Chavez Bloc Races with Oil Cartel to Grid the Continent
by Bill Weinberg
As the left-populist Evo Morales takes office in Bolivia, a clear anti-imperialist bloc is consolidating in South America, led by Venezulea’s Hugo Chavez and also including Brazil, Argentina, Uruguay and potentially Chile. Days before Morales was inaugurated Jan. 22, Chavez and other regional leaders met in Brasilia to announce ambitious plans for new gas and oil pipelines spanning the continent, linking national markets across vast areas of rainforest and towering mountains.
Now a race is on between a series of pipeline projects already being developed under the auspices of multinational corporations and the proposal unveiled at Brasilia: the first predicated on extracting resources from South America with the minimum return to the continent’s inhabitants; the other on harnessing those resources to lift the continent’s masses out of poverty.
The corporate projects invariably link oilfields in the continental interior—the Amazon and Orinoco basins—with the Pacific and Caribbean coasts for export to the United States. The Caño-Limon pipeline, run by a consortium led by California’s Occidental Petroleum, links Colombia’s Arauca oilfields in the Orinoco with the Caribbean. To the south, the Putumayo-Tumaco line links the new oilfields of the Colombian Amazon to the Pacific, with Petrobank Energy of Canada a major investor. In Ecuador, the new Heavy Crude Oilduct (OCP) similarly spans the Andes, linking Amazon oilfields to the coast, with Occidental again a leading member of the consortium. In Peru, the Camisea pipeline, built by Halliburton for a consortium led by Hunt Oil of Texas, has just gone on line, again linking Amazon gasfields to the coast. All of these projects have met with long protest campaigns by impacted indigenous and campesino communities. And another such project, a proposed gas line linking the Bolivian Amazon to the Chilean coast, to be built by Sempra Energy of California, was effectively cancelled by the Bolivian indigenous uprising of October 2003.
The main pillar of the Chavez plan, in contrast, does not link the Amazon to the sea but crosses the Amazon to link the South American nations to one another. The proposed arteries that would reach the sea envision exports not to the US but to China.
The plan is also seen as a move towards establishment of a regional joint venture of state-sector oil companies, to be dubbed PetroAmerica, which would integrate Latin America and the Caribbean on principles of self-sufficiency, and re-invest profits into development and social programs.
At the Second Bolivarian Congress of Peoples‚ a pan-Latin American summit of social and political leaders that Chavez hosted in December 2004, Evo Morales said: “We dream that PetroAmerica can be consolidated… [W]hy can’t PetroAmerica have partners like China and Bolivia to stop the North American empire? It’s important to advance these economic proposals to liberate our peoples… Enough of foreign people who come to dominate us, and to subjugate us and make themselves the owners of our lands.”
The London Times reported Jan. 22 that on Morales’ pre-inauguration trip to Venezuela he and Chavez announced plans to merge their respective countries’ state energy sectors as a first step towards the creation of PetroAmerica.
But apart from the daunting costs and technical challenges of the Chavez pipeline vision, there are clear political obstacles. Some observers believe that the proposed network’s competition with the pipelines already pumping or under construction will have a destabilizing effect on the new South American bloc. A perhaps more fundamental contradiction is that indigenous and campesino communities whose lands stand in the path of Chavez’ proposed pipelines could find themselves facing the same kinds of pressures they now face before the corporate mega-projects—thereby undermining a crucial constituency of the region’s left-populist governments.
An Anti-Imperialist “Spinal Chord”?
At the Jan. 19 Brasilia meeting, Chavez, Brazilian President Luiz (“Lula”) Inacio da Silva and Argentine President Nestor Kirchner agreed to move ahead with a planned gas pipeline running the length of the continent. The proposed pipeline would stretch 10,000 kilometers (6,215 miles)—more than three times the length of the US-Mexico border. It would take seven years to build and cost up to $20 billion, according to Venezuela’s Energy and Oil Minister Rafael Ramirez.
“We are moving forward with tremendous political will to make this project a reality,” Ramirez told Bloomberg news, adding that the pipeline would be the “spinal cord” of South America. The line would start at Venezuela’s Caribbean coast and run through Brazil before reaching Argentina, dissecting the Amazon Basin.
Sophie Aldebert, Rio de Janeiro-based associate director at Cambridge Energy Research Associates, expressed skepticism that the project will ever be built. “It is very difficult to believe this will take place, because of the distance, the financing and the supply,” Aldebert told Bloomberg news in a telephone interview.
The plan envisions using Venezuela’s 150 trillion cubic feet of natural gas reserves, the world’s eighth-largest, to help resolve chronic gas shortages in Argentina. “In the opinion of all the presidents, this is one of the most important steps for the consolidation of a united South America,” Lula’s top international aide, Marco Aurelio Garcia, told Bloomberg. “Energy is becoming the driver of that integration.”
An imperative for Venezuela in the regional integration is to open South American markets for its hydrocarbon resources and lessen its dependence on the US, which now takes about two-thirds of the country’s oil exports.
But Venezuela is having trouble meeting its own internal demand. Venezuela in December actually cut home deliveries of heating and cooking fuel in some eastern states because of natural gas shortages. However, Chavez boasted to reporters in Brasilia that Venezuela’s capacity may double as the country develops offshore fields near the border with Colombia and off Trinidad and Tobago.
The ever-present threat of US intervention was also an implicit issue at the meeting. Chavez used the summit to discuss purchase of 36 training aircraft from Brazil’s Empresa Brasileira de Aeronautica SA, the world’s fourth-largest aircraft maker. The US, of course, opposes the sale, and Brazil needs Washington’s approval to sell the aircraft as they utilize US technology.
“It’s totally absurd,” Chavez said. “They are training planes for our cadets so that they can learn to fly. This is an example of the absurdity of US international policy; they are punishing Brazil and international trade.”
Integration or Rivalry?
Chavez also called for integrating Bolivia into the new pipeline network. Together Venezuela and Bolivia “have gas for 200 years,” he said. “This pipeline is vital for us.”
But a Jan. 20 analysis for the Associated Press by Alan Clendenning finds the Latin leaders’ “show of brotherhood could backfire if this expensive dream becomes reality since the network they hope to build would also likely turn the continent’s neighbors against each other as they compete for clients.”
Bolivia is already the biggest exporter of gas to Brazil and wants to increase exports to Argentina through another proposed pipeline. By joining the much larger proposed pipeline, Bolivia “would be tying [its] production prospects to whatever Chavez wants to dictate,” said Andres Stepkowski, a Bolivia-based oil consultant.
Chavez dismissed that idea in Brasilia. “There is no desire to compete. I don’t think there is any fear in Bolivia, rather there’s joy that this project is going to integrate us all. You wait and see.”
Critics say Bolivia lost a big export opportunity with the collapse of a multi-billion-dollar plan to build a pipeline over the Andes to a Pacific port in Chile, where the gas would be liquefied for shipment to Mexico and Southern California. Evo Morales helped lead the rebellion against that plan in 2003, charging that Chile and the United States stood to profit to Bolivia’s disadvantage. California’s Sempra Energy turned instead to Indonesia as its supplier, company spokesperson Art Larson told AP.
Bolivia’s vice president-elect, Alvaro Garcia Linera, said the Chile project will never happen with Morales as president, but that his administration would consider a pipeline that could reach the Pacific via Peru. Since both countries lost territory to Chile in the 1879-1884 War of the Pacific, Bolivia and Peru have often been united against their more prosperous southern neighbor.
Yet if a Bolivia-Peru pipeline is built, the two countries “would be fighting for the same markets, Mexico and the United States,” said Pietro Pitts, editor-in-chief of Venezuela-based LatinPetroleum.com. “It’s a race to see who’s going to get that gas first,” Pitts said. “Why would Peru want to let Bolivian gas get through unless it charges a lot for the pipeline?”
These analyses quoted by AP ignore the potential for opening new markets for the region’s hydrocarbon resources—especially fast-industrializing China, which has a growing economic presence in South America. When president-elect Morales met with Chinese President Hu Jintao in Beijing, he hailed China as an “ideological ally” and invited it to develop Bolivia’s gas reserves, the New York Times reported Jan. 10. Hu promised to encourage “strong and prestigious” Chinese companies to invest in Bolivia.
Venezuela: South America’s New Saudi Arabia?
Chavez is also preparing an unprecedented thrust of domestic expansion in the oil sector. Venezuela’s state oil company, PDVSA, has announced plans to reach crude production levels of 5.8 million barrels per day by 2012 and 7.5 million barrels per day by 2020, Business Wire reported Jan. 11. PDVSA also intends to invest $3 billion into expanding its refining capacity, and form strategic alliances to use refineries in the other Caribbean and South American countries.
With reserves estimated at more than 77 billion barrels, Venezuela is hoping to surpass even Saudi Arabia as a global supplier. During the first six months of 2005, Venezuela’s oil production reached 3 million barrels per day—a figure PDVSA hopes to increase by 6.6 million barrels per day, building 650 additional kilometers of pipelines in the oil-rich eastern region.
Alejandro Granado, PDVSA’s vice president of refining, said the company is considering spending $10.5 billion to build three new refineries in Cabruta, Caripito, and Barinas, increasing Venezuela’s processing capacity by 700,000 barrels per day. Granado said that the governments of Venezuela and Cuba are also working together to reactivate the island nation’s Cienfuegos refinery, which has a processing capacity of 70,000 barrels per day. Venezuela is also considering the possibility of processing 50,000 barrels per day from the eastern Franja de Orinoco region at Uruguay’s La Teja refinery, and building new refineries in Brazil through its alliance with Petrobras, the Brazilian state company.
Asdrubal Chavez, PDVSA’s internal director, announced that by 2012 PDVSA will have 58 tankers in its fleet, with construction and maintenance of the ships to be coordinated via strategic alliances with Argentina, Brazil, China, and Spain.
PDVSA has also announced the PetroAndina Initiative, which features building an oil pipeline from Venezuela to the Pacific via Colombia, Business Wire reported. Asdrubal Chavez told Business Wire the pipeline will facilitate greater access to Asian markets.
The Chinese news service Xinhua reported Dec. 23, 2005 that Venezuela is already exporting 140,000 barrels of crude oil per day to China, compared with 1.5 million to the US.
The Los Angeles Times reported Dec. 18 that after a near breach in relations earlier last year, petro-politics has now brought Chavez and Colombian leader Alvaro Uribe back together. On Dec. 17, the two leaders hugged, called each other “brother” and schmoozed in the shade of a giant ceiba tree near the spot where Latin American independence leader Simon Bolivar died on Dec. 17, 1830 in the Colombian port of Santa Marta. Uribe invited Chavez to Santa Marta to mark the 175th anniversary of the death of the Liberator. After two hours of talks, they announced a series of economic initiatives.
The low point in Venezuela-Colombia relations came in January 2005, when agents acting on behalf of Uribe’s government abducted Colombian guerrilla leader Rodrigo Granda out of the Venezuelan capital to a Colombian prison. Venezuela recalled its ambassador and suspended commercial relations for a month. Later, Chavez accused Colombia of hosting enemies plotting against him.
But Uribe needs continued access to Venezuela’s markets (the second-biggest destination for Colombian goods after the US) and the continued goodwill of its government toward the estimated million Colombians living and working there. And Chavez needs access to Colombia as an artery to export oil to China. Venezuelan Energy Minister Rafael Ramirez confirmed to the LA Times that the two countries were moving forward on the pipeline plan. As a first step in the project, Venezuela has agreed to foot the cost of a $300 million pipeline to import Colombian natural gas
In a sign of warming relations, Colombia in November rejected asylum claims for six Venezuelan officials who Chavez said were involved in the April 2002 coup attempt against him. Speaking to reporters Dec. 17, Chavez denied charges that Venezuela offers refuge to Colombian guerrillas. “It’s a lie, and no one has ever shown any proof to the contrary,” Chavez said. “We are for peace.”
Sierra de Perija: Battle for the Border Zone
The proposed new pipeline links between Colombia and Venezuela would have to cross the Sierra de Perija, the mountain range which forms the Colombian border. This strategic Sierra is already slated by the Chavez government for new coal-mining concessions—which has led to the first signs of tension between the populist regime and indigenous peoples and ecologists.
Robin Nieto reported for Venezuelanalysis.com Dec. 13, 2004 that Chavez is supporting the controversial plan to increase coal mining operations in the state of Zulia, a key oil-producing region bordering Colombia. But ecologists and Zulia’s water authorities warn that the plan may threaten the state’s most important water supply. Coribell Nava, a biologist at the Bolivarian University of Venezuela in Maracaibo, Zulia’s capital, says that increased coal mining would severely degrade the biologically rich Sierra de Perija, which protects the state’s critical watersheds.
“Coal is found in the heart of the hydrological valley. The [mining] concessions that are being granted in the Sierra Perija would terminate our water source,” Nava said.
Maracaibo holds over half the state’s population of approximately 2.5 million, and depends on only two sources of water, both in the Sierra de Perija: the Tulé and Manuelote reservoirs. These reservoirs are fed by the Cachiri and Socuy rivers, respectively.
CorpoZulia, the national government’s regional development corporation, is planning to open new coal mines along both rivers above the reservoirs. The state water authority, HidroLago, has expressed concerns about the plan.
“If the coal mining project continues, the ecological impact will be disastrous,” Herencia Gonzalez said, manager of the regional branch of HidroVen, the national government’s water authority.
Gonzalez told Venezuelanalysis that last year she and national Environment Minister Ana Elisa Osorio visited the coal mines currently in operation in the Sierra, and said she was shocked by what she saw. “I could not believe my eyes,” Gonzalez said, “Is it worth destroying our natural heritage and our water source for coal?”
The Paso Diablo and Mina Norte concessions that Gonzalez and Osorio visited are located just north of the Manuelote reservoir. Contamination of local lands and waters from mining at these two locations has already displaced local Bari, Jukpa and Wayuu indigenous people residing in the area.
William Fernandez, a 27 year-old student at the Bolivarian University in Maracaibo, and a member of the Wayuu nation, told Venezuelanalysis how his family was forced from their lands by the mining operations: “We lived in the Caño Corolado sector by the Guasare River from 1986 to 1995. We dedicated ourselves to agriculture, corn, and the raising of cattle. Because of the effects on the environment we had to leave the area.”
Fernandez’ family is now living in another area that is also being affected by mining—this time from barite (barium sulfate) mines. “We are now thinking of leaving this area too because of how it affects our animals,” Fernandez said.
Indigenous territories in the Sierra de Perija have yet to be demarcated by the national government. Rusbel Palmar, a leader of the Organization of Indigenous Peoples of Zulia (ORPIZ), wants to issue be settled before new mining concessions are granted. “The coal infrastructure plans have not been presented to indigenous people,” he told Venezuelanalysis. “These plans cannot be done without consultation with indigenous people and different sectors of civil society.”
The national plan for the Sierra and Zulia includes construction of a new mega-port for coal export at the sea mouth of Lake Maracaibo, to be dubbed Puerto America, and a 500-megawatt coal-fueled electric plant to power a new rail line linking the port to the mines. These projects are set to begin next year according to CorpoZulia. The plans were outlined in the Zulia-wide newspaper, Panorama, in an Oct. 27, 2004 article, in which CorpoZulia boasted they will employ “clean and efficient” technology.
Zulia already faces a chronic water shortage—impacting not only the state’s north-western coal-mining regions of Mara and Paez, but also Maracaibo. Many districts of the city receive running water only once a week.
The national government recently provided Zulia a loan of $15 million for water infrastructure for the state’s northwest region. However, this infrastructure would still depend on the two reservoirs now threatened by increased coal production.
Nava stressed that the rivers are threatened not only by sulfur contamination from mine waste, but also the deforestation that would result from new mining operations. “The cutting down of pristine forest is just part of the ecological disaster,” he said. “The deforestation will also affect the water reservoirs since without trees and their roots to sustain the soil of surrounding mountains, the rain will literally wash the soil directly into the water reservoirs.”
While CarboZuilia, the coal mining division of CorpoZulia, pledges to invest coal proceeds into regional development projects, like road-paving, ecologists contend that the cost of coal mining outweighs the economic benefits. “Coal today currently represents only 0.02 per cent of revenues for the national government,” said Lusbi Portillo, a professor at the University of Zulia and head of environmental group Homo et Natura. “Coal is not very significant in terms of economic production. However coal is important to other countries like the US, which consumes more than 900 million tons of coal each year.”
Portillo also points out that investments for Puerto America will eventually come from the IMF and the World Bank—despite the anti-globalization stance of the Chavez government. “Venezuela is serving the [US] empire at our expense, and Zulia is a zone of sacrifice.”
Even the national vice-minister of Environmental Conservation, Jose Luis Berroteran, said that coal mining in the Sierra de Perija is incompatible with the purported vision of the current Venezuelan government.
“Coal mining is not in accordance in a country that agrees with the Kyoto Protocol,” Berroteran said. “Perhaps coal mining may be acceptable in other countries but not here, not in a country with a government that has a new vision. It runs contrary to policies of sustainable development.”
The Mina Norte and Paso Diablo sites account for more than 80% of Venezuela’s annual coal production of 8.5 million metric tons. The mines are both owned by joint ventures of private companies with the national government as a minority partner. Mina Norte, 20 kilometers north of the reservoir, is run by Carbones de la Guarija, a joint venture of CarboZulia and Carbomar, an international consortium with a 64% stake in the mine. The two largest stakeholders in Carbomar are the local Massey Family (30.9%) and Chevron (29.94%).
Carbones del Guasare, which operates Paso Diablo, five kilometers north of Manuelote, is held jointly by CarboZulia and the foreign companies Anglo Coal (24.9%) and Peabody Energy (BTU), which recently purchased 25.5% of the mine from Germany’s RAG Coal International. Peabody Energy is world’s largest coal company, with annual sales of over 200 million tons and more than $2.8 billion in revenues. According to Peabody’s company profile, their coal and other products fuel more than 10% of all US electrical generation and over 2.5% of worldwide electrical generation.
Lusbi Portillo argues that Venezuela’s environmental movement has been paradoxically weakened under the progressive Chavez government. “It’s like ploughing the ocean,” said Portillo. “In an oil culture where we were taught that oil, coal and minerals make us rich, where can you go? PDVSA is supposedly ours now, it has been rescued from multinational corporations, this is what people believe, and this makes our work as ecologists even harder.”
Portillo is organizing a protest against the coal concessions at the Miraflores presidential palace in Caracas in March. “Five buses will take indigenous people and social organizations from Zulia to Miraflores,” he pledged.
Venezuelan Ecologists Under Attack
Portillo has been menaced by powerful figures in Venezuela’s industrial bureaucracy for his activism on behalf of the Sierra de Perija. In December 2004, the Venezuelan Program for Education and Action in Human Rights (Provea), an independent group, issued an urgent alert warning of threats made against Portillo by the CorpoZulia’s president, Brigade General Carlos Martinez, and by an engineer with the Venezuelan Ministry of Energy and Mines, Juan Rojas.
According to Provea, on Dec. 8, 2004, at a forum at the Second Bolivarian Congress of Peoples held that month in Venezuela, Martinez said: “Just as there existed a human rights mafia in Venezuela, environmentalists formed a green mafia. Behind this green mafia, opposed to the exploitation of coal in the Sierra de Perija, were the counter-revolutionaries and the transnational companies, and it was directed by the CIA.” He singled Portillo for particularly damning criticism, citing his recent statements against the mining concessions in the Zulia state newspaper The Truth.
Days later, on Dec. 11, representatives of CorpoZulia, the national Ministry of Energy and Mines (MEM) and Irish coal mining company Brendan Hynes made a tour of communities in Zulia’s mining zone. These representatives called together the inhabitants of the parish of Monsenor Godoy in the municipality of Mara, to seek the community’s approval for new coal concessions. The meeting was chaired by MEM engineer Rojas, who is attached to the national mining agency IngeoMinas. At the meeting, Rojas stated that Portillo was “a terrorist” and accused him of stealing MEM vehicles. Throughout the event, he continued to make indirect allusions to the presence of Portillo in the meeting.
Provea, of which Portillo himself is an associate member, protested that: “These remarks endanger the life and integrity of activists in the ecological and human rights movement in Zulia… These acts not only seek to inhibit the activity of communities affected by current and planned mining projects but could be interpreted as a green light to state or private actions which could endanger the life and integrity of Lusbi Portillo and other leaders of the ecological and human rights movements in the Zulia region.”
Despite these tensions, the rupture between indigenous peoples in Zulia and the Chavez government is not yet complete. But the struggle in the Sierra de Perija could prove a microcosm of the contradictions Chavez and his South American allies will face in the new race for strategic control of the continent’s resources.
“The 2nd Bolivarian Congress of Peoples: On the Road Towards a Community of South American Nations,” by Robin Nieto, VoltaireNet, Dec. 10, 2004
“Venezuela’s Chavez Promotes Pipeline in Brazil Summit,” Bloomberg News, Jan. 19, 2006
“Pipeline network could divide South America,” by Alan Clendinning, AP, Jan. 20, 2006
“Venezuela: The New Saudi Arabia,” BusinessWire, Jan. 11
“For Leaders of Venezuela and Colombia, Common Ground,” by Chris Kraul, Los Angeles Times, Dec. 18, 2005, online at Americas.org
“The Environmental Cost of Coal Mining in Venezuela,” by Robin Nieto, Venezuelanalysis.com, Dec 13, 2004
“Urgent Action to protect Venezuelan environmentalist and human rights defender,” Provea, Dec. 16, 2004, online at Mines and Communities Website
“Bolivia: Evo woos China on gas investment,” WW4 REPORT, Jan. 10, 2006
See our related stories:
“Colombia vs. Venezuela: Big Oil’s Secret War?” WW4 REPORT, April 2005
“Amazonia: Planning the Final Destruction,” reprinted from Native Americas,
Special to WORLD WAR 4 REPORT, Feb. 1, 2006
Reprinting permissible with attribution