell operates in 100 countries, but about 40% of spills are in Nigeria, which is quite incredible. There is evidence of sloppy management.” Shell rejects these allegations.

The actions of the Nigerian government are a critical part of this story. Oil is estimated to have earned Nigeria more than US$600 billion since the 1960s, and the oil and gas sector represents about 80% of government revenues; the government’s reluctance to take a hard line with oil companies is not difficult to understand. The most that local people often ever see of the state are armed soldiers visiting the region to protect oil companies’ assets.

A similar story is unravelling in Colombia, where BP has a presence in the Casanare region. Strikers recently blockaded a plant 200 kilometres from the capital, Bogotá, for a fortnight, prompting BP officials to say they felt like hostages. The dispute has been rolling on since February over issues including labour, the environment and human rights. Most of these have now been resolved.

CINEP, a Colombian NGO that investigates oil companies, says the strike was not marked by the extremes seen in previous BP disputes. Its representative Fernando Rodríguez says: “Disputes involving BP are characterised by a heavy hand and shows of government force.”

Rodríguez alleges that in a 1995 dispute with BP contractor Servipetrol, the army shot at the civilian population. He says paramilitaries then persecuted and assassinated community leaders.

BP strongly denies any paramilitary connections. Poly Martinez, a media representative for the company, says: “BP has no relation whatsoever with illegal armed groups, irrespective of their motives or inclinations.” BP did acknowledge it had had to deal with officials in elected positions who had turned out to have paramilitary links.

In Kazakhstan, Friends of the Earth is worried about the environmental, social and health effects caused by the development of the Kashagan oilfield. The consortium behind the project includes companies such as ExxonMobil, Shell and Italy’s ENI. Friends of the Earth said thousands of people already have been relocated in the region because of sulphur emissions and other highly poisonous chemicals such as mercaptans, which are present at high levels in northern Caspian oil. All the companies deny they have behaved irresponsibly.

In Ecuador, the Amazon Defense Coalition asserts that Chevron holds the record for the world’s largest oil-related contamination in the populated Amazon rain forest – an even more sensitive ecosystem than the marshes of Louisiana. The allegations are at the root of a class-action lawsuit in Ecuador where the oil giant faces more than US$27 billion in damages for poisoning an area the size of the US state of Rhode Island with 18.5 billion gallons – 70 billion litres — of toxic “produced water” – water that emerges from drilling activities. That is more than 474 times the amount of contamination estimated to have been spilled in the Gulf of Mexico, according to claims by representatives of the plaintiffs.

A bigger campaign is building behind the involvement of the oil majors in Canada’s tar sands. The sands are naturally occurring mixtures of sand or clay, water and a dense form of petroleum called bitumen. They are found in large quantities in Canada and Venezuela. Making liquid fuels from oil sands requires energy for steam injection and refining. This process generates two to four times the amount of greenhouse gases per barrel of final product as conventional oil.

A spokesman for FairPensions, the shareholder activist group, says: “Every day the extraction process uses enough natural gas to heat 3.2 million Canadian homes for a day. Tar sands are a significant factor in Canada’s failure to meet its Kyoto protocol targets.”

It is also alleged that tar-sands development affects the health and human rights of people over wide areas. According to FairPensions, about 11 million litres of contaminated water leaks into surrounding rivers and groundwater each day, containing arsenic, mercury and various carcinogens that have been linked to elevated rates of cancer in downstream communities.

Investors have raised the issue at Shell and BP shareholder meetings; some shareholders are worried about the long-term profitability of tar sands, pointing to the very high operating costs.

But the oil companies are “as likely to curtail their hunt for new sources of energy as turkeys voting for Christmas”, says Friends of the Earth. The organisation points out that Cairn Energy won clearance in June to drill off Greenland this summer. Greenland is viewed as one of the last great frontier areas in the oil and gas business, and the US Geological Survey estimates that the territory could hold 50 billion barrels of oil and gas. [Cairn recently reported a gas discovery off Greenland’s west coast – “early indications of a working hydrocarbon system” that could lead to a possible oil discovery.]

But campaigners point out that the region is under “constant threat of ice floes”, while in Canada, members of parliament complain that Cairn has had no history of drilling in the Arctic. The company says it has “prepared for every eventuality”.

According to Canadian energy economist Peter Tertzakian: “We are going to the ends of the earth to find the next barrel.” But at what cost? Environmental pressure group Platform says the drive for “frontier oil” comes out of “a political environment whereby concerns over energy security are routinely top of the agenda”. To illustrate its point, Platform points out there has been a quickening in the race for rights to territory in the Arctic, with the Russians symbolically planting a flag under the North Pole during a 2007 submarine expedition.

But the last frontier is perhaps Antarctica. Signatories to the Antarctic Treaty officially refrain from any territorial claims on the continent, but some countries, including Britain, Australia and Russia, have made unofficial claims and produce stamps with maps of Antarctica showing territory purportedly belonging to them.

The worldwide dash for the black stuff underscores Tertzakian’s argument that although we may not soon run out of oil, “new supplies will be increasingly dirty, insecure, expensive and indiscreet”.

Copyright Guardian News and Media Limited 2010

Green finance for cleaner energy

The green energy lobby is looking on the recent crisis in the Gulf of Mexico with mixed feelings of sadness and optimism that the spill — now contained — could galvanise the push for new sources of power and fresh economic models that reward cleaner energy.

There is more than a hint of “I told you so” from campaigners who have long warned that offshore drilling for oil was potentially disastrous. Energy experts such as Graciela Chichilnisky say the lesson should be to weigh the scale of the risks — however infrequent disasters may be — against the rewards.

“Offshore drilling by its own nature involves potentially catastrophic risks, namely small-probability events with enormous consequences. As with nuclear energy, the upside is relatively small,” she says. “The downside, however, is enormous. We are seeing right now what an offshore drilling catastrophe can imply for our nation.”

The Columbia University economics professor is clear, though, that only with financial incentives will investment shift to clean from dirty energy.

“The first principle of creating change is you have to make the change profitable,” she says. “Finance performs a very important role in the world economy and environmentalists usually don’t understand it and they are usually very hostile to finance. But if you are going to have a major transformation, it is not going to happen without finance.”

Green finance could be about to have its day and not just because British prime minister David Cameron has pledged to create a green investment bank. With the political focus on moving away from oil, Chichilnisky and other campaigners are pushing hard for “climate bonds” that would provide financial incentives for the energy industry. “I am totally convinced we have to go solely for the energy industry. They are our enemy so far and I’m convinced that until they become our friends there will be no change in the environmental agenda. Finance can do that,” says the Argentinian-born economist.

Her vision for climate bonds, which she describes as the “carbon market on steroids”, involves investors lending money to power companies from developed nations to go into developing nations and build clean energy plants — preferably ones that are carbon negative because they capture carbon from the atmosphere for uses such as petrol production.

She is convinced there is demand from investors, developing countries and energy companies, who find it hard to finance projects in such nations in traditional ways. “Here is the pitch: You want to invest in something that leads to more economic growth, more exports for our nation and changes the world economy towards a greener place because it decreases carbon emissions. That’s a good pitch and I want to sell it globally.”

— By Katie Allen

Copyright Guardian News and Media Limited 2010

Homepage photo by Caroline Bennett/Rainforest Action Network shows crude oil at a toxic pool near Lago Agrio, in Ecuador’s Amazon region. The site was abandoned by Texaco in 1990.