What I’m up to: Tuerto

Have you wondered why my pace of posting has been very slow for a while? Along with paid work, I have a new project: Tuerto magazine. Check it out. And come write for us. Seriously. We want stories about South America. It’s going to rock.

I’ll still post the most energy-wonky stuff over here, because that’s not what Tuerto is all about. But if you have gotten anything out of Setty’s Notebook, who knows. Maybe you’ll enjoy Tuerto. Check it out.

Argentina shale-oil drillers don’t say the M-word (Mapuche)

I spent the last couple days hanging around the Shale Oil & Tight Gas 2012 conference in Buenos Aires. While I have heard a lot about environmental protection, tax issues and infrastructure development, I didn’t once hear anyone say the word “Mapuche,” or even “indigenous” for that matter. Here’s what Eurasia Review says about that, as quoted at Unrepresented Peoples and Nations Organization:

…While new techniques of hydrocarbon drilling, such as hydraulic fracturing, or fracking, in new areas are lauded by some as a solution to Argentina’s energy imports, the indigenous communities who live in areas where these resources can be found argue the activity is a threat to their communities.

Methanex moving chemicals plant from Chile to less stable Latin American state

Louisiana, here they come. Bloomberg reports:

Methanex Corp. (MX), the world’s biggest methanol maker, plans to dismantle an idled Chilean factory and ship it to Louisiana where it will be reassembled to capitalize on the lowest U.S. natural-gas prices in almost a decade.

The article fails to explain the back-story here.

Colombia oil unrest grows (Ecopetrol) (plus Hugo Chavez and Kim Kardashian)

Since nobody ever reads the Colombia stories, I thought I’d throw in a little brain candy. Platts says:

Blaming labor unrest and community demonstrations directed at its client Ecopetrol, oil field services company Estrella International Energy Services said it has closed down all rigs and makeover platforms in the Barrancabermeja area of central Colombia…

Argentina cracks down on big oil!

But no, not for pollution, even though the tailpipe emissions I’ve seen in Argentine farm country are the worst I’ve seen anywhere in modern-day South America. No, these companies didn’t just cause asthma or pollute drinking water or muck up the beaches — they may have colluded on diesel pricing. Yes, South America is the same as North America. Oil companies can generally do as they please, but don’t you dare overcharge for fuel.

Here’s Reurters (in Spanish). Accused: Shell, Esso, Exxon and Oil.

If I were a slightly more serioius blogger this would be my takeoff point for a long riff on the bizzare nature of Argentine energy policy, but instead, I think I’ll get back to work so I can get out and enjoy the summer today. Here’s a nice little description of Argentine energy resources and policy, in English. Have a great day!

Venezuela keeps “planning” to leave ICSID arbitration panel

They have been talking about it for years, and they keep talking. Here’s a tidbit from a PDVSA statement from last night:

El presidente de PDVSA informó la decisión del Gobierno Bolivariano de retirar a nuestro país del CIADI: “de acuerdo con las líneas del presidente Chávez, nosotros hemos decidido  salir del CIADI, hay una serie de acciones que tienen que ver con nuestra política internacional, un conjunto de 25 convenios que existen en materia de protección recíproca de inversiones con 25 países distintos y existe una posición del Gobierno venezolano de acuerdo con los mecanismos internacionales que están establecidos para notificar nuestra salida del CIADI”.

The bold part is the only thing you really need to translate: We have decided to leave ICSID. ICSID is the World Bank arbitration body where Venezuela is now facing what, 20? 21? complaints, from the 2004 complaint of Vannessa Ventures (now Infinito Gold) to the 10 cases filed last year by Gambrinus Corp. (apparently over the Fertinitro chemical plant), Hortensia Margarita Shortt (over a seized Lake Maracaibo maritime company), Tenaris SA (over a pipe factory), some Koch brothers interests (Fertinitro again), Owens Illinois (glass factories), Williams Cos. (oilfield pressurization project), Cry–lex (if you don’t know, consider yourself lucky), Longreef Investments, Nova Scotia Power, Highbury International, and on and on. There are 21 on the ICSID website, but I think they settled Cemex. So 20.

Four years ago, when Pres. Hugo Chavez first started talking about this possibility, the big deal was supposedly that if Venezuela did leave ICSID multilateral bodies, it would could trigger technical defaults on some bonds, giving quick payouts to the hedge funds and other holders, many of whom have bought at discount prices. The Financial Times went with that story, without saying who it got the info from or whether it had seen any prospectuses. The only prospecti I have don’t mention ICSID except to say that the republic may pull out of the body. So I don’t know if that old argument still holds. Anyway, if it does, hooray, another chance to bid up Venezuela bonds.

UPDATE: Yes, the old story in FT is about the IMF, not ICSID. Thank you to readers for pointing this out. I shouldn’t blog on so little sleep.

UPDATE2: Financial Times now saying “The decision to withdraw from the International Centre for Settlement of Investment Disputes (ICSID), based in Washington, means that disputes with foreign companies, including an unsettled disagreement with ExxonMobil, will be heard by Venezuelan judges.”

That doesn’t seem right at all. The specific bilateral investment treaties all have arbitration provisions, and even if ICSID is left out, there are still ways to do arbitration. For example, the Russia agreement:

It says that Russian companies can sue Venezuela, and vice versa, at the Stockholm Chamber of Commerce arbitration court.

Or here’s the ever-popular Canadian treaty:

The dispute may, by the investor concerned, be submitted to arbitration under:

(a) The International Centre for the Settlement of Investment Disputes (ICSID), established pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of other States, opened for signature at Washington 18 March, 1965 (lCSID Convention), provided that both the disputing Contracting Party and the Contracting Party of the investor are panies to the ICSID Convention;

or

(b) the Additional Facility Rules of ICSID, provided that either the disputing Contracting Party or the Contracting Party of the investor, but not both, is a party to the ICSID Convention; or

In case neither of the procedures mentioned above is available, the investor may submit the dispute to an international arbitrator or ad hoc arbitration tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).

And Barbados. (Do you really want me to go on???)

1. Disputes between one Contracting Party and a national or company of the other Contracting Party concerning an obligation of the former under this Agreement in relation to an investment of the him shall, at the request of the national concerned, be submitted to the International Centre for Settlement of Investment Disputes for settlement by arbitration or conciliation under the Convention on the Settlement of Investment Disputes between States and Nationals of other States, opened for signature at Washington on March 18, 1965.

2. As long as the Republic of Venezuela has not become a Contracting State of the Convention as mentioned in paragraph 1 of this Article, disputes as referred to in that paragraph shall be submitted to the International Centre for Settlement of Investment disputes under the Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the Centre (Additional Facility Rules). If for any reason the Additional Facility is not available the investor shall have the right to submit the dispute to arbitration under the rules of the United Nations Commission on International Trade Law (UNCITRAL).

But hey, that’s why you come here for news instead of subscribing to a newspaper.

PDVSA Refinery emissions: Lungs o the Earth takes a deep breath

Lungs of the Earth, newly and improvedly expanding beyond Brazil, takes on Venezuelan state oil company PDVSA for saying that its refinery emissions are A-OK.

This reminds me of one time when after months of trying to reach the Venezuelan environment minister, Yubiri Ortega, I finally got invited to a press conference with her to hear about Caracas’s plans to confront what was then a growing drought. After the event, I went over and asked her about refinery and diesel emissions. Does the environment ministry have air quality monitoring stations, I asked. She said it has ozone monitoring in several Metro stations. I had seen those, and while ozone monitoring in the Metro is not a bad idea (electric sparks can boost indoor ozone levels) that wasn’t what I was talking about. I asked about diesel and refinery emissions in particular, and she said those were handled by the oil ministry. I said, but you are responsible for writing the standards, and do you have any plan to tighten the standards? She raised her voice and told me to speak to the Oil Ministry, and then walked out.

Here’s a video of refinery emissions, taken rather clumsily from a bus at the cluster of heavy-oil upgraders at Jose, near Barcelona, Anzoategui, Venezuela. While it’s a crappy video, it does show how every few seconds the flare stack flares up hard — which it’s not supposed to do. There was a constant black plume out of these upgraders during that period.

Anyway, Lungs knows more about this than I do. Go read.

Colombia oil: Big year coming

Yes, I know I have a reputation to uphold as the guy with a skeptical eye on the Colombian oil miracle. But credit where it’s due: They said they’d double output to a million barrels a day, and here we are: Here is Colombian President Manuel Santos saying that his country may pass that milestone sometime around today.

There’s also a trading opportunity. Now, I’m no equities analyst, nor a CFA, so take everything here with a big grain of salt, ok? But: Otto has a post up about how Venezuela-exposed companies, and more importantly that country’s bonds, will offer opportunities for fun and profit this year. However, the stocks he mentioned are illiquid. I.e., the three companies mentioned had less than 80,000 shares of volume yesterday — combined. And for regular retail people, it’s a trick to get into the sovereign bond market (trust me, I’ve tried).

But all isn’t lost. Where Venezuela stands out isn’t gold, but oil. This is where the Colombian companies may come in.

Exxon-PDVSA: I had a feeling we’d get more details

Yes, I too am tired of this story. But here are a couple things worth reading, as two guys try to show that it is possible to both know about Venezuela and also speak (contrary to what I wrote yesterday):

Noel Maurer on his Power and the Money blog:

Exxon received from PDVSA what it was contractually entitled to get. The standard used by the ICC was the market value of the assets, not book value. The assumptions used to calculate that market value, however — chief among them estimates of the expected future price of oil — were limited by a clause in ExxonMobil’s 1998 association contract that effectively put a ceiling on the value of the company’s investment.

…the highest possible oil price that can be used to value damages in the event of expropriation is $27 per barrel in 1996 dollars, or $37.50 in 2007 dollars.

And more such details from Russ Dallen, talking to Bloomberg

Now back to the fun stuff

Chile: Big copper getting worse rap

Just out, a poll by the Centro de Estudios de la Realidad Contemporania that asked Chileans an interesting question: should big copper be nationalized? Or to be more precise: “A raíz del conflicto de Anglo American con Codelco han habido gente que plantea la necesidad de nacionalizar las grandes empresas privadas que explotan yacimientos de cobre. Está usted en acuerdo o desacuerdo de nacionalizar las grandes empresas privadas que exploten yacimientos de cobre?”

(“Because of the conflict between Anglo American and Codelco, people have discussed the need to nationalize the big private companies that exploit copper deposits. Do you support or oppose the nationalization of the big private companies that exploit copper deposits?”)

67% in favor, including majorities from every political party. Who would ever have thought that Anglo American could turn Chileans into a bunch of Southern Cone Hugo Chavezes? But don’t worry, remember what Henry Kissinger (supposedly) said the last time such sentiments arose: “I don’t see why we need to stand by and watch a country go communist due to the irresponsibility of its own people.”

More seriously: I think the Anglo item isn’t the main thing here. The groundwork comes from the student movement. As I said months ago:

… the uprising in Chile is leading to a major renaissance of resource nationalism in the country that has long been the continent’s most accommodating to foreign mining companies. I’ll write more about this in the future, but suffice to say that “renationalize the copper” as a panacea for the country’s ills has gone from fringe notion to conventional wisdom in a matter of months.

BONUS: The by far weirdest item in this poll is that they asked whether the killings by the military government (1973-1989) were a necessary evil to avert communism. Most people disagree, but a few agree. Including 5% of people who say they are in the Communist Party.