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WestLB Finances OCP Oil Pipeline Through the Mindo Important Bird Area, Ecuador
The Two Competing Pipeline RoutesAs you will see from the map, there were two proposed routes for a new heavy crude oil pipeline over the Andes in central Ecuador. The environmentally preferable southerly route, proposed by the Williams Company, would have followed the existing Trans-Ecuador Pipeline (SOTE) over most of its route. The northerly route, along a new right-of-way from east of Papallacta on the east slope of the Andes to Balao on the west slope, was advocated by the competing OCP consortium consisting of affiliates of EnCana (formerly Alberta Energy) (Canada), Eni (Agip Petroleum) (Italy), Kerr-McGee (US), Occidental Petroleum (US), Perez Companc (Argentina), Repsol YPF (Spain), and Techint (Argentina). It will bisect the Mindo Important Bird Area, causing substantial damage and eventual constructive total loss of the largest remaining area of contiguous cloud forest on the west slope of the Andes, which is critical habitat for several species of rare, endemic birds, in particular the endangered Moustached Antpitta Grallaria alleni, Tanager Finch Oreothraupis arremonops, and Black-breasted Puffleg Eriocnemis nigrivestis. The environmentally devastating northerly route was supported by powerful politicians who apparently stand to gain personally when it is built. Ecuador Has Insufficient Proven Oil Reserves to Justify a New PipelineIn 2000, the government decided to build the OCP (northern) pipeline, but advocated that the Williams pipeline be built in addition. However, on December 14, 2000, Williams pulled out of negotiations. Williams spokesman Gustavo Romero said: "There isn't enough crude for two companies, and as a result, there's no reason to build a pipeline that would carry up to 434,000 barrels of crude daily, at a construction cost of $544 million." (Weekly News Update on the Americas.) Indeed, insufficient capacity is not a justification for building even one new pipeline. According to the Ecuador government, Ecuador currently has 4.4 billion (US) barrels of proven oil reserves. However, according to the US Energy Information Administration, Ecuador's proven oil reserves amount to only 2.1 billion barrels. The SOTE has a capacity of about 380,000 barrels per day, or 138.7 million barrels per year. According to the US Energy Information Administration (see below), after ongoing improvements have been completed, the SOTE's capacity will be 409,000 barrels per day, or 149.3 million barrels per year. The OCP will carry 450,000 barrels per day, or 164.25 million barrels per year. Furthermore, 50,000 barrels per day of Ecuadorian oil are shipped to Colombian ports through the OTA pipeline, which may be upgraded to a capacity of 85,000 barrels per day, or 31 million barrels per year. (See below.) Domestic consumption in 1999 was 152,000 barrels per day, or 55.5 million barrels per year. Not counting the Oleoducto Norperuano (see below), with the SOTE, OCP and OTA operating at capacity and domestic consumption assumed to remain flat at 1999 levels, Ecuador's proven oil reserves will be exhausted in less than 11 years (Ecuador government numbers) or less than 6 years (US government numbers). ("Ecuador hopes for two oil pipelines, but unlikely." Reuters, 18 November 2000.) Consequently, the government argues that the pipelines will be filled by as yet undiscovered oil. ("Ecuador need $3b to develop new fields." Reuters, 10 March 2001.) Petroecuador, the government oil company, wants a new pipeline to avoid blending its crude oil with lower quality crudes produced by private companies, in the hope of obtaining higher prices at the U.S. West Coast. Petroecuador will have exclusive use of the existing SOTE pipeline, and the private companies will use the new OCP pipeline. ("New pipeline to improve price of Ecuador crude." Reuters, 23 March 2001). FinancingThe OCP Consortium has obtained a $900 million, 17-year loan from Westdeutsche Landesbank. WestLB is planning to syndicate the loan to a group of other major banks. In April 2001, it was disclosed that the Argentinian firm Perez Companc, which obtained a 15% interest in the OCP from Repsol YPF in February 2001, had secured a $200 Million line of credit from Citibank and Deutsche Bank (owner of Bankers Trust) for pipeline construction, and that Bank Boston (now part of FleetBoston), BealBank, and BNP Paribas helped to coordinate the line of credit, in which Bladex, Hypovereinsbank and Vereins-und-Westbank are participants. (BnAmericas.com). News BlackoutDespite the involvement of American multinational oil companies and banks, there has been a virtual news blackout about the environmental consequences of the pipeline in the American mainstream press. The only articles have been about the conflict between Williams and the consortium. (See November 11, 2000 article in the New York Times business section about Williams' threat to walk away from the project if it was not awarded the entire contract.) It was recently reported that advertising revenues at the New York Times have declined. Since Chase Manhattan Bank and Citibank purchase expensive daily ads in the Times, it seems highly improbable that New York's only remaining purportedly "serious" newspaper will "discover" the controversy until it is too late to stop construction. BackgroundThe following is an excerpt from a U.S. Energy Information Administration report dated July 1999. Pipelines In order to resolve this problem, the government is currently working with private oil companies to build a new heavy crude pipeline. This long-planned project is now expected to begin in late 1999. Five private companies active in Ecuador have signed a letter of understanding to build and operate a pipeline to carry heavy crude from the Amazon region to the port of Balao: U.S.-based Occidental, Arco, and Oryx; Spain's Repsol-YPF; and Canada's Pacalta. Construction would take an estimated 18-20 months and cost about $400 million. It would have an initial capacity of more than 100,000 bbl/d, expandable to more than 300,000 bbl/d, for heavy crude between 16° and 22° API gravity. The line would run parallel to the existing Transecuadorian pipeline. Analysts have estimated that when completed, it could prompt $2.3 billion in additional foreign investments in oil production, and pave the way to more than double oil production by 2003. The development of a new pipeline is expected to enable the government to proceed with additional exploration tenders, easing producers' worries and assuring them that transport capacity will be available if new discoveries are found. Activity is also underway to upgrade existing pipelines. The SOTE pipeline, the nation's largest, currently transports 349,000 bbl/d of crude oil from the Amazon Basin to the Pacific port/refining facilities at Esmeraldas. Petroecuador plans to increase output by another 300,000 bbl/d within a few years and to 350,000 bbl/d by 2003 or 2004. Production volumes could eventually be pushed up to 800,000 bbl/d. It is seeking private partners to finance the project and to provide technology. The investment is estimated at $280 million and work should last 18-20 months. Upon completion, a fee will be charged, set by Petroecuador, for those firms wishing to transport crude through the pipeline. In addition to this major upgrade, Petroecuador signed a deal with Arco in January 1999 to expand the pipeline by 60,000 bbl/d through the addition of looping and compression at a cost of $33.5 million. Work is tentatively set for completion by October 1999. The pipeline had most recently been upgraded in July 1998 when Argentina's YPF oil company added a series of new pumping stations on the line to increase flow. In addition, Ecuador uses Colombian shipping ports on the Pacific to export an estimated 50,000 bbl/d of its Amazon-produced products. The Trans-Andean [OTA] pipeline pumps oil from Ecuador's Amazon Basin to Colombia's Pacific port of Tumaco. A joint $78.5 million project between Petroecuador and Colombia' Ecopetrol is being considered to increase the Trans-Andean Pipeline's capacity from 60,000 bbl/d to 85,000 bbl/d. The pipeline has been sabotaged several times in the past two years by guerrilla attacks in Colombia, causing loading delays and forcing Petroecuador to declare force majeure to contract holders. The signing of a peace treaty with Peru has opened up additional cross-border possibilities for the transport of Ecuador's oil. The two countries' governments are working out details for connecting their oil pipeline networks. The most viable connection would be with Peru's Oleoducto Norperuano pipeline, which has a capacity varying between 70,000 bbl/d and 200,000 bbl/d.
OIL Oil exports are the main source of government revenue for Ecuador, and revenues have increased significantly in 2000 with the recovery of world oil prices. The oil price collapse of 1998-1999 had negative ramifications for the Ecuadorian oil industry, as maintenance was delayed and wells were shut in. Petroecuador, the state oil company, plans to proceed with a tender later this year, hoping to attract foreign investment in the country's five largest oil fields: Shushufindi, Sacha, Libertador, Cononaco, and Auca. It aims to boost combined production at the five fields by 60,000-100,000 bbl/d. These fields accounted for 180,000 bbl/d in 1999, down from 196,000 b/d in 1998. Privatization of Petroecuador is expected in the coming year or two. In November 1999, Mahuad requested the resignation of Petroecuador president Jorge Pareja due to conflicting opinions about the privatization of the company. Mahuad was interested in privatizing the company more quickly, while Pareja was a proponent of retaining more government control. While a specific privatization plan has not yet been offered, progress toward that end is expected in the near term. Joint ventures between Petroecuador and private oil companies already are becoming increasingly common, and private foreign production accounted for increasing proportions of overall production throughout the 1990s. Ecuador has experienced recurring problems between oil producers and the government on one side, and indigenous peoples on the other. Native tribes inhabit most of the highly productive southeastern area of Ecuador, and these tribes do not get any monetary compensation for the drilling that occurs in this territory. Indigenous peoples have staged many peaceful demonstrations against the Ecuadorian government and oil production policies, and, as stated above, helped to remove former President Mahuad from office. Pipelines A new pipeline is planned to alleviate oil transport capacity constraints. In spite of new legislation that removes many obstacles to building new pipelines in Ecuador, a five-company consortium headed by Canada's Alberta Energy has not moved forward with plans to build a second major export pipeline. The consortium, which also includes Repsol-YPF, ENI, Kerr-McGee, and Occidental, continues to negotiate for more favorable terms. The new legislation allows private companies to own and operate pipelines in perpetuity; previously, facilities had to be returned to the government after a set period. The legislation also authorizes pipeline owners to set tariffs and relax requirements for downstream investment by producers. Once the pipeline is completed, Ecuador's transport capacity could increase to as much as 700,000-800,000 bbl/d, allowing for significant increases in oil production. Meanwhile, Ecuador is negotiating delivery of 140,000 bbl/d of oil from Petroleos de Venezuela (PdVSA) until the new pipeline is complete. A smaller export pipeline was built in the late 1980s, a 25-mile spur off the Transandino to Colombia (OTA). It carries about 50,000 bbl/d of Ecuadorian crude to Colombia's Tumaco port. The OTA is the target of frequent Colombian guerrilla bombings and is susceptible to mudslides and mechanical problems. Exploration and Production Other companies, however, are leaving Ecuador. The Japan National Oil Corporation made public in August 1999 its decision to pull out of the country. In October 1999, Arco (now merged with BP Amoco) decided to sell its assets in Ecuador, as well as exploration properties in Colombia and Peru. Italy's Agip, a consortium member in Arco's Ecuador production, took over as operator in Arco's Villano field. In July 2000, CMS Energy sold its Ecuadorian assets to Crestar Energy of Alberta, Canada. Paul Greenfield's Original Request for International Assistance to Stop the OCP route, 18 March 2000Ecuador's desperate desire to improve its failing economy has "inspired" plans for the building of a new, heavy crude-oil pipeline over the Andes. The local newspapers are announcing that the construction route will follow that of the already-existing pipeline -- over the Chiriboga Road (down the west Andean slope). The truth of the matter is that plans were underway to build it along the Calacali-Nanegalito-Mindo Highway, to the north of Chiriboga. Environmental impact studies carried out by ENTRIX AMERICAS gave the okay to this proposed route and expressly warned about the areas to the north and south -- both areas of protected forest. The construction company, TECHINT (TENCO INT. CONST. CORP.), have decided not to use the Calacali route because they say that geological studies show that the soils along the highway are soft and weak. They have begun surveying the area to the north -- the Nono-Tandayapa-Mindo Rd, where they have invaded private property without asking permission and have cut trails through forest . One of these trails goes right through territory of Moustached Antpitta, Grallaria alleni. The area they are planning now to use covers the Bosque Protector Mindo-Nambillo which was recently declared Birdlife's first IBA (Important Bird Area) in South America, within which more than 30 range-restricted and red-data species are found, including Tanager Finch, Oreothraupis arremonops. This area is also one of Ecuador's principal "eco"-tourism localities, and much of the private land has been set aside as reserves to protect the local flora and fauna. We need help to force TECHINT to look for a suitable site away from this area. We are working on our own environmental impact study, and we will give them alternate routes, but we need to hit them with pressure from all sides! If you could pass the word around, please do! We need short messages in any language sent to the following E-mail addresses. I can send a short model letter if need be. Isidro Gutierrez:
isidrog@ambiente.gov.org Sérgio Lasso:
slasso@ambiente.gov.org (Copies of your communications should be sent to the attention of "Ejecutiva" and "Forestal" del ex-INEFAN. I understand that Sr. Lasso would know the addresses.) Dr. Gregorio Tello - TECHINT [Tenco]: tenco@tenco.com.ec Peter Ortiz - ENTRIX (Texas): portiz@entrix.com Gustavo Rodriguez - ENTRIX (Quito): entrix@pi.pro.ec Thank you for any help you can give. Best regards, Paul Greenfield From: COMITE PRO RUTA DE MENOR IMPACTOJanuary 2001This is a letter that the Committee opposing the proposed pipeline through the Mindo Important Bird Area have sent to the Alberta Energy Company in response to a false and misleading form letter sent by the said Canadian company to people who have written to complain about Alberta Energy's involvement in the disastrous pipeline project: Quito. 5 January 2001 Gwyn Morgan Dear Mr. Morgan: Hundreds of concerned citizens who have written to express their objections to your proposed OCP [Oleoducto de Crudos Pesados] pipeline project in Ecuador have received a form letter from Mr. Thomas Oddie, Director of Environment, Health and Safety, justifying Alberta Energy's involvement in this environmentally irresponsible project. On behalf of the "Committee for the Route of Least Impact", comprised of over one hundred international and national organizations, local communities and concerned residents, we feel we must write to correct a series of erroneous and misleading statements in the aforementioned form letter. Most of all we wish to take this opportunity to urge you once again to reconsider the proposed route. We of course welcome Alberta Energy's stated commitment to environmental preservation and the highest standards of care. However we fail to see how this commitment is consistent with the OCP consortium's insistence on the Northern Route. In fact, we must ask why Alberta Energy is aggressively promoting in Ecuador a project that would not meet even the most basic standards to be allowed to go forward in Canada. The inconsistency is especially striking, since in March of last year you wrote in World Energy Magazine of how AEC was proudly applying the strictest Canadian standards to all its operations in Ecuador. [Applying Canadian Standards to Energy Projects in Ecuador, by Gwyn Morgan. World Energy, Vol. 3 No.1 (1999).] The proposed Northern pipeline route will cross through habitat vital to the survival of more than 450 species of birds, of which over 40 species are unique to the area and at least 20 are threatened with extinction. In several cases, these species are only found in the Mindo area (specifically where the proposed pipeline will be built). Additionally, the forests that would be affected by the pipeline are critical habitat for 50 Canadian migratory species. Many of these populations are in significant decline in Canada and it is believed that habitat destruction in the tropics may be largely to blame. It is inconceivable that a company would be allowed to proceed with a similar project in Canada if it were thought that so many unique and threatened species were at risk. It would be akin to building a pipeline through the heart of the Whooping Crane staging areas in Alberta or Saskatchewan or through pristine areas of Banff or Jasper National Parks. In his letter Mr. Oddie states that "the EIS for the OCP Project is expected to be completed early in 2001." We have understood both from written and oral communications with OCP representatives here in Ecuador as well as from Entrix, the firm hired for the environmental impact study, that the EIS was actually completed and presented to the Ministry of Energy and Mines by November 2000. Despite our repeated requests to review this important study, the OCP consortium has refused to make the report public, choosing instead to quote selectively from the EIS in paid announcements defending the Northern route in the Ecuadorian press. This, again, is behavior that Alberta Energy would not engage in at home, nor be allowed to under Canadian regulations. Alberta Energy's form letter also asserts that the "proposed northern routing was selected only after extensive environmental review and comparison with the southern route proposed by some as an alternate route", while going on to contradict itself, noting that "to our knowledge, no other environmental evaluation has been carried out on the southern route." For the scores of biologists and conservationists familiar with Northwestern Ecuador, it is evident that the southern route, traversing areas long-deforested and in the area of influence of major roads and an existing pipeline, would cause far less impact. We believe that no EIS prepared to "the highest standards" could argue otherwise, and object to the assertion that these environmental differences between the two routes are in any way "illusory." Alberta Energy's statement that the Southern route traverses areas of seismic activity is in fact correct. Unfortunately, according to the Ecuadorian Geophysical Institute these seismic and volcanic risks are essentially equivalent for both routes. Given these very real risks, and the associated risks of an oil spill, the choice of constructing the pipeline through a region rich in endemic plant and animal species as well as home to a thriving ecotourism industry invites the threat of additional catastrophic impacts. It is hard to imagine just what "the highest standards" that might be applied during construction and operation of the pipeline in such a sensitive area would look like. During the surveying stage your crews have already trespassed on private and public nature preserves and cleared cloud forest vegetation without authorization. The consequences would be disastrous if similar operating procedures were employed when heavy machinery, earth moving equipment and hundreds of workers move in. We can only trust that Alberta Energy has not been adequately informed regarding the environmental characteristics of the pipeline project, and would be more than willing to provide information and feedback to the environmental evaluation of the alternative routes when this is made public. We invite you to visit the pipeline route with us in order to see the areas that will be damaged by the project through the eyes of local residents and ecologists. We believe that given the importance and fragility of the area it is virtually impossible to avoid severe and irreversible impacts if this Northern route is chosen. We are pleased to note Alberta Energy's statement that the Southern route has not been discarded. Given this recognition that other options exist, we urge you again to consider alternative routes that achieve the same business objectives and meet Ecuador's urgent development needs while avoiding gratuitous environmental damage with costs to be borne by current and future generations of Ecuadorians. Sincerely, Rodrigo Ontaneda, Fundación Maquipucuna Marta Echavarria, Heliconius Cia. Ltda. On behalf of the Comite Pro Ruta de Menor Impacto (pipeline@ecnet.ec) 17 November 2000: Disastrous decision for protected rainforest in Ecuador (BirdLife International) If you can write well, it is much more effective to send letters to the editor and to circulate your letters on the Internet than to write to the companies involved. In 2001, Ecuador moved up from most corrupt to the second most corrupt country in Latin America. (Transparency International - trailing Bolivia by 0.3 on a scale of 10), and this project would be unique if there were no "commissions" or non-itemized "disbursements" for local politicians. Ecuador is also the foremost ecotourism destination in Latin America, if not the world, because of the Galápagos Islands. Yet its crooked politicians regularly sell out to each and every destructive special interest, even (especially) in the Galápagos, where the Ecuadorian Navy repeatedly releases illegal fishermen but detains Sea Shepherd's conservation patrol vessels. Since this pipeline depends on overseas financing, pressure should be applied on the banks to withdraw financing of the pipeline routed through the Mindo IBA. At present the multinational banks are getting a free ride, thanks to a news blackout by the mainstream press. Related Matters
Nevertheless, the pipeline has been built directly through the Chiquitano forest, with financing from the World Bank, the Inter-American Development Bank, the Andean Development Corporation, the European Investment Bank and the Overseas Private Investment Corporation (OPIC), i.e., U.S. and European taxpayers. It might have been stopped but for the betrayal of international environmental groups that had opposed the direct route on grounds that the OPIC is not permitted to loan money for construction in "primary forest." However, before the issue could even be joined, five environmental groups, including the World Wildlife Fund, the Missouri Botanic Garden and the Wildlife Conservation Society, betrayed the public interest and Bolivian environmentalists for a token payment, agreeing not to oppose the direct pipeline route in return for a $20 million trust fund (chump change to Enron, which received $4 Billion from OPIC and the Export-Import Bank for overseas projects) to be used for mitigation and development of conservation programs which the environmental groups would help administer. ["Conservation groups questioned for siding with Shell and Enron." Drillbits & Tailings, Vol. 4, no. 11, 23 July 1999.] Bolivian environmentalists continued to oppose the pipeline, but with the mighty international environmental groups in bed with Enron and "Slick Willy" Clinton, resistance was futile. The World Wildlife Fund later pulled out of the unsavory, backroom deal it negotiated in response to criticism in the press. The conservation program has proven to be a hoax and is in fact preserving nothing, except perhaps some jobs at WCS, MBG et al. (It pays to sell out. Top executive compensation, as of 2001, from Animal People, November 2001: Wildlife Conservation Society (Bronx Zoo) -- Christopher A. Smith: $852,749 (!!!!), William Conway: $450,853 (!!!), John McKew: $307,176, Richard Lattis: $238,734, Dennis Baker: $227,945, John Robinson: $221,398, W.B. McKeown: $217,398, John Hoare: $183,852; World Wildlife Fund -- Kathryn Fuller: $262,401, James Leape: $189,493, Deborah Hechinger: $184,231. "Attorney Christopher A. Smith, 60, with no zoo background, succeeded William Conway as president of the Wildlife Conservation Society in September 1999, after Conway reached mandatory retirement at age 70. Smith left, however, in March 2000. His compensation [$850,000 for six months!] and that of John McKew and Dennis Baker includes severance. Conway, whose compensation includes retirement benefits, still consults for WCS. James M. Large Jr. was named acting president." WWF President Kathryn Fuller receives additional income as a member of the Board of Directors of ALCOA, which plans to destroy Iceland's wild rivers for a massive, below-cost aluminum smelter.) Enron has built a 30-meter wide road through the heart of the Chiquitano forest. There is no adequate access control, and colonizers and their cattle are following the new road and clearing forest. Exactly what the ISEA predicted would happen is happening. [Amazon Watch page on the Chiquitano forest pipeline] [Friends of the Earth page, which includes a link to a 14 minute video by Amazon Watch.] Update December 2001: Enron has filed for bankruptcy and the officers, directors and auditors have been sued for billions of dollars lost by shareholders in the largest case of corporate looting and fraud to date. Every Enron document that hasn't been shredded [this was written before reports of wholesale document shredding by Enron and Arthur Andersen surfaced] is likely to become part of a massive litigation database, including any surviving records of Enron's negotiations with the WWF and other conservation groups and records of other dirty deals, such as the NRDC's support of Enron's acquisition of Portland General Electric in return for financial support. The head of a company that abandoned a plan to rescue Enron indicated that the pipeline was an example of an important factor in Enron's demise: pouring cash from its highly profitable energy trading operations into exotic and risky investments. "Cause of death: Mistrust. Unanswered questions led Dynegy to cancel Enron merger." Washington Post, 13 December 2001. Update, May 6, 2002: "Enron Pipeline Leaves Scar on South America: Lobbying, U.S. loans put project on damaging path." James V. Grimaldi, Washington Post. Tells the story of Enron influence over OPIC through a Chicago political operative, George Muñoz, who was appointed President of OPIC by "Slick Willy", and OPIC's anti-environment Environmental Director, Harvey Himberg, and about how the crooked CFO of Enron, Andrew Fastow, used the project to generate a personal $2.1 million gain through partnership swaps. Clearly, had the large environmental groups stood firm and refused Enron's bribe money, the direct pipeline route could have been stopped. UPDATE May 9, 2002: "Enron's Pipe Scheme: Energy giant bulldozed over environmental, human rights concerns to build Bolivian pipeline -- with U.S. government backing" by Jimmy Langman. CorpWatch. "Indigenous leaders in the Chiquitano also maintain that while some conservation groups enjoy big salaries [How right they are! See above for the scandalous Wildlife Conservation Society executive salaries, which have not been disclosed to WCS members.] and other perks from the fund, the impacts of the pipeline on local communities are not being adequately addressed." Update November 14, 2002: Field Audit of Enron and Shell's Cuiabá and Bolivia-Brazil Pipeline Impacts. Amazon Watch. (pdf). OPIC, Enron and Shell lied about their construction plans (big surprise!), and even worse destruction is coming. A massive industrial development is planned for what's left of the Chiquitano Forest.
"Mrs Graham [late owner of the Washington Post & Newsweak] had plenty of reasons, material and spiritual, to find excessive boat-rocking distasteful. The family fortune, and the capital that bought and nourished the Post, was founded in part on Allied Chemical, the company run by her father Eugene Meyer. Perhaps because rabble-rousers had derisively taunted her as 'Kepone Kate' after a bad Allied Chemical spill in the James River, we remember a hard edge in her voice when she deplored 'those fucking environmentalists.' Yes, privately her language was agreeably salty." From "The High Life of Katharine Graham: She needed fewer friends." Counterpunch, July 25, 2001. |
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The following is an excerpt from the
