Latin America: Reconciling Oil and the Environment

IPS, 19 April 2008 - Years of public scrutiny, ever-newer technologies, more government regulations, notions of corporate responsibility and the market-driven need for greater efficiency are all factors behind improvements in the environmental policies of Latin America's petroleum industry.

"Our line makes it incompatible to exploit the underground riches as long as above ground people are living in poverty," says Juan Bravo, manager of the environmental wing of Venezuela's state-run oil company PDVSA in the Orinoco belt in the southeast.

For decades, oil and natural gas exploitation in Venezuela polluted fields, rivers, lakes and cities, and fostered the growth of poor settlements around the installations where the country's oil wealth was produced.

But since the industry was nationalised in 1976, no fossil fuel deal has been approved without including projects for social improvement and environmental preservation. In laying a natural gas pipeline between northern Colombia and northern Venezuela, PDVSA spent 15 million of the original 150 million dollar investment on community development programmes in the areas the pipeline crossed.

In the Orinoco belt, an area of around 55,000 square kilometres holding an estimated 1.2 trillion barrels of extra heavy crude, at least one-fifth of which is believed to be recoverable, the PDVSA and some 30 foreign corporate partners pump half a million barrels per day.

"To a large degree, the environmental achievements are due to the new codes of conduct for global energy companies. They don't enter into any deal without seeing the state of the land and without conducting environmental hearings," Venezuelan petroleum engineer Diego González told Tierramérica.

For example, unlike the conventional oil fields in eastern Venezuela, cluttered with thousands of vertical oil pumps, oil is now extracted horizontally: when the drill reaches the level of the petroleum deposit underground, submergible pumps draw out the crude from various points, without altering the surface landscape, González explained.

In Brazil, the state oil giant Petrobras "conducts monitoring projects that evaluate the environment before implementing the drilling or production efforts," particularly in the Atlantic Campos Basin, northeast of Rio de Janeiro, the company said in a written statement to Tierramérica.

The studies "identify restrictions for the location of the units (drills and pipelines) where there are important ecosystems, like deep-water coral reefs, in order to propose alternatives with fewer environmental impacts. Furthermore, all effluents are monitored, such as the water used in production, sanitation effluents, rubble and fluids from drilling," stated Petrobras.

In Ecuador, heavy environmental damage has been caused in the Amazon region by ChevronTexaco over a quarter century, which could mean compensation payouts of seven to 16 billion dollars, the equivalent of the corporation's annual earnings, according to experts in Ecuador.

The pollution, caused by more than 600 petroleum waste pits, triggered the emergence of a vast ecological movement with international support to fight oil drilling in the Amazon's Ishpingo, Tambococha and Tiputini fields -- in which Brazil's Petrobras is also interested -- in order to protect areas of the National Yasuní Park.

"Cases like Brazil and Ecuador tend towards efforts to avoid oil spills, for which technology is constantly being improved. In part, we owe this to the start of production in the North Sea more than 30 years ago," González told Tierramérica.

In contrast to the large-scale oil exploitations that in Mexico, Venezuela, the Persian Gulf or the former Soviet Union preceded environmental concerns and legislation, those of Britain and Norway in the North Sea started in the 1970s and had to heed strict environmental standards.

In addition, to make petroleum production profitable in that area and to avoid wasting even one barrel, the companies had to develop safe and modern technologies, which regulators in other countries then began to require as well.

Oil spills continue to be a headache for companies like the state-run Petróleos Mexicanos (Pemex), which faces a serious decline in its oil fields and which spends one percent of its 17 billion dollar budget on environmental matters.

Of the 24,000 barrels of oil that Pemex spills on average each year, one-third are the result of illegal tapping of its pipelines, according to the company. Environmental groups identify Pemex as the most heavily polluting company in Mexico, responsible for 57 percent of the country's environmental emergencies.

In the company's code of conduct, the first item is "to respect and improve the environment", and its 155,000 employees are prohibited from "considering production more important than ecological balance."

Venezuela's PDVSA drew up management plans for the 28 blocks into which the 21,000 square kilometres of the currently exploited portion of the Orinoco belt are divided.

New maps and recognition of areas "allow decisions about the best sites and routes for the installations, roads or pipelines, but also for work as a project with each field, beginning with reforestation to capture carbon dioxide (a greenhouse gas), while oil activity continues," said PDVSA's Bravo.

González noted that "the storage of crude no longer brings problems, because each tank or pump station has to have a walled-in space to contain spills equivalent to one-and-a-half times its storage capacity."

But the production of heavy crude in the Orinoco belt to convert it into lighter synthetics "generates new environmental problems because they have a high content of sulphur and metals, which must be stored or transported for sale, but whose markets aren't as easy to reach as the oil markets," he said.

The Orinoco belt's daily output is 600,000 barrels -- one-fifth of Venezuela's total -- and each day produces 1,600 tonnes of residual sulphur and 14,500 tonnes of petroleum coke.

The coke is an input for the steel industry and is sold within Venezuela, while the sulphur derivatives are exported for use in fertiliser, agrochemicals, vulcanised rubber, dyes, etc. But storage and transport have their own financial and environmental costs.

"If the aspirations of this government are achieved, of producing (in the belt) up to four million barrels of crude a day, it would leave more than 10,000 tonnes of sulphur and almost 100,000 of coke per day," said González.

PDVSA invited companies from Argentina, Brazil, China, India, Iran, Russia, Spain and Uruguay to help certify that 236,000 billion barrels of crude are extractable, which would mean Venezuela holds the largest oil reserves on the planet.

(*Additional reporting by Mario Osava in Brazil, Kintto Lucas in Ecuador and Diego Cevallos in Mexico. Originally published by Latin American newspapers that are part of the Tierramérica network. Tierramérica is a specialised news service produced by IPS with the backing of the United Nations Development Programme and the United Nations Environment Programme.)