THE BIBLE BLOG

By Marcela Valente

Vast reserves of natural gas and oil trapped underground, whose exploitation would signify major environmental impacts, will be the greatest challenge facing YPF, the Argentine oil company that recently returned to state control.

While experts in various branches of engineering and economics are enthusiastic over the prospects of the reserves discovered, they warn that the price paid to benefit from them could be steep.

“There is indirect evidence of deposits in Argentina, but this will be determined with certainty when further exploration takes place,” economist Roberto Kozulj from the National University of Río Negro told Tierramérica.

Kozulj, a specialist on the oil economy, said that the obstacles lie in the amount of investment required and the environmental risks, due to the consumption of huge volumes of water and energy and the chemical substances used to extract these resources.

According to the Annual Energy Outlook 2011, released in April of last year by the United States Energy Information Administration, Argentina is the country with the third highest geological potential for these types of hydrocarbons, after China and the United States.

The study assessed the viability of 48 shale gas basins in 32 countries and estimated Argentina’s shale gas reserves at 774 trillion cubic feet (TCF), 60 times greater than the country’s current conventional reserves.

The shale gas formations are in four basins, but the Neuquén basin is the most promising. This is where the Vaca Muerta and Los Molles formations are found, which stretch across the subsoil of four provinces: Neuquén and Mendoza, in western Argentina, La Pampa in the center of the country, and Río Negro in the center-south.

The government of the province of Neuquén already has data on the region’s potential gathered through preliminary studies, says economist Ariel Carignano of the National University of Comahue in his report, “¿Qué es el gas no convencional? Aspectos técnicos básicos y desarrollo en la Argentina” (What is Unconventional Gas? Basic technical aspects and development in Argentina), published in November 2011.

The report states that, although there is a “high degree of uncertainty,” studies by the Undersecretariat of Mines and Hydrocarbons of Neuquén estimate that there are 170 TCF of recoverable gas in the Vaca Muerta formation and between 130 and 192 TCF in Los Molles. The exploitation of these reserves would significantly increase gas production, create employment and promote the development of new technologies, but would also take a heavy toll on the environment.

This is the dilemma facing the new YPF, after the expropriation of 51 percent of its shares, which were held by the Spanish oil company Repsol until the May 3 passing of the bill that President Cristina Fernández de Kirchner submitted to Congress on Apr. 16.

YPF, created by the Argentine government in 1922, has thus returned to state control as a private corporation with a majority stake owned by the government and the rest held by national and foreign private companies and stockholders.

The motive for the expropriation was a steep drop in oil and gas production and proven reserves, resulting from insufficient investment. Argentina, once energy self-sufficient, has been forced to import fuel since 2010.

Now, “the main challenge lies in taking advantage of the opportunity while mitigating the environmental impact,” say Argentine chemical engineers Mariana Matranga and Martín Gutman in an article published in the online magazine Voces en el Fénix.

The article, “Gas y petróleo no convencional: Perspectivas y desafíos para su desarrollo en Argentina” (Unconventional Gas and Oil: Prospects and challenges for their development in Argentina), outlines the opportunities offered by exploitation of these resources, but warns that the effects on the environment pose serious questions.

The natural gas trapped in underground formations of shale rock is of the same quality as conventional gas but is much more difficult to extract.

It is reached through a technique known as hydraulic fracturing or “fracking”, in which holes are drilled vertically to depths that can reach thousands of meters, and then horizontally some 1,000 meters along the shale formation.

Chemicals and large amounts of water are pumped underground at high enough pressure to fracture the shale, releasing the gas, along with “fracking sand” used to prop open the underground cracks from which the gas is harvested.

Similar methods are used to reach the gas trapped in dense and highly impermeable sandstone formations, known as “tight gas”, and the light crude in porous shale rock formations, called “shale oil” or “tight oil”. Matranga and Gutman, chemical engineers at the University of Buenos Aires, note that up until 10 years ago, these reserves were impossible to exploit, but today the technology needed to do so exists, having been developed mainly in the United States and Canada.

Nevertheless, they add, numerous countries and regions have suspended the extraction of these deposits in order to assess the extent of the damage this causes to the environment.

The wastewater from fracking contains radioactive substances and heavy metals that require treatment. Fracking operations can also pollute the groundwater, soil and air, say the authors.

Moreover, the deployment of thousands of water-transport trucks, heavy machinery, human resources and infrastructure for these operations would lead to “a marked increase in greenhouse gas emissions,” they add.

A report published in October 2011 by the National Academy of Engineering of Argentina, “Gas de reservorios no convencionales: Estado de situación y principales desafíos” (Gas from Unconventional Sources: Current situation and key challenges), concurs with the warnings voiced by Matranga and Gutman.

To offer an idea of the magnitude of the undertaking, the Academy notes that “the required development of suppliers, technology and human resources is comparable to efforts in Argentina at the time for the nuclear power sector.”

Technologies like 3D seismic surveying, horizontal drilling and hydraulic fracturing are now available, and if Argentina adopts them, within five years it could be producing fuel that it is currently importing at high prices.

This development could open up new opportunities for the export of engineering and other services to China, which also has large shale gas reserves, or the production in Argentina of fracking sand for export to other countries in the region, says the Academy.

But it also voices its concerns over “the conservation and protection of water” and “the use of chemical products.”

To illustrate the volumes of water involved, it notes that the first small-scale shale gas production operation in Neuquén required 16 water pumping trucks operating simultaneously and to their full capacity.

In addition, the Academy stresses, the decline in production from these types of reserves tends to be much more rapid than in the case of conventional deposits.

About the author:

Tierramerica

Tierramérica is a joint project of the United Nations Environment Programme (UNEP), the United Nations Development Programme (UNDP) and The World Bank (WB), with IPS serving as the executive agency.

By Ricardo Herrera Farell

Since 2006, every May 1— International Workers’ Day — President Evo Morales nationalizes a foreign-owned private company. This year, it was Cochabamba-based Transportadora de Electricidad, or TDE, subsidiary of Red Eléctrica de España, or REE, responsible for 74 percent of the country’s electricity grid. In that central city, the Bolivian president signed the takeover of the Spanish company’s shares. But a few hours later, in the southern city of Tarija, he inaugurated a US$100 million gas processing plant owned by a transnational oil consortium of Repsol, British Gas and Pan American Energy.

How can we understand the process of nationalization Bolivia is now experiencing, where on the morning of May 1 the president expropriates TDE with a military presence and by the evening he exchanges compliments with Antonio Brufau, chairman of Spanish oil company Repsol, and ensures him protection from legal liability for his investments?

“It is not contradictory. It’s very clear that May 1 is chosen to gain popularity by showing us that we are reclaiming strategic public resources, while demonstrating that a firm like Yacimientos Petrolíferos Fiscales Bolivianos, or YPFB, cannot go it alone with the state and requires significant international private sector investments. What happened with TDE is a nationalization done with share purchases that, while forced, could have been done without military intervention and without turning it into a media spectacle with political purposes,” Álvaro Ríos, analyst and former Mining and Hydrocarbons minister, told Latinamerica Press.

“The expropriation of TDE is part of an annual liturgy celebrated May 1 that consists of sacrificing a private company on the populist circus’s altar. That sacrifice, accompanied by ambiguous symbolism like the take-over of facilities by armed troops, sets out to give the impression of a strong state, although at this point, it attracts more indifference that interest from the people. What’s more, this liturgy is provided for in the Constitution, which states that the state should control the energy supply chain,” said Francesco Zaratti, an energy analyst.

“The hugs and smiles for Repsol are in response to a structural need at YPFB, the public hydrocarbon company, which is unable to run the energy supply chain without the help of multinational corporations. Bolivia is a rentier state that needs ‘tenants’ to pay monthly rent and to keep running its source of income — gas fields — to fully comply with supply contracts to Argentina (Repsol) and Brazil (Petrobras). Repsol is currently a good tenant and must be treated well,” said Zaratti.
Within hours of the measure, Hydrocarbons and Energy Minister Juan José Sosa told the media that with the privatization of TDE, Bolivia takes over 85 percent of the power lines in the country and with it is looking to extend the grid’s reach into all nine of the country’s departments, not just the six that were part of the Spanish company’s network.

“TDE should have expanded the network to other departments, but they kept the coverage to just six, so the state connected the other three,” Deputy Minister of Electricity and Alternative Energy Lutgardo Álvarez told state news agency, ABI.

Foreign companies emerge winners

Since Morales first came into power in 2006, his administration’s policies have been geared toward re-nationalizing state property from strategic industries that were privatized in the 1990s. To that end, hydrocarbons were nationalized with Executive Order 28701. Then came telecommunications with the Bolivian National Telecommunications Company, metal with Vinto Metallurgical Company and the Huanuni mine, and electricity with the National Electricity Company, the industry leader for which TDE transported high voltage electricity through the National Interconnected System, or SIN.

According to the Ministry of Economy and Public Finance, the conversion of these companies to the public sector last year benefited 30.8 percent of the population, which translates to just over 3 million people in poverty who receive state subsidies.

Revenue generated by nationalizations gave rise to voucher programs like “Juancito Pinto” for schoolchildren, “Renta Dignidad,” a pension for Bolivians over the age of 60, and “Juana Azurduy” for pregnant woman and children under the age of 2. The benefits of nationalization, according to administration sources, are reduced poverty and improved quality of life for Bolivians, especially in rural areas. Moreover, the majority of more than a dozen nationalizations concluded on amicable terms between the companies and the government through compensation.

“It is assumed that the purchases were made at very good prices, but this has not taken into account the depreciation of equipment and infrastructure that are being acquired. The state has purchased facilities severely damaged by the lack of investment in the last 10 to 15 years. So it has become big business for foreign companies to reach a financial settlement with the state, because they benefit when they leave,” said researcher Marcos Gandarillas, of the Bolivian Center for Documentation and Information, or CEDIB.

Lack of investment in hydrocarbons

For Gandarillas, the government’s political future depends on whether there is a real policy regarding the strategic sectors of the economy. He believes that foreign investors have not shown readiness to shoulder the country and the development of different sectors. “For example, on April 18, the government approved Executive Order 1202, which establishes an incentive payment of $30 per barrel of oil in the form of credit notes, or Nocres, which will add to the $10 per barrel [the companies] currently receive. That was one of the demands of the oil companies that, together with increased fuel prices, led to social conflicts called the “gasolinazo” at the end of 2010. Although these increases were finally repealed, companies have continued to pressure the government. The latter, lacking vision for the sector, was unable to deal with this. Now we are in a dangerous situation, because too many resources are spent on importing petroleum products. That’s because there is no investment. Companies themselves have no obligations to explore new oil reserves and when they did have them, they were not fulfilled. The latest reserves that are running out actually date from the 1970s,” he said.

According to a study by the Center for Labor and Agricultural Studies, or CEDLA, the average cost of hydrocarbon products for foreign companies is below the $27.11 paid by the state, including for the fields that have proven to be less prolific. Some have even received an additional incentive since 2006 that releases them from royalty payments.

Meanwhile Rios believes that the country is receiving very good income primarily from the sale of gas to Argentina and Brazil, but as of 2016 the output curve will begin to decline and “if nothing is done before that date to attract investments, we could enter into serious economic deterioration.”

“Nationalizations are good for governments looking at the short-term, but they are bad for the people in the medium- to long-term,” Zaratti said. “They bring in high revenue in the short term, but they leave behind investment, modernization, and efficiency. Bolivia, like the majority of countries in the region, has neither a school nor training for the skilled human resources needed to run large companies, so improvisation, party sectarianism, and electoral short-termism take hold.”

But the recent measures taken by the state have been backed by some grassroots organizations, including the Bolivian Labor Confederation, or COB, which through its executive director Juan Carlos Trujillo backed the nationalization of TDE and the state takeover of private companies, a move noted within the policy document of the COB’s 15th Congress. The National Council of Ayllus and Markas of Qullasuyu of La Paz, or Conamaq-La Paz, also showed support, though both organizations opposed Morales’s government on other issues.

About the author:

Latinamerica Press

Latinamerica Press is a product of Comunicaciones Aliadas, a non-profit, non-governmental organization based in Lima, Peru, specializing in the production of information and analysis about events across Latin America and the Caribbean with a focus on rights, while strengthening the communications skills of local social leaders.

The complex dynamics of Turkey’s geographical position and cultural uniqueness have always defied easy explanation. But in the decade since Tayip Erdogan and his Justice and Development Party (AKP) were first elected, change within Turkey and between Turkey and the world has erupted in a number of different directions. Consequently, the word “enigmatic” is perhaps the best way to describe Turkey’s foreign policy over the past ten years.

By Dr. Anthony Rusonik

Turkish society has shown conflicting signs of drift towards East and West under Ergodan’s rule. On one hand, we witness continued restrictions on press freedoms, trumped-up charges against rivals in the secular defense establishment, and a slow but deliberate injection of political Islam into the primary educational system. On the other, there is the 2010 Constitutional package that elevated an independent judiciary, encouraged freedom of association, and was designed to promote Turkey’s EU bid, albeit without success. One day Erdogan makes a personal apology to the Kurds for historic wrongs, the next day the Turkish army increases operations against the PKK in Northern Iraq, and Erdogan bristles at French and American recognition of the Armenian genocide.

Given these apparent contradictions, two common themes emerge in a survey of the literature that attempts to explain Turkish behaviour, as evidenced in a December 2010 episode of TV Ontario’s “The Agenda”. One school, led by scholars such as Daniel Pipes, considers that Turkey has gone “rogue”, shifted to Iran and is now bent on the destruction of the secular republic founded in 1923 by Kamal Ataturk. Pipes argues that Turkey can no longer be trusted by NATO and should be expelled from the alliance. The other school of thought represented by Janice Stein of U of T, maintains that Turkey’s “swings” are natural and manageable bumps on the road of a journey towards modernization, democratization, and constitutionalism. New forces unleashed vie for influence in a spirited pluralism.

A third school of thought – less credible in traditional Realist frameworks of analysis but nonetheless evident in observation of Erdogan and the pendulum that is now Turkish foreign policy – is that Turkey is more and more Mr. Erdogan’s country. Its fluctuations reflect the Prime Minister’s ego and mercurial temperament more than is allowed in “serious” analytical frameworks. In particular, Erdogan’s neo-Ottoman ambitions are merged with personal character traits where pride and honour sometimes overcome traditional state interests. In short, Mr. Erdogan bristles when he feels slighted, basks in the glory of praise, and this seems to affect his policy decisions.

Since neither Stein nor Pipes’ approaches can explain past behavior nor predict current outcomes with confidence, a framework based on leadership psychology deserves closer examination.

The Economist first offered this explanation in its assessment of Turkish-Syrian relations. Puzzled as to why Ankara demonstrated such patience for Bashar Assad’s crackdown and the resultant destabilization of Turkey’s southern border, The Economist concluded that the irreparable break between Erdogan and Assad didn’t occur until the former had the belated revelation that the latter chose not to heed his advice. It wasn’t Assad’s repression per se that produced a fit of pique in Erdogan and his barb that “Assad would end up like Qaddafi.” No, it was Assad’s apparent refusal to heed Erdogan’s personal advice to reform that led to Erdogan’s contempt for his former friend. Still, most in Syrian opposition see more bluster than action in Erdogan. Apart from support for Syrian refugees, Turkey has not acted against the Assad regime. Erdogan’s “zero problems” policy is in tatters and the moment for Turkey to assume leadership of the Arab Spring seems lost.

The same kind of personal reaction is evident in Turkey’s drift towards Iran after Ankara’s political liberalization and economic reforms failed to impress Germany and France. Former French President Sarkozy dismissed Turkey’s EU bid in no uncertain terms with “I do not think that Turkey has a place in Europe.” In a bid to spite the Europeans, Erdogan turned East despite Tehran’s support for Assad, despite competition with Iran for influence in the Arab world, and despite discomfort with Iran’s nuclear ambitions. Unless and until, Erdogan declared, Western sanctions against Iran win UN endorsement and Israel’s nuclear program is also investigated, Turkey will continue to import Iranian oil. It appears a snubbed Erdogan has overplayed his hand, such that the Iranians tested his patience and forced him to prevent Iranian aircraft loaded with arms for Assad to overfly Turkish territory. It seems that Erdogan might have traded his last chance at EU membership for an alliance with Iran that may risk key Turkish interests.

The role of insult or perceived insult also deserves full investigation in the demise of Turkish-Israeli relations. Here, neither Pipes nor Stein can explain the Ankara-Jerusalem whirlwind without some of the puzzle pieces force-fit to their theories. Pipes maintains Erdogan’s break with Israel was an orchestrated and calculated policy that needed a pretext –The 2009 Gaza Flotilla– to launch a neo-Ottoman bid for Turkish resurgence in the Arab World. Pipes casts Erdogan in the provocative and reckless tradition of Gamal Nasser and Saddam Hussein, where the aspiring Muslim leader taunts Israel to win the Arab street, grows bolder with apparent success, then pays the price. If there is some truth to this assertion, it is still at odds with the image of Erdogan calling Israeli Prime Minister Netanyahu with an offer –insistence—to send Turkish water bombers to help the Israelis fight forest fires, or the acceptance of Israeli humanitarian aid for Turkish earthquake victims.

On the other hand, Stein’s view of the tattered relationship as a natural re-balancing after a decade of close defense ties that have elevated Turkey’s military too high in domestic politics and rendered Turkey’s prestige too low in the Arab world doesn’t quite capture the dynamic of demise either. It fails to explain why Erdogan cannot muster more than rhetoric against Assad now because he cannot – or will not – reach out to Jerusalem to ensure its intentions and support – quiet or otherwise – should Turkey act against Damascus. His rhetorical threats to send another Flotilla with Turkish naval escort, or to challenge Israel and Cyprus over their massive natural gas finds in the Mediterranean, seem muted and frustrated. A diplomatic channel with Jerusalem, Erdogan must know, would allow him to negotiate Turkey’s economic claims to the undersea riches.

If Erdogan’s break with Israel is only partly explained by his half-hearted Nasserite ambitions and as a measure to curb Turkey’s military, then the lion’s share of the answer is indeed the fact that Erdogan considers that Israel is too proud, too stubborn, and has slighted Tayip Erdogan once too often.

Well before the Flotilla incident and Erdogan’s steadfast determination to extract an apology from Israel as a condition to restore a degree of warmth to the relationship, Erdogan perceived a series of insults from Israel.

The first fissures in the relationship formed in January 2009 at Davos, where Erdogan assailed Israeli President Shimon Peres over the Gaza War. The tone of Erdogan’s attack at first appears to support Pipes’ position that Turkey calculated the break and used the Gaza war to launch a neo-Ottoman drive. The undercurrents, however, are of greater interest. First, the “last straw” from Erdogan in the debate wasn’t Peres per se, but the fact that the moderators allowed him less time to speak than Peres had. That’s what enraged Erdogan. Second, although he could not say it at the time, Erdogan was furious that the Gaza operation was planned and occurred while he had invested his personal energies and reputation in secret Israeli-Syrian negotiations The fact that had such diplomacy succeeded Erdogan would look a fool in hindsight now as Assad’s crackdown is unabated is both ironic and irrelevant. What counts is that Erdogan felt burned, and he never forgot it.

The sense of humiliation reached a new level a year later as the Israel summoned the Turkish ambassador over an anti-Israeli television broadcast in Turkey. To emphasize their displeasure, the Israelis declined to shake hands or display the Turkish flag, and they arranged to seat the Turkish ambassador in a lower position.

Erdogan bristled. Ankara called for Israel “to abide by diplomatic courtesy and respect.” The statement was less critical of the Israeli policy per se than in the way Turkey perceived Israel handled the differences.

In hindsight, then, it seems little wonder Erdogan attempted to restore Turkish pride and protest Israeli policy with his refusal of Israeli requests to curb the Gaza Flotilla in 2010. Erdogan maintained that the Flotilla was a popular expression of support for the Palestinians, and that the state would not interfere with that. In yet another irony, and regardless of where one casts blame in the incident, Erdogan’s immediate demand beyond an end to the blockade was for an apology and compensation – from the state of Israel to the Turkish state. This was no longer a private matter for Erdogan, but a national interest and a personal mission.

Lost in the aftermath of the incident was the fact that Turkey was a quiet advocate for the release of GIlad Shalit and secret Hamas-Israel talks, such that Turkey’ prestige as a power-broker was restored. The fact that the Israelis remained distrustful and preferred the now-deposed Mubarak regime in Egypt to mediate is immaterial.

No, the relationship did not hit rock bottom until the UN Palmer report concluded that Israel’s blockade was legal and, further, that Israeli commandos had a right to defend themselves when they encountered resistance on the Ravi Mamara. Stunned and enraged that he was contradicted by the UN, Erdogan denounced the report that he had insisted upon and awaited with uncharacteristic patience. Defiant, Erdogan reiterated his insistence on an Israeli apology and cancelled all residual military deals with Israel.

Israel has offered regret and humanitarian compensation, but refuses a formal diplomatic apology for legal reasons. The standoff continues, at considerable cost to both Ankara and Jerusalem. Israel is again excluded from NATO exercises at Erdogan’s insistence. Erdogan’s pride may be intact as a result, but his Syrian and Cypriot headaches would ease if he could swallow a bitter bill. Israel has made it national policy not to engage in a rhetorical war with Turkey or to prod at Erdogan’s wounds, but the American recognition of Armenian genocide- even as Israel withheld its own recognition- is a reminder that Jerusalem‘s isolation does not render it without means.

Warranted or not, and irrespective of one’s own biases, one must conclude that an Israeli apology could have far more impact on relations with Turkey than conventional analysis considers possible.

Turkey under Erdogan is neither a rogue in Eastern drift towards Iran nor a model for Westernized democratic Islam. Rather. Turkey under Erdogan is, well, Turkey under Erdogan.

Dr. Anthony Rusonik is a contributor to Geopoliticalmonitor.com.

About the author:

Geopolitical Monitor

Geopoliticalmonitor.com is an open-source intelligence collection and forecasting service, providing provide research, analysis and up to date coverage on situations and events that have a substantive impact on political, military and economic affairs.