Monthly Archives: February 2013

How much do oil companies save under Venezuela windfall tax cut? (reposted)

(Reposted, because when I posted this the other day, I was using some incorrect assumptions. It’s all much better now. Crummy old version of post can be seen here.)

So Venezuela’s legislature approved the cut in the “special contribution for exceptional international oil prices” or whatever they call it. Windfall tax, in effect. And people wonder, how much do the oil companies save?

I don’t know, since when you save money on one tax you often end up paying more on some other tax. But here’s what the chart looks like on the windfall prices tax, which isn’t a tax but a “special contribution” (meaning it goes right to the presidential slush fund, rather than being shared with state and local governments):

Venezuela windfall oil taxes as of 2007, 2011 and 2013

Venezuela windfall oil taxes as of 2007, 2011 and 2013. Click for full size

At $100 a barrel, under the 2011 rates, oil companies had to contribute $31 a barrel. Under the new rates, you contribute only $21. According to my math, anyway. At $110 a barrel, the difference grows to $10.50 per barrel, and stays there — from there on up, the difference is always $10.50.

Several of the big joint ventures in Venezuela are aiming for output of 200,000 barrels a day. The private partners generally own 40%, so they can count 80,000 barrels a day as their production. At that output, a difference of $10.50 a barrel works out to $306 million a year ($307.4 million in leap years).

But that isn’t exactly how much the oil companies save. Because that $306 million is pretax income, and all sorts of other taxes come in. And to figure that out, you really need to go beyond some dude writing for free on the internet.

Colombia oil industry to become world-class water miner

Colombian oil producers in the Llanos Basin pump far more water than oil. The percentage of water they produce is going to get ever-more dramatic in coming years, as the oil runs lower and what is called “water cut” gets higher. State oil company Ecopetrol, which has some of the biggest llanos oilfields, is now trying all sorts of ways to turn that water into something useful, such as irrigating forage for cattle and irrigating water-hungry lumber trees. They are improving treatment for the water they dump into rivers and they recently built their first injection well.

They are pumping the water into a wet landscape, and the aquifer they are pumping from is so full of water that in decades of oil production in the area, the water pressure has dropped about 1%, according to engineers who briefed me and another reporter in August (yes, took me a while to post this). So this is not one of those cases where the environmental impacts are obvious and horrifying.

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Will Rolls Royce scandal touch Venezuela?

A few months ago, Rolls Royce said its sales team may have gotten a bit too enthusiastic in sealing deals in Indonesia and China. Reuters reported at the time:

Aerospace and defence group Rolls-Royce (RR.L) may face prosecution after Britain’s Serious Fraud Office (SFO) ordered it to hand over details of possible bribery and corruption in China and elsewhere, the company said on Thursday.

The world’s second-largest maker of aircraft engines said the SFO had asked it to conduct an internal inquiry into dealings involving intermediaries in China, Indonesia and other overseas markets, which it did not name, and report the results.

“It is too early to predict the outcomes, but these could include the prosecution of individuals and of the company. We will cooperate fully,” Chief Executive John Rishton said.

This story doesn’t mention it, but Rolls Royce has also sent equipment to Venezuela, via some unusual intermediaries. Here’s an article in Spanish. It would be interesting to know why exactly Rolls was willing to sell turbines to middle-men rather than selling for possibly twice as much money directly to PDVSA.

Why does anyone care about Keystone XL? Ride a bike.

Some Canadians who get the real issue.

Some Canadians get it.

I honestly don’t get US environmentalists’ decision to make their Line In The Sand against climate change at the Keystone XL pipeline. In an era of $100 a barrel oil, Canada’s oil resources are not going to be left idle, and other countries with dirty but accessible oil aren’t going to sit and wait for cleaner resources to come on stream.

In fact, stopping the pipeline may cause increased carbon emissions. An oil pipeline is about the most energy-efficient transportation method among all commodities. Yes, it’s made to transport dirty Canadian tar sands oil. But if Keystone XL isn’t built, that same filthy oil is most likely going to get shipped to Asia instead, using even more carbon on the way. And the US will buy oil from elsewhere, some of it being the carbon-intensive heavy oil of Venezuela and Colombia. (And every complaint raised here about the tar sands is true in the lawless llanos of South America: carbon-intensive processing; huge water production and little control over water disposal; disputes with indigenous people and other local cultures; pipeline spills.) The US will get that fuel by ship, using more carbon per barrel to import it than if it were carried by pipeline.

The problem isn’t the transportation method of the oil. The problem is the oil. Cars kill everything: they run over people, birds, dogs, butterflies, you name it. Single-occupant cars obstruct social life and increase stress. Cars make mass transit less efficient and get in the way of bicycles. Meanwhile, they devour the bulk of the world’s liquid fuels and convert these long-buried plant molecules into carbon dioxide and smog. The problem, at heart, is cars. (Planes suck too, especially per passenger. My biggest contributions to the greenhouse effect are from my occasional plane trips.)

The story is in the news these days because environmentalists are counting on US President Barack Obama to stop the pipeline, while some are expecting him to let the pipe get built. Personally, I say he stops it. It’s become a cause celebre, and the main beneficiary is a Canadian company. It’s easier to stand up to those supposedly dirty Canucks than to stop the real climate villains in suburbia, those who fire up a one-occupant car every morning to commute to work.

What’s most frustrating about watching this fight from afar is that it is so similar to the drug war. Just as slowing the flow of cocaine from Colombia’s Caribbean coast has done nothing to reduce US drug addiction (the shipments moved to the Pacific, to Venezuela, and to Brazil), slowing the flow of oil from Alberta to Louisiana will do nothing to reduce US car addiction. And just as with the drug war, it’s easier to rant and rave about some foreign threat than to face the fact that the harms are ultimately caused by one’s own friends, clients, neighbors, family members, and self.

If you don’t want a hotter planet, stop driving cars, especially inefficient cars and those with just one or two occupants. Stop building parking lots. Don’t take plane trips, either. Convince the people you know to do the same. And don’t go start with some “we need structural change first.” Structures, such as new transit lines, get built to meet demand. You need to be that demand, rather than blocking the intersection and slowing down the few US bus lines that still exist.

On the other hand, if you want to feel good about yourself without making such a change, go ahead and worry about one pipeline or another. But don’t try and convince yourself you are stopping climate change.

PS: If you have either already made what personal changes you can, or you just prefer to stick to structures rather than personal choices, the infrastructure projects that are most important to halt are parking garages, regional malls, exurban office parks, and regional sprawl more generally. They are what induce driving. (Low-density suburban residential development can also make the list, but as I’ve seen here in Latin America, such development can coexist with good mass transit and a low-carbon lifestyle as long as there are little shops scattered through, neighborhood schools and nearby transit stops. Such things are verboten in the USA.)

What I did on my summer vacation

Lago Ralco, a power reservoir on the upper Bio Bio River in the IX Region-Araucanía, Chile.

Lago Ralco, a power reservoir on the upper Bio Bio River in the IX Region-Araucanía, Chile.

This is one of those dam projects that give hydroelectricity a bad name. The Lago Ralco reservoir flooded thousands of acres of land in an indigenous Mapuche area. To explain, this is an area where only Mapuches can own land, but Endesa, an Italian-owned electric company, was able to come in and flood that land.

The low-lying pastures, homes, schools, gardens, cemeteries, roads, soccer fields — lives, really — were forced out, up onto the steep mountain slopes. The roads are now higher and steeper, making them less reliable in winter. The pastures are gone. Locals have survived by salvaging trees killed by the flooding and selling their valuable hardwoods. But the stock of trees diminishes every year. The death and destruction is especially visible now as the reservoir is at its lowest level since being filled, at least 10 meters and maybe 20 meters below the grey, dead high-water mark.

This project was controversial from when it was proposed in 1990 until it was completed in 2004. There are plenty of indigenous people who say that the electric company hasn’t fulfilled its promises. One of those promises was tourism development, and I can vouch that this article is correct — there is no tourist development on the lake. In fact, getting there and away was one of the more difficult bits of logistics I’ve managed in years of bumming around the Americas. I’m not sure I’ve ever seen well-built, public roads with so little traffic. A four-times-a-week bus reaches one end of the lake, but other than that, you either drive, walk, bike or take a horse. We literally walked all afternoon from the lake to the next town and saw three vehicles in motion.

Some portion of the electrical potential I’m using to write this comes from that dam. Thanks, dam.

You probably didn’t notice I was gone, as I’ve been posting so little. Back to work we go.