Monthly Archives: August 2010

What does the Iraq war have to do with a Colombian pipeline?

All roads lead to Rome. And in the ideal U.S. policy world, all pipelines would lead to Houston. China, Russia, Iran, Iraq and Venezuela have struggled against oil shipment hegemony. Part of the reason is just a desire for independence. But there is also the growing demand in China, India and the rest of East Asia, which drives up prices and invites profit-seeking tankers. From Valparaiso to Vladivostok, the Pacific basin tends to have higher fuel prices than the Atlantic, and much higher than the Gulf Coast. The easiest way to see this is on this table from the U.S. Energy Information Administration, which shows recent fuel prices around the world. Compare the prices of “residual fuel oil” in Los Angeles and Singapore to those in the Gulf Coast, New York and Antwerp. I would do it for you but Excel keeps crashing. Trust me, Pacific basin prices are usually higher*, to the point that it is sometimes worth it to pay the extra 3 weeks of tanker travel to Singapore rather than ship crude from, say, Nigeria, to the States.

Now let’s game out how Colombia should play this racket. Colombia is the only South American country with both Pacific and Caribbean or Atlantic coasts. So it’s the only place that can reasonably choose between shipping to China or to the States. A couple years ago, when Venezuela and Colombia were in one of their recurrent love-fests, an official of Colombia’s energy ministry told me that they had worked out a few possible routes for a pipeline from the Venezuelan llanos to Colombia’s Pacific coast. This seems like a win-win — Venezuela gets Chinese prices while saving weeks of shipping, and Colombia gets both transshipment fees and a boot on Venezuela’s neck. (Oh did I say boot on the neck? I guess that’s why the Chinese and Japanese project backers decided to abandon the concept.)

Anyway Colombia itself is also an up-and-coming oil producer, aiming to pump a million barrels a day by 2012. So where should it send that oil? A look at the country’s pipeline map shows that it could really go either way. The Andes are formidable but Chinese demand is more formidable. Ecopetrol, Colombia’s state oil company, announced today that it would spend U$4.2 billion on pipeline upgrades to (drumroll!) the Caribbean port at Coveñas.

Now reread the title of this post.

*Got Excel to work. On days when both Singapore and the Gulf Coast traded, the Singapore price averaged 5.9 cents a gallon higher over the past year. Los Angeles was 16.5 cents higher.

The more you drive (a country), the less intelligent you are

How else does one explain that it’s only future- and ex-presidents who can see the obvious way to win the WarOnDrugs™ but nobody in a position of power ever just, you know, legalizes the stuff?

Vicente Fox in power
Vicente Fox out of power

Juan Manuel Santos out of power (h/t)
Juan Manuel Santos in power

OK just kidding, I know it has nothing to do with intelligence, and that rather people in power aren’t allowed to be intelligent. Just thought it would be cute to throw in a Repo Man reference.

Monkey post gets attention

Many thanks to the several thousand of your who stopped by over the weekend to read about the cute fuzzy monkey (now the top Google hit for “cute fuzzy monkey”!), and thanks to WordPress.com for putting the story on the front page. Nice to meet all of you. You’ll be pleased to know that at least one of the companies involved is also paying attention — Talisman Energy clicked the article about 20 times Monday. For me, it’s good to know that the company is paying attention. I have nothing against any of the companies involved here, and it seems like these monkeys can be protected. I’d also be happy to print any company response to the article. I left a message with Talisman, but just in case, anyone who is so inspired can reach me any time at settysoutham@gmail.com.

Another reason I live in Latin America

Bolivian soldiers with flags

Bolivian troops march in Oruro on Day of the Sea, March 23, 2008.

The Flacso think tank in Chile surveyed Latin Americans to determine their level of support for the military. Not just whether they think their military forces are doing a good job, but whether their military forces should exist. Fifteen percent — one out of every seven people polled — opposed the existence of the military. This in countries (other than Costa Rica and Panama, which have no military) that use the military for all sorts of domestic law and order tasks, and where the mass media and governments presuppose the existence of a military to defend or recapture some aspect of national pride.
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Chevron-Kroll story shows how companies recruit reporters

Being an English-language journalist in South America means getting recruitment offers from all sorts of interesting characters. Reporters, because of our reputation (in some parts) for (at least seeking) fairness, are able to walk more freely through places like the oilfields of Venezuela, the slums of Rio de Janeiro and the indigenous communities of the Amazon than someone who walks right up and says “Hi, I am from” Exxon Mobil/U.S. State Department/the I Hate Fidel Castro group on Facebook. “Would you mind answering a few questions?”

One such recruitment effort has hit a little snag. Kroll, the world’s biggest private investigations company, tried to recruit a journalist named Mary Cuddehe to do some reporting in the Ecuadorian Amazon in the hopes of influencing a multi-billion-dollar lawsuit against Chevron Corp. They had a particular bit of investigation that needed doing, and they thought the best person to do it would be a freelance reporter not associated with the company. They offered her $20,000 for six weeks of work that may have discredited a study that is part of the proof that Texaco (now part of Chevron) screwed over people in the Ecuadorian Amazon. As you’ll see, she told them to stuff it.
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Venezuela gold, electricity, aluminum, steel news

Eiffel bridge over Cuyuní River, Bolivar State, Venezuela. River is this color in large part because of uncontrolled "artesanal" mining, in which individuals blast the ground to extract gold dust and nuggets, washing away the red tropical soils.

I didn’t note it on Friday but Venezuela changed its rules for sales of gold by legitimate producers. Bloomberg covered the story and its implications for Rusoro Mining here. One tidbit that goes unsaid is that better terms for legal producers could, maybe, in time, cause corporate mining to overtake the Hobbesian horror known as artesenal mining. Venezuela’s central bank estimates that 60 percent of the country’s gold is channeled into the legal market within Venezuela. The rest is smuggled to Guyana, Brazil and Colombia, for who knows what sort of end.

Speaking of the Bolivarian Republic, Guri dam was 82% full on Friday at 8 a.m., up from 19% three months earlier. The rains have been well above average (as someone predicted in his first blog post) and recuperation has been aided by continued low generation in the power plants. Sidor, the country’s biggest steel mill, is taking its time to fire up furnaces after shutting half its production to save electricity. Venalum, the biggest copper aluminum smelter, is supposed to get about a fifth of its shuttered production back on line this year, with a goal of getting back to full production by the end of 2012, according to a person familiar with the plans. This helps save energy, albeit at the cost of primary economic output. So it goes.

Corrected Aug 16 to show that Industria Venezolana de Aluminio, or Venalum, processes aluminum. Not copper. Thanks to eagle-eyed reader Juan Cristobal for bringing me back to reality.

Chile miners to stay trapped a long time (updated)

Miners' families wait

Miners' families wait outside the San Jose mine near Copiapó, Chile. Image taken from La Tercera; click on it for a gallery of what it's like outside the mine as people wait.

Nobody knows yet whether the 33 trapped Chilean copper miners in Copiapó are alive or dead. Assuming they are alive, the government and state copper company Codelco have been running a rescue operation that involves drilling eight holes of eight inches (20 cm) apiece as close as possible to a refuge room 700 meters (2200 feet) below the surface of the desert where the miners are presumed to be hanging out.
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PDVSA bailout was bigger than I thought

El Universal has the story.

Due to sinking revenues, last year state-run oil holding Petróleos de Venezuela (Pdvsa) asked government agencies for financial help and by means of promissory notes and issuance of investment certificates, it got near USD 6 billion.

Pdvsa financial statements reveal that in 2009 the Bank for Economic and Social Development (Bandes), the Bank of the Treasury, the Deposit Guarantee and Bank Protection Fund (Fogade) and the National Treasury Office ended transferring funds to the corporation. CONTINUES<

Amusingly, they come up with more than $6 billion in government aid to PDVSA in 2009 and they don´t even count the $2 billion gift from Fonden to PDVSA that I reported earlier. The ones they see are mostly government short term loans and loan guarantees. The one I spotted was, to my mind, even more egregious, and I am surprised nobody else has reported it. I think I did a bad job of explaining the situation in my first article, so let me spell it out.

At the beginning of 2009, Venezuela´s central bank transferred (Excel) $12 billion to Fonden, an off-budget infrastructure development fund. Later in the year, Fonden gave PDVSA $2 billion in compensation for some undefined social spending. At the same time, PDVSA paid a $2 billion dividend to the government´s general operating budget. So if you follow the money and ignore the middlemen, you see the Central Bank using reserves to cover Venezuela´s annual operating budget in a year with oil prices averaging $57 a barrel, $17 a barrel higher than the assumption in the federal budget, and Fonden and PDVSA being used as money launderers.

I may be misinterpreting things here. I don´t mean to take a cheap shot or anything, so if any of the four instutions involved (Venezuela government, PDVSA, Venezuela Central Bank or Fonden) care to respond, I´m happy to give them space to reply. Just as I´m happy to give space to Talisman Energy or Pacific Rubiales. We´re all grownups here, right?

Pacific Rubiales, Talisman get the cute fuzzy monkey!

Callicebus caquetensis

Nothing better for a critically endangered monkey than a 1,152-km seismic survey! (Image from Wired News)

There’s a new species of Titi monkey. It purrs. And it lives in an area where Pacific Rubiales Corp. and Talisman Energy recently won the right to explore for oil.

The bid round, called Ronda Colombia 2010, had as its slogan “Colombia: The perfect environment for hydrocarbons.” Now we get to see which part of that slogan wins out — the hydrocarbons part or the “perfect environment” part.

You can see a map of where the monkey lives in the original paper (PDF) and a map of the CAG-5 block that Rubiales and Talisman Energy won here (graphics-heavy, computer-choking PDF)

You can see if you look at the shape of the Caguan river that this is almost certainly the same place. One population of the monkeys appears to be within the so-called CAG-5 block, while the other population is probably outside the exploration area.

On winning the block June 23, Rubiales said:

CAG 5 Block: This block was awarded to a joint venture formed by the company’s subsidiary, Meta Petroleum Corp. (50%) and Talisman (50%). The block is a Type 3 Special Technical Evaluation Agreement (TEA) block with an area of 372,036 hectares located towards the central part of the Caguan Basin. During the 36 months of the first exploration phase, the joint venture will invest US$82.2 million in the acquisition of 1,846 km of multi-spectral analysis, 1,152 km of 2D seismic, and the drilling of five stratigraphic wells. The winning bid carries an additional royalty of 2%. The block is located just to the north of the company’s Tacacho and Terecay Contracts. The company believes that this block has a very high potential for hydrocarbon accumulation and should maintain the continuity of the Tacacho and Terecay structures towards the north.

Seismic exploration generally involves driving machines along more or less straight lines through the territory and vibrating the ground to detect the geology. Rather like a purring monkey, only bigger.

No one at Pacific Rubiales was immediately available to comment.

The area of southern Colombia in question was under guerrilla control for a long time, making it off-limits for both biologists and oil companies. Now, the government has secured the area and is handing out oil exploration licenses before the biologists can conduct even the level of surveys that detects mammals, much less the slow, difficult work of finding new species of lizards, butterflies, fish or frogs.