Puerto Rico's Oil - For Whom?

September 25, 2007

A strong movement has come forth in Puerto Rico in recent years to oppose the exploitation of non- reusable natural resources-par- ticularly nickel, cobalt and iron in the west; copper, silver and gold in the central areas; and hydrocar- bons in the north-by foreign capital. The most alert en- vironmental, political and religious groups have postulated and defended the position that all non- renewable resources should be exploited for the benefit of the Puerto Ricans, caring that no harm is done to the environment and their health. The consensus of these groups is that to further those aims the exploitation has to be under the control of the Puerto Ricans. In the last four years one of the main battles fought in Puerto Rico has taken place in the economic, social and political arena of oil ex- ploration and exploitation. In par- ticular, since 1975, a struggle has been going on in Puerto Rico to keep Mobil and Exxon from finishing the exploration and start- ing the exploitation of potential oil and natural gas deposits on-shore and off-shore in the north central portion of the Island. Also a strug- gle is still going on to force the U.S. government to recognize the Puerto Rican ownership of any oil, natural gas, minerals and other natural resources present within Mar/Apr 1980 the twelve mile territorial limit and the 200 mile economic zone sur- rounding this Caribbean country. The struggle has been waged by organizations like the Puerto Rico Bar Association and by pro- Commonwealth and pro-Indepen- dence leaders and parties. Many countries are nowadays involved in the process of wresting the control of the exploration, ex- ploitation, commercialization and industrialization of hydrocarbons and other non-renewable re- sources from the big transnational companies that have traditionally benefitted from those activities. Puerto Rico is no exception to this general trend. The essence of this economic and political struggle is the recognition by the traditional producers of raw materials that the unequal exchange between them and the transnationals has led to their impoverishment while constituting an enriching process for those companies where their headquarters are based. Potential oil and natural gas traps were discovered in Puerto Rico in 1973. The discovery was a by-product of seismological and geological studies made to locate areas for the construction of nuclear plants to generate elec- tricity. The studies were made by Fugro and Western Geophysical, two U.S. companies under con- tract by the Puerto Rican Water Resources Authority (PRWRA). The PRWRA is a public utility under U.S. and Puerto Rican laws. Around $7 million dollars were used by PRWRA to conduct these studies, which extended for more than a year and a half. Right after the discovery of these potential oil and natural gas traps, a debate arose within the government and later within the whole society as to who should finish the exploration undertaken by the Puerto Rican government and who should be in charge of the exploitation of any oil and/or natural gas that might be found. The debate has not ended and no end to it is foreseen in the near future. On one side there are those who maintain that private com- panies such as Mobil and Exxon should finish the exploration of any hydrocarbons found. On the other side are those who maintain it is the Puerto Rican people who should control the exploration and exploitation of such resources. What is at stake in this whole discussion? THE EVIDENCE The seismological studies undertaken up to the present show the presence of two potential hydrocarbon traps-one in Tor- tuguero off-shore, and one in Dorado off-shore that quite prob- ably extends on-shore. Both poten- tial traps are located west of San Juan in the north central region. A third potential trap could be located off-shore northeast of the Old San Juan area, possibly ex- tending below the city and the San Juan Bay. The evidence suggesting the presence of oil and natural gas is as follows: 41update * update . update * update (1) An anomaly in the transmis- sion of the sound waves called a "bright spot" has been found in the Dorado area. The experience in the oil industry is that whenever a bright spot is found there is a 50% chance of finding natural gas. The San Juan and Tortuguero potential traps, on the other hand, are portions of the same discon- tinuous geological formation found in Dorado. (2) The presence of fluid con- tacts suggesting the presence of natural gas, oil, and salt water have been detected through seis- mological studies. These results increase the probability of finding oil and natural gas in Dorado above 50 percent. (3) The organic carbon content of the San Sebastian Formation just above the potential hydrocar- bon traps is almost twice the world average for this type of tertiary for- mation where, as a matter of fact, 90% of oil has been found up to now. The presence of organic car- bon in such amounts is another in- dication of good hydrocarbon potential. (4) Based on these results and on additional work done by Mobil scientists between 1975-76, some of them have privately conceded that Puerto Rico indeed shows great promise for finding oil and natural gas. This information and conclusions led Mobil to submit an official proposal for oil exploration and exploitation to the Puerto Rican government in October 1976. The exploration would cover 1,000 square miles of off-shore and on-shore areas. Exxon also submitted a less detailed and thorough proposal around the same time. 42 o In the 1960s, the centerpiece of the new development strategy was a $3 billion petrochemical industry. In 1976, CORCO, Puerto Rico's largest refinery declared bankruptcy. (5) In 1975, after more than three quarters of a century of its political and economic presence in Puerto Rico, the U.S. govern- ment reversed its traditional posi- tion of recognizing Puerto Rico's ownership of its off-shore natural resources and declared such re- NACLA Reportupdate * update, update * update sources federal property. Scarcely four years before, the U.S. govern- ment had recognized the right of Puerto Rico to extend an explora- tion permit to Oceanic Exploration which went as far as 25 miles off- shore. Evidently the U.S. govern- ment has concluded that there is a high probability of finding oil and natural gas in Puerto Rico. What other explanation could there be for its 1800 turn on the matter of the off-shore titles and rights of Puerto Rico? THE STAKES At stake in this controversy are between 4 and 6 billion barrels of recoverable oil. So has concluded Degolyer and McNaughton, a very respected firm within oil circles, which studied all the data available at the end of 1974 under contract for the Puerto Rican government. These theoretical calculations only include the Tortuguero and Dorado regions, leaving out the San Juan and any other off-shore or on-shore areas with oil poten- tial. In 1978, after three years of public and private debate over who should explore and exploit the hydrocarbons that could be found on-shore and off-shore the Island, the Puerto Rican government decided to continue on-shore oil exploration by itself. Right away companies such as Mobil and Tex- aco offered to do the exploration under contract for the government with supposedly no strings at- tached. The pressure brought for- ward by Industrial Mission (an en- vironmental group) and other groups prevented the government from handing over oil exploration to Mobil and other companies. However, Mobil's proselytes within governmental circles are MarlApr 1980 still in favor of Mobil's bid for a takeover of oil exploration and ex- ploitation off-shore. The rationale used by Mobil and its cohorts in this controversy does not differ much from the traditional ideology used time and again in other coun- tries rich in exploitable non- renewable natural resources. Their arguments can be sum- marized in the statement: these countries lack the economic, technological and human resources to explore and exploit their natural resources so they are better off when they invite private capital to be in charge of those endeavors. Such arguments could be contested in the followng man- ner. Oil activities can be divided in- to three general phases: explora- tion, quantification and exploita- tion, the first being the least expen- sive activity. In Puerto Rico, $7 million have already been invested in seismological and geological studies. Approximately $10 million more are needed to complete this first phase both off-shore and on- shore, including exploratory drill- ing. Ten million dollars is around one twenty-fifth of one percent (0.25%) of the annual budget of the Puerto Rican government. With such a relatively small amount of money, Puerto Rico could possibly discover from five to six billion barrels of recoverable oil with a potential value of $80 to $120 billion dollars. Even the exploratory activities are based on step-by-step deci- sions. The decision as to where drilling will be done or even whether drilling should take place at all will depend on the results of the seismological studies. If drilling takes place and oil is or is not found, then additional decisions have to be made as to future ac- tions. In Puerto Rico the plans call for additional seismological studies on-shore and off-shore. If hydro- carbons are found, or if the infor- mation obtained in the drilling leads to the conclusion that hydro- carbons could be found in relative- ly nearby areas, additional drillings will be undertaken. After finding hydrocarbons a decision must be made on whether to go ahead with the quantification process. Only after this phase is completed is it decid- ed whether to go ahead with the exploitation as such. Hydrocarbons are one of the dearest economic assets any country could have these days. If hydrocarbons are discovered in a country they can be used as col- lateral to obtain economic and technological resources to quan- tify and later on exploit them. The main threat to the well-being of Puerto Rico in this area has been Mobil Oil Corporation, which has tried to impose its political will and economic conditions upon the government and the Puerto Rican people in general. The struggle is just beginning. To overcome this and other threats Puerto Ricans will need all the power that a con- scious people can muster and all the help from progressive forces in the U.S. and elsewhere.

Tags: Puerto Rico, Oil, exploitation, US control

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