Gordon Campbell on the opportunity to force Petrobras’ hand on oil exploration

The proposals by the Brazilian firm Petrobras for exploratory oil and gas drilling off East Cape are still controversial. Yet as New Zealand heads towards the Rio+20 conference in Brazil, this country has been handed an unexpected free bargaining chip by the Brazilians. Reason being: at home, in an ongoing battle with the US oil giant Chevron over a relatively small local oil spill last November, the Brazilian government has been waging a spectacularly aggressive campaign for compensation against Chevron and its main drilling contractor. Federal prosecutors have filed suit for $11 billion dollars in damages and have laid criminal charges against 17 Chevron executives who – if convicted – are facing prison terms of up to 30 years. Loud and clear, the Brazilians have let it be known that they have a stiff “zero tolerance” attitude to oil spills off their coastline. It is pursuing Chevron in the courts even though the state oil firm Petrobras has a one third joint venture stake with Chevron in the exploration that has generated the fuss.

Plainly this stance is a PR gift to New Zealand – or it would be, if we were willing to use it. What New Zealand should be making publicly clear to the Brazilians is that we expect the same ‘zero tolerance’ approach from them here, as they expect from everyone else on their home turf. It is usually very hard to feel sorry for Chevron, which has behaved abominably in Ecuador over a massive oil pollution caused by the activities of its predecessor, Texaco. (Scoop wrote about the Ecuador case and its implications for investigative journalism here, and also here)

Yet with the oil spill off the coast of Brazil last year, it is almost possible to see Chevron as a victim. The November 7 spill at the so called “Frade” well was relatively small by international standards (i.e. about 2,400 barrels) and the oil did not come onshore but dispersed in the other direction, out into the Atlantic. Meaning: no injuries occurred at the spill site, there were no contaminated beaches or fisheries, and no oil-covered bird life and turtles were being washed onshore. Moreover, as Bloomberg Business Week explained in this pretty extensive article, the cause of the spill was not accompanied by failures in the blow out preventer (BOP) technology, as happened with BP and their Deepwater Horizon rig disaster in the Gulf of Mexico. The BOP worked fine this time. By and large, Chevron did what it was supposed to do once it had detected the cause of the spill. A later, smaller spill in March this year also cited by the Brazilian prosecutors seems to have been a total false alarm: only oil equivalent to a single barrel of oil was detected, and judging by the absence of any trace of the industrial fluid used in oil prospecting, this ‘spill’ appears to have been due, in fact, to natural seepage.

So apart from the golden opportunity of holding the Brazilians to the same sky high standards they expect of others, what else can New Zealand learn from this incident? Well, while the 2,400 barrel spill at Frade was relatively small, it was still well in excess of the oil lost overboard in the Rena stranding – and if that amount of oil came ashore here rather than dispersing out at sea, the damage to the East Cape/Bay of Plenty region would still be immense. Secondly, the Frade spill last November occurred at 3,400 feet – which is roughly the same, or shallower, than the drilling expected in the Raukumara Basin off East Cape, which ranges from 1,500 -3,000 metres.

Thirdly, the Frade spill occurred during the problematic well’s initial “exploratory” phase of operations, and not during the process of extraction. So, Petrobras could clearly still cause a lot of damage here, even during the early phase of their work. Fourthly, the cause of the spill was plainly due to Chevron not knowing what it was doing: the drill bit punctured the reservoir and suddenly encountered pressures that were far higher than the technicians had expected to encounter. As Business Week put it:

How Chevron made this mistake – misjudging the conditions in an undersea oil pool – has not yet been determined. The company says it is studying the incident, as are Brazilian regulators. Regardless of whether these investigations find negligence, the Frade episode demonstrates once again that deep water drilling is a risky enterprise. Ph.D’s are not omniscient; their computer models are not flawless.

Right. So all the assurances from our politicians and the local oil industry flacks about ‘best industry standards’ being observed around the New Zealand coast are in the end, quite worthless. This deep sea drilling stuff is at the frontier of current knowledge – the oil companies really don’t know what they’re doing, and can’t predict when and how things may go wrong. Right now, New Zealand should be using Brazil’s high moral tone to our own advantage – and bargaining hard with them to put their money where their mouth currently is and be prepared to post, say, a massive indemnity bond to offset the cost of any subsequent cleanup to our coastline from their future activities. Unfortunately though, New Zealand is worried about looking like a soft touch only when it comes to those without power – the boat people and the asylum seekers. It is more than happy to look like a soft touch to multinationals.

Footnote: incidentally, the Chevron case in Ecuador has just moved to an interesting new phase. Denied and delayed redress in US courts, the Ecuadorians are now suing in Canada, and are seeking penalties from Chevron Canada’s assets, as payment for damage done in Ecuador by the US parent. It is a novel move. In libel cases, claimants routinely shop around the world for a suitable venue and usually end up, if they can, before the courts in Britain where the libel laws are far more sympathetic to claimants. It will be interesting to see if the Canadians will let this one get past first base – but if they do, the promise is that multinationals may come to be held liable wherever, for what they do, wherever.

Left Wingery

Danyl at the Dim-Post has written this week about left wing commentators in New Zealand. While it’s not a competition – plainly, there’s plenty of room for more in the LWC parish – but if forced to choose…over the past five years, the one indispensable ‘don’t lose this guy under a bus’ LWC figure in this country has been Idiot/Savant on the No Right Turn site. And while we’re talking about indispensable sites, a lot of people over the last ten years have come to rely on the US academic Juan Cole (he’s based at the Ann Arbor campus in Michigan) for his coverage of events in Iraq, and elsewhere in the Middle East. For the past two years, Cole’s equivalent in Syria coverage has been another US academic, Joshua Landis of the University of Oklahoma. The Syria Comment site run by Landis is a really terrific source of news and analysis.