MEXICO: Oil Reforms Leave State in the Red

Global Geopolitics Net Sites / IPS
Wednesday, October 29, 2008

All rights reserved, IPS – Inter Press Service, 2008.

Diego Cevallos

MEXICO CITY, Oct 29 (IPS) – The oil industry reforms approved by the Mexican Congress and applauded by the government and most of the country’s parties, with the exception of factions on the left and part of the business community, will deprive the state of a source of funding that currently finances 40 percent of the public budget.

”Good for the oil industry, which will now have more funds, but the lack of an alternative source of financing for the state is very worrisome,” Roberto Gutiérrez, an expert on energy issues at the Autonomous Metropolitan University (UAM), told IPS.

From 2009 to 2016, the flow of funds from the state oil monopoly PEMEX to the state coffers will gradually be reduced, according to the reforms approved Tuesday by the lower house of Congress after six months of heated debate. (They passed the Senate last week).

The hope is that by increasing the proportion of revenues left in the hands of the oil company, Pemex will improve its performance, which has been undermined by a lack of funds and up-to-date technology, while output has steadily fallen and reserves have shrunk (according to official figures they will last less than nine years).
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Popularity: 79% [?]

ENERGY: Harsh Blow for OPEC

Global Geopolitics Net Sites / IPS
Saturday, October 25, 2008

All rights reserved, IPS – Inter Press Service, 2008.

Humberto Márquez

CARACAS, Oct 24 (IPS) – In an unexpected reaction, oil prices continued to slide, by up to six percent Friday, despite OPEC’s decision to cut output by 1.5 million barrels a day as of Nov. 1.

West Texas Intermediate (WTI) was trading at 64 dollars a barrel Friday, nearly four dollars down from Thursday, and Brent experienced a similar drop, to just over 62 dollars.

The drop ”is an extremely harsh blow for OPEC (the Organisation of Petroleum Exporting Countries), because the market that it has refrained from regulating since 2003 is responding to its cutback with less demand, and the cancellation of orders,” Elie Habalián, a former Venezuelan OPEC governor, told IPS.

In 2003, OPEC abandoned the price band system on which it had based decisions for years to increase or reduce production, in order to keep prices within that range. Habalián pointed out.
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Popularity: 10% [?]

CORRUPTION-PERU: Officials Charged in Oil Contract Scandal

Global Geopolitics Net Sites / IPS
Thursday, October 23, 2008

All rights reserved, IPS – Inter Press Service, 2008.

Ángel Páez

LIMA, Oct 22 (IPS) – An anti-corruption Peruvian prosecutor brought charges against one current and three former high-level officials and 10 other people in a scandal over alleged bribes in lucrative oil contracts awarded to Norway’s Discover Petroleum company.

The charges filed by prosecutor Óscar Zevallos include corruption of public officials, criminal conspiracy and trafficking of influences. Judge Jorge Barreto immediately accepted the case.

The most prominent of the 14 defendants — Petroperu’s former president César Gutiérrez and former general manager Miguel Celi, and Perupetro’s current president Daniel Saba and former director Alberto Químper — were named to their posts by the administration of Alan García, who took office in July 2006.

(Petroperu is the state-run oil company involved in the transportation, refinery and commercialisation of fuel and other oil derivatives, while Perupetro is the government licensing body in charge of promoting investment in the oil industry and granting contracts to oil companies doing business in Peru).

The government has been severely shaken by the scandal, which led the entire cabinet to step down on Oct. 10. Although 10 of the 17 ministers were reinstated, the prime minister was among those who were replaced.

Among the evidence presented by the prosecution are recordings of telephone conversations between Químper and Rómulo León, a former lawmaker of the governing APRA party and former minister during García’s first term as president (1985-1990) who is now a representative of Discover Petroleum.

The defendants also include five other Petroperu officials, who carried out a ”technical assessment” that led to the September decision to grant five oil contracts to Discover Petroleum.

The recorded conversations indicate that Químper and León conspired so that Discover Petroleum would win the contracts and enter into a partnership with Petroperu.

Químper, the former director of Perupetro, who has strong ties to the governing party, was given that position when he failed to be elected to Congress.

Former Petroperu president Gutiérrez and Perupetro president Saba insist that the decision to award the contracts was transparent, and that there were no meddling or kickbacks of any kind.

But in the taped phone conversations, Químper and León can be heard discussing alleged payments that they were to receive from Discover Petroleum once the contracts were signed with the Peruvian state.

The deal was never actually finalised, however, because the tapes, dubbed ”petroaudios” by the local press, were leaked to the media.

The suspicion that the recordings were illegally taped in a corporate spying operation by one of Discover Petroleum’s competitors has prompted another prosecutor to launch an investigation into who tapped the phones of the state oil officials and others during the eight month span from February to September.

Also facing charges filed by Zevallos are businessman Fortunato Canaán from the Dominican Republic and his Mexican associate Mario Díaz Lugo, who lobbied on behalf of Discover Petroleum in Peru.

Canaán hired León on the recommendation of members of the government.

In taped conversations between Canaán and León, the latter promised that the contracts would go to Discover Petroleum one way or another.

Executives from the Norwegian company, accompanied by Canaán, met twice with President García.

The ”petroaudios” also indicate that León later had a falling-out with Canaán and became Discover Petroleum’s local lobbyist. In a letter published in the local press, Canaán complained that his former partner had betrayed his trust.

The prosecutors brought charges against Discover Petroleum employee Jostein Kjaerstad as well.

León, in hiding, sent a video to several local TV stations just before the charges filed by the prosecutor were announced. In the video, he says the ”petroaudios” are not evidence of corruption and criticises García for publicly calling for his arrest before the courts issued an actual warrant and without giving him a chance to explain himself.

”The highest-level representatives of the government have jumped on the bandwagon, and the president himself has stigmatised me, which is deeply painful because it is unjust,” said the former minister.

León also said he would turn himself in if the warrant for his arrest was revoked. Químper’s arrest has also been ordered.

In the ”petroaudios”, the defendants can be heard mentioning meetings and conversations with former prime minister Jorge Del Castillo and former energy minister Juan Valdivia, both of whom resigned on Oct. 10.

However, neither is facing charges, although they will be summoned to testify as witnesses.

Discover Petroleum said in public statements that the contracts were obtained in strict compliance with Perupetro’s technical requirements.

Popularity: 8% [?]

ECONOMY: Increased Nuclear Energy Demand Boosts Namibia

Global Geopolitics – Global News Blog – Global Politics Online – IPS
Tuesday, September 09, 2008

All rights reserved, IPS – Inter Press Service, 2008.

Brigitte Weidlich

WINDHOEK, Sep 9  (IPS)  – The worldwide scramble for energy sources due to dwindling fossil fuel reserves has placed renewed emphasis on nuclear energy as solution for future needs. As a result, Namibia in south-western Africa is experiencing a uranium boom.

With around 3,800 tons of annual production, Namibia is the world’s sixth largest uranium producer. Its delivery of seven percent of world uranium production has led to the country being wooed by big powers that wish to secure supplies for their nuclear energy expansion plans.

Spot prices doubled in 2007, reaching 136 dollars per pound but recently levelling at around 82 dollars a pound.

Currently over 40 foreign companies obtained exclusive prospecting licences (EPLs) from Namibia’s mines and energy ministry (MME). Two uranium mines are operational and 12 more are in the pipeline.

The MME has in the meantime stopped issuing EPLs and will lift the temporary ban only once it has drafted a nuclear policy with the help of the International Atomic Energy Agency (IAEA). Once the policy is completed, a law on nuclear energy will follow.

‘‘The interest in uranium is a boost for Namibia’s economy,” says Joseph Iitha, MME permanent secretary. ‘‘The increase in local uranium mining enables Namibia to contribute towards resolving the global energy shortage.”

French nuclear group Areva managed to slip through the ban on EPLs. The company bought local company UraMin and the EPL was part of the deal. Areva plans to invest 750 million dollars to create one of the world’s largest uranium mines in Namibia.

‘‘Construction has started and production is planned towards the end of 2009,” Iain
McPherson, manager of Areva’s local subsidiary UraMin, says. UraMin will process
100,000 tonnes of ore per day to extract about six to eight million pounds of
uranium per annum.

The mine will have a lifespan of some nine years. The deal caught the Namibian government off-guard. ‘‘Government will undertake measures that this will not happen again,” said Prime Minister Nahas Angula after the 2,5 billion dollar deal was announced.

Namibia, rated by US minerals advisors Behre Dolbear Group this year as twelfth among 25 mineral importers to the US, has been pursued by investors since 2007.

China’s premier Hu Jin Tao and Russia’s (former) prime minister Mikhail Fradkov discussed energy matters while Japan and recently India have expressed interest in buying processed uranium û also called yellow cake û from Namibia.

India’s minister of state for commerce, Jairam Ramesh, discussed uranium supply during his visit in April this year. India is restricted from importing uranium from the 45 nuclear supplier group (NSG) countries because it is outside the nuclear non-proliferation treaty.

Namibia and Niger, along with Uzbekistan, are the three major non-NSG countries producing sizeable amounts of uranium.

Namibia’s oldest uranium producer, Rössing Uranium û in operation since 1976 with around 3,400 tons annually û started exporting an undisclosed amount of uranium to China in 2006, while its remaining exports go to the U.S. (30 percent), Japan (28 percent) and the European Union (13 percent).

Rössing is a subsidiary of British mining giant Rio Tinto and is one of the largest open pit mines in the world. It was doomed to close in 2009 due to low spot prices but the unexpected boost for uranium, which started two years ago, resulted in a turnaround strategy. The mining area has been expanded and the mine’s life span is predicted to last until 2021.

Rio Tinto owns a 68 percent stake in Rössing, the government of Iran 15 percent, South Africa’s Industrial Development Corporation (IDC) 10 percent and the Namibian government has three percent. The latter however holds 51 percent when it comes to voting rights.

A second mine, Langer Heinrich Uranium, a subsidiary of Australian company Paladin Energy, started operations in December 2006 and has produced 348 tons of processed uranium with a target of 1,000 tons for 2008.

Canadian Forsys Metal Corporation was granted Namibia’s third uranium mining licence in August for an open pit mine on the farm Valencia, almost the size of the nearby Rössing mine.

To get at the ore, 122,4 million tons of waste rock have to be moved. The final pit will be 1,400 metres long, 700 metres wide and 360 metres deep.

Forsys Metals entered into a memorandum of understanding with South Korean company Korea Electric Power Corporation (Kepco) as both companies mull possible joint venture arrangements for the future exploration and development of Valencia.

Namibia imports about 50 percent of its electricity from neighbouring South Africa, which experiences dwindling supply against rising energy demands locally and in the southern African region.

Russia has offered to build a nuclear power plant in Namibia as Moscow seeks to break into the African nuclear market. Russia’s nuclear chief Sergey Kiriyenko, head of Russia’s atomic energy agency Rosatom, said last year that Russia was looking to build a floating nuclear power plant for Namibia to secure local electricity demand and for exports to South Africa.

‘‘We are ready to build one,” Kiriyenko said when he accompanied Russian natural resources minister Yuri Trutnev to Namibia in February 2007. Russia is pioneering efforts to build offshore nuclear power plants, shrugging off criticism by environmentalists who say they are inherently unsafe.

Already in July 2006, Russian VTB Bank and Namibia’s private company Capricorn Investment Holding set up a joint venture in Namibia. Under the contract, VTB’s share in the authorised capital of VTB Capital (Namibia) (PTY) Ltd. will be 50 percent plus two shares.

However, the expanding uranium mining activities in the Namib Desert require huge volumes of water.

The state-owned water corporation NamWater cannot supply sufficient amounts of water and agreed that Areva subsidiary UraMin constructs a 15 million cubic metre per year desalination plant at the coast, which is progressing rapidly.

‘‘We have to respond to the challenges of supplying water in a desert environment and government has decided that all NamWater mining clients, old and new, must be supplied with desalinated water in future. We aim for early 2010,” NamWater chief executive Vaino Shivute told local reporters at a recent briefing on the project.

Environmentalists are worried about huge water pipelines soon criss-crossing the scenic Namib Desert. They fear the pace of the uranium boom is detrimental to the area’s ecology.

Environmental non-governmental group Earthlife Namibia called for greater public consultation between government and the public before the MME approves new uranium mines.

‘‘We want the processes of the Areva mine to be transparent and to have no secrecy about their plans and operations,” Earthlife Namibia spokesperson Bertchen Kohrs says.

‘‘We do not want to see our government approving new mining licences with the same horrible speed that it did with the Langer-Heinrich mine. They must give the public a fair chance to respond to the findings of the environmental impact assessments (EIA),” demands Kohrs.

The MME is about to develop a mining charter which includes a black economic empowerment content. Foreign mining companies will have to give shares to previously disadvantaged Namibians in future, once the charter is finalised.

Popularity: 30% [?]

PARAGUAY-BRAZIL: Lugo to Seek New Terms for Itaipú Dam

Global Geopolitics – Global News Blog – Global Politics Online – IPS
Friday, September 05, 2008

All rights reserved, IPS – Inter Press Service, 2008.

Mario Osava

RIO DE JANEIRO, Sep 5 (IPS) – Paraguay’s new government wants to increase ninefold the revenues the country takes in from the sale of its share of the energy generated by the Itaipú hydroelectric dam, which it runs jointly with Brazil.

But above all, it plans to defend its sovereignty over Paraguay’s main source of energy.

”We want to have the right to make our own free decisions about our energy” — the first of six points that the administration of Fernando Lugo would like to discuss with Brazil, said Roberto Colman, a member of the new commission created in Asunción to negotiate international treaties like the one that established the binational Itaipú power plant.

One of Paraguay’s aims is to be able to sell energy to third countries or increase the portion of energy consumed domestically, Colman said in an interview with IPS during a visit this week to Brazil, where he is seeking support from different institutions and social movements for the Lugo administration’s demands.

Under the bilateral treaty, Brazil and Paraguay are each entitled to half of the output of the plant, which had a potential of 14,000 megawatts in May 2007. But Asunción is only allowed to sell its surplus energy to Brazil, and in order to increase the share of energy that it consumes internally, it must notify its partner five years in advance.

Paraguay currently consumes a mere eight percent of the energy generated by Itaipú, and takes in just 400 million dollars a year from the 46 million megawatt-hours that it exports to Brazil.

If it could sell that surplus energy for 80 dollars per megawatt-hour, the price set for Brazil’s wholesale energy market by the national regulatory agency, the total would climb to 3.5 billion dollars a year — ”a fair price,” said Colman.

He explained that this is the second of the proposals outlined by the Paraguayan negotiating committee.

The increased revenue would help finance the long list of social projects and plans drawn up by the government of Lugo, a former bishop who was sworn in as president on Aug. 15, putting an end to six decades of rule by the notoriously corrupt Colorado Party.

Itaipú is the world’s largest hydroelectric facility, a position it will hold until the Three Gorges dam in China is operating at full capacity.

With a 1,350-sq km reservoir fed by the Paraná river, which forms part of the border between Brazil and Paraguay, Itaipú generates energy that integrates — and divides — the two countries.

The projects that the centre-left Lugo wants to finance with the increased revenues his government is demanding include employment generating initiatives, ”integral” agrarian reform that would provide credits, technical assistance and other measures to promote family farms and agribusiness, infrastructure works and social programmes.

But the basic question, said Colman, is ”recuperating our sovereignty” over the country’s chief source of energy, through the recognition of Paraguay’s right to sell electricity to other neighbouring countries in need of electric power, like Argentina, Uruguay and, on an occasional basis, Chile.

These are the two central — and touchiest — points. But they will be difficult to negotiate, as they would require a modification of the treaty that was signed by the two countries in 1973, which expires in 2023, he acknowledged.

But based on statements made by Brazil’s leftist President Luiz Inácio Lula da Silva and his close associates with respect to the need for generosity towards the smallest partners of the Southern Common Market (Mercosur), the Paraguayan negotiators hope the Brazilian government will be favourably disposed towards opening up the Itaipú treaty to negotiation, said Colman.

The negotiations could benefit by the desire expressed by the leaders of Mercosur (which is also made up of Argentina and Uruguay) to ”eliminate asymmetries” and promote ”integration based on solidarity,” by means of measures aimed at bolstering development in the trade bloc’s two smaller members, since it is not in Brazil’s best interests to have a neighbour with problems, he added.

A reduction or cancellation of the debt owed by Paraguay for the construction of the Itaipú hydroelectric project, which could balloon to 65 billion dollars by the time the treaty expires in 2023, due to the high interest rates, is the third point that the Paraguayan government is seeking to negotiate, and is also of interest to Brazilians, because the financial costs drive up the price of energy for all of the consumers, argued Colman.

Furthermore, the 4.19 billion dollar debt, he said, is ”spurious,” and accumulated because a Brazilian company did not even pay the price agreed to in the treaty, to which have been added the ”usurious” interest rates of 7.5 percent a year, plus an adjustment for U.S. inflation.

The first step, however, is ”to achieve a consensus in Paraguay” on the proposal for negotiations of the treaty with Brazil, which would undoubtedly not begin until after the October municipal elections in Brazil, said Colman.

An effectively binational administration of Itaipú, rather than the current administration which is ”in the hands of Brazil,” the design of oversight bodies, a thorough audit of the project ”from the very start” and the completion of the complementary works on the Paraguayan side for the distribution of electricity in the country are the rest of the points to be negotiated, he said.

Analysts say it will be a complicated process. The nationalisation of Bolivia’s natural gas resources affected investments by Brazil’s state-run oil company Petrobras in 2006 and triggered an outcry from business sectors and opinion-makers in Brazil, who condemned the move by Bolivia and criticised the Lula administration for giving in to what they described as a ”violation” of the Brazilian oil industry’s contract with Bolivia.

In the case of Itaipú, the backlash could be even stronger because it involves a possible rise in electricity prices, which would affect society as a whole, and not only a few economic sectors, like in the case of Bolivia’s gas.

Popularity: 18% [?]