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.

…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.

Members of the Mapuche community say the Argentine government’s aggressive push to increase energy supplies by allowing oil companies to explore in their lands will cause irreversible environmental and social damage…

“There is no doubt that all of the official announcements about these mega-fields are a direct and clear threat to the life and culture of the affected Mapuche communities,” said Jorge Nahuel, a member of the Xawvnko Area Council of the Neuquen Mapuche Confederation.

Last November, members of the Gelay Ko community in Neuquen blocked work on a gas well on their land that US oil company Apache had been drilling, saying that they were not previously consulted of the project….

Mapuche community authority Cristina Lincopán of the village, said the government brings water each month in trucks to the area from Zapala, a city 60 kilometers (38 miles), because the water is so contaminated from the oil industry.

She said that community members are suffering from blindness, skin diseases and diarrhea.

I talked to one old Neuquén hand today at the conference who questioned whether there were any Mapuche communities in the area before oil development began. He said that what indigenous people are there may have arrived in recent years, and said any issue with them is “manageable.”

As you may know, opposition from indigenous groups can slow down natural resource development. I don’t know how these things work in Argentine law, but quite often, the moral right to prior consultation on natural resource development can trump any legal right that a company has to mine rocks, cut trees or pump oil. Pooh-pooing an indigenous community’s concerns by questioning whether the community really exists and has a claim is not a respectful way to start the conversation.

The industry is trying to apply its lessons from North America here in Argentina. Mostly, this means getting ahead of water issues, and trying to prevent pollution before it starts. It’s great to see the industry trying to protect the environment. But they may be applying North American lessons a bit too literally. They need to get ahead of indigenous issues, or the Southern Cone’s most promising energy resource will be just another bunch of rocks.

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. Argentina used to sell Chile lots of natural gas. Methanex built four plants in Tierra del Fuego to turn some of this fuel into chemicals. At the time, Argentina’s peso was pegged to the dollar and its price of natural gas was regulated.

Argentina eventually devalued its currency, making everything in that country more expensive. Except gas. It kept natural gas prices low, causing motorists to convert a big chunk of the vehicle fleet to the cheaper fuel. Soon, Argentina was suffering for lack of natural gas. People started freezing in their homes for lack of heating fuel. Power plants went into crisis mode. Predictably, Argentina cancelled its supply agreement with Chile.

Methanex had to shut down several methanol production lines. Over time, it has sought new natural gas supplies, including Chile’s own gas resources. But Southern Cone gas is still several times more expensive than the same fluid in Louisiana. So, off they go. It’s hard to analyze their cost-benefit situation because the company statement doesn’t reveal how much they plan to spend on the move.

Recall that Methanex took lots of rhetorical fire last year when southern Chile was facing higher gas prices.

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…

Barrancabermeja … is also situated in the country’s Middle Magdelena oil exploration region…..

…26 Ecopetrol workers in Barrancabermeja were injured in clashes with police in early November….

…some communities near drilling operations have blockaded roads in various parts of Colombia in recent months to protest alleged environmental damage….

Plus much more, go read Chris Kraul’s article.

Colombia may be entering the next stage of the resource cycle. It’s always like this — nationalize (like Hugo Chavez), and over time the industry loses investment and skilled workers, which then causes a push for privatization, and finally things are at least partly privatized, and business picks up, but then people see injustice and pollution, and demand more resource nationalism, and — oh, we already talked about the next step.

I don’t know, but I suspect that if the government keeps bashing heads, it’s just a matter of time before the extreme resource nationalism comes back and new hassles pop up for the private companies. You might also argue that if they don’t bash heads, the country will turn into Argentina. Maybe they should get off the oil kick and try and sell reality TV stars. Like Kim Kardashian. Holy cow, I managed to get her into this post after all.

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!

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.

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.

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.

I expect some people will speculate on Ecopetrol (EC) and Pacific Rubiales Corp. (PRE.to), the biggest oil producers in Colombia. I don’t know if these companies are planning a triumphant march into the Venezuelan oilfields in the next apertura. But in terms of supplier relationships, language, training, and even personal knowledge of Venezuelan fields, these two companies — especially Pacific Rubiales, with its many ex-PDVSA executives — are obvious candidates to help get Venezuelan oilfields fixed up in a post-Chavez scenario.

That said, my advice is to play these games at your own risk. I don’t think any new president in Venezuela will rush to change the rules for oil companies operating in the country. “Entreguismo,” or a policy of handing natural resources to foreigners, is hated in Venezuela. Yes, a non-Chavez leader can promise to halt expropriations of oil rigs, making it cheaper to drill. But that same person will have a hard time starting a new “apertura” of inviting in foreign companies to work the oilfields, especially if the Chavez’s PSUV party survives his departure and serves as an aggressive opposition.

And there is the question of how cleanly power gets transferred in the unlikely event of a Chavez loss. You might get a win by betting on PRE in the next dip and seeing the shares surge on Oct. 7, election day. But if Venezuela collapses into chaos Oct. 8, so will that bet.

I expect people in New York and Toronto to tout this as a “play” in hopes of playing on public ignorance about Venezuela oil. They are most likely to pitch Pacific Rubiales, because it seems to be taboo in North America to write a skeptical word about that company. So yes, you can probably make some money playing that stock. But just know what you’re getting into: You’re not betting that the Colombians will drill any Venezuelan oilfields within the next couple years. You’re betting that someone else hears the pitch later than you and is willing to bid up the shares.

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

(“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.