Foreign Petroleum Companies Developing New Paradigm For Operating In Rain Forest Region

Crude oil and water-treating facilities are shown at Occidental Exploration & Production Co.'s central production facilities on Block 15 in Ecuador's Oriente rain forest. Among Oxy's environmental initiatives on the block is a program for treating and reinjecting all produced water.

Multinational petroleum companies working in South America are gradually sculpting a new paradigm of how to operate in a rain forest with utmost regard for its indigenous people and environmental resources.

This new paradigm can serve as a litmus test for future of oil and gas operations in the rain forest-not only for South America, but for other such jungle settings around the world. And the lessons learned here can readily be adopted as standard operating procedures for projects involving other environments and communities, from the natives of arctic deserts to the mean streets of the urban poor.

This is more than a new wrinkle in public relations for an oil and gas company. What's involved is a need for a company to recognize that it must move beyond compliance on laws and permits and regulations into the next stage: a top-to-bottom commitment to partnership with all the stakeholders in a project, not just the companies themselves and the respective government with ownership of hydrocarbon resources.

Companies working in the Amazon rain forest are learning that these stakeholders must now include the people living near the proposed project and non-governmental organizations (NGOs) that have championed causes they contend might be affected by the project.

Again, this is not just for the sake of winning good P.R. points, contend industry executives and consultants at the cutting edge of such endeavors.

"Larry Meriage, Oxy Oil & Gas vice-president, executive services and public affairs
"Oil development is under attack all across the rain forest. The radical environmental activists contend that all oil development is a bad thing, regardless of your track record."

Across the globe, petroleum companies continue to run into public opposition to projects and operations that often stems from initiatives by NGOs or community groups. Such operations or projects can make or break companies: Arctic National Wildlife Refuge, Point Arguello, Brent spar, Shell Nigeria, Unocal/Thailand's Myanmar-Thailand pipeline, and BP Colombia (see story, p. 42) to name just a few of the more widely publicized industry efforts.

Companies that simply fall back on maintaining regulatory compliance and securing all required government approvals as sufficient to proceed with a project run the risk of costly delays, litigation, and even crippling the economics of or scuttling a project. Obliviousness to the issues raised by these other stakeholders could prove fatal to a petroleum company's interests.

Changing focus

Industry focus on issues central to rain forest operations in South America is shifting in response to a change in focus by environmental activists.

Larry Meriage, Occidental Exploration & Production Co. executive vice-president for executive services and public affairs, said, "The issue has shifted to concerns over the welfare of indigenous peoples away from just the traditional rain forest environmental initiatives."

Put more bluntly, one environmental/community relations environmental management consultant who specializes in South American environmental issues said, "At one time, the environmental NGOs were just 'tree huggers' and ignored the natives. Now, none of these environmental NGOs would think of hugging a tree unless an Indian was standing under it."

In recent months, NGOs and community organizations have launched initiatives aimed at limiting or halting oil and gas activity in South America's rain forests.

One dramatic example came earlier this year, when members of an indigenous group numbering several thousand, the U'wa, had reportedly threatened to commit mass suicide in protest if Oxy proceeded with exploration of its Samore block in U'wa territory in northeastern Colombia. A Colombian high court in February ruled the U'was' cultural integrity was threatened and ordered Oxy to shelve the project. The Colombian Council of State, set up to resolve conflicts between Colombians and their government, overturned that decision, ruling that Oxy had in fact secured permission from the U'was to explore their land. Nevertheless, exploration work remains on hold pending further negotiations among Oxy, government, and U'wa officials.

In Ecuador, the former administration of President Abdala Bucaram had sought to reopen a lawsuit by Ecuadorian Indians against Texaco Inc. that was dismissed in New York last year. The suit, filed in October 1993 in New York, sought more than $1 billion in damages, alleging destruction of the rain forest in Ecuador's Oriente region and subsequent health problems among the Indians there stemming from Texaco operations that date back almost 3 decades and that were turned over to state oil company Petroecuador in 1992. The government's position conflicts with its earlier settlement with Texaco calling for a cleanup of the former Texaco properties that is almost completed, as well as its earlier support of Texaco in the lawsuit. The government switched to siding with the Indians and claims the earlier settlement was invalid. It's difficult to assess where the government stands on the suit now; Bucaram was recently ousted after mass public protests against him, and an interim caretaker government hasn't publicly addressed the issue.

That kind of scenario is unfolding across other South American countries where multinationals work in the South American rain forest, usually resulting in delays, sometimes in lawsuits, and occasionally accompanied by violence.

"Oil development is under attack all across the rain forest," Meriage said. "The radical environmental activists contend that all oil development is a bad thing, regardless of your track record," Meriage said. And he contends they're gaining leverage far out of proportion with the size.

Tiny groups with just a handful of members have become increasingly sophisticated at using the Internet to put out "action calls" to build opposition to industry projects in the rain forest. An example is such a group posting on its Internet website a "model" letter to a company CEO calling for a halt to some project that interested parties can download and send by the hundreds or thousands to the CEO (while making them available to the media as well). Often, unsubstantiated charges are made in these letters that have a tendency-as does much information on the Internet-to take on a life of their own, sometimes getting picked up by the national or international media and helping fuel a wildfire of public opposition further fueled by publicity stunts and press conferences.

These smaller, more radical groups "are trying to tap into the fund-raising mechanisms of the larger, more established NGOs," such as Greenpeace and the Sierra Club, the consultant said. "The bigger the scare story, the better the chance (these new groups) have of making it into the big time on raising funds. And the truth isn't necessarily an issue."

Industry's traditional responses

When such salvos are fired by the less mainstream environmentalists, the companies affected have tried two basic approaches: ignoring them or refuting them directly.

Neither response has worked, Meriage contends. Ignoring them runs the risk of what is embodied by the catch-phrase of the moment for the anti-drug abuse crusade in the U.S.: "Silence is acceptance."

And Meriage's own efforts to respond to the radical groups' wilder claims in such a circumstance, with a point-by-point letter refuting the claims, were futile.

"Trying to engage the radicals in dialogues doesn't work because they lie and distort everything," he said. "They're very skilfull with the use of the Internet; it gives them a widespread, immediate impact. What we've seen in these action calls is that there is no lie too big to tell about an oil company."

Oxy's Ecuadorian staff encountered that truism first hand. Oxy Community Relations Manager Manuel Echeverría, who has spearheaded the company's community relations outreach efforts tied to Block 15 operations, was hit by claims contained in a letter from environmental activists sent (and made available on the Internet and to media) to Oxy Chairman Ray Irani expressing concerns about Oxy operations in Ecuador.

The letter claimed that, in its dealings with Secoya and Siona natives in Block 15, Oxy had neglected to provide the indigenous groups with information concering its proposed operations (a seismic program) in their territory or the "high likelihood of serious harm to these communities" that an independent study Oxy contracted had allegedly found would be caused by such operations, among other serious allegations.

The letter writer also claimed that Echeverría, in a meeting, responded to his inquiries over these claims that he "did not need outsiders to tell him how to treat 'his Indians,'" adding that "Occidental's dealings with these communities and the defense provided by Mr. Echeverría reflect an inexcusable standard of paternalism and contempt for indigenous peoples."

In a letter to Irani responding to the charges, Echeverría heatedly denied the claims, often citing some as blatant falsehoods and others as distortions.

He was especially incensed by the "my Indians" claim, noting to OGJ his own Indian ancestry.

"This really tells a lot about their ethics," Echeverría wrote Irani. "What I said what was that Ecuador has enough intelligent and caring people. Therefore, they should worry about their people in the (U.S.) and that I would worry about my people in Ecuador."

Separately, to OGJ, Echeverría reiterated that point: "These are my people; why would I want anything that wasn't the best for them?"

The activist's letter is part of a pattern of tactics that the more hardline environmental NGOs employ in their battle with oil and gas companies working in the rain forest.

Another such instance came last summer, when a local environmental NGO distributed a flier in Ecuador accusing Oxy of violating environmental and child labor standards in its Block 15 operations.

Any response Oxy might have made was quickly preempted by a response to the flier from the leaders of the Rio Jivino, Santa Elena, and San Antonio indigenous communities and Limoncocha Indigenous Association in a letter to Echeverría:

"The interest shown by you and the personnel working at Occidental maintaining our environment is worthy of admiration and gratitude, because we could see that money is not the only goal and that you have been interested in the health of our families.

"These actions will let us reach a balance between the state and the foreign investment, which would lead us out of the economic crisis that we live in...We are attentive toward false accusations and personal interests that go against the truth of our actions; notwithstanding, we-Occidental and the communities-are conscious that these organizations, that claim they know and defend the environment, have never been in the Amazon region, especially in our communities.

"For these reasons, we reject these false accusations against Occidental, and they do not know the truth, and we affirm that they are not authorized to represent us."

Occidental Community Relations Manager Manuel Echeverría, responding to an environmental activist's contention that Oxy shows "contempt for indigenous peoples": "These are my people; why would I want anything that wasn't the best for them?" Among Oxy's community outreach programs are efforts to improve native health, such as a vaccination program for children and to sustain economic self-sufficiency, such as setting up a native carpentry shop. Photo by Paul Marrgraff, Quito, courtesy of Oxy.

New strategy

Now, instead of just ignoring the claims of the more radical NGOs or getting in a direct confrontation with them, Oxy tries to foster dialogues with "responsible" environmental groups as well as directly affected stakeholders in a project, inviting them to see for themselves the plans and projects.

As well as focusing on environmental and community programs, the company also would press the point about a project's economic benefits, about the ripple effects of spending hundreds of millions of dollars throughout a local and national economy, about the number of jobs created, and about how the majority of the employees are nationals. The lessons are not lost on the governments and publics of these countries, notably those beset by problems stemming from the drug trade, such as Colombia.

Meriage noted, "The petroleum industry has invested billions of dollars in the economies of these countries; it helps offset the reliance of these economies on narco-traffickers"-a lesson certainly not lost on the companies in Colombia that must deal with almost-routine attacks on facilities and personnel by guerrillas reportedly backed by cocaine cartel money. Here also lies a central irony of this debate, Meriage contends: that the environmental damage caused by attacks on these facilities, such as the hundreds of bomb attacks on Colombian oil pipelines, isn't included by the radical environmentalists in their litany of environmental sins against the rain forest.

"We're trying to continually work with these governments to improve our relations-it's just good business sense. It takes a long time to establish a relationship with these governments; there have been numerous changes within the government, and we're still going to be here. But once you get established, then other opportunities become available; and you only get more business by being good neighbors, by being responsible.

Meriage contends nothing is gained when an oil and gas company is reluctant to divulge information or is reticent to defend itself against critics over sensitive environmental/community relations issues.

"We can do these things better when we speak for ourselves and provide greater transparency in our operations. "The 'hunker-down' mentality doesn't get you there; it's a blueprint for disaster, an invitation for critics to suggest that you have something to hide.

"It's not a question of 'spin doctoring'; we have good programs, and we ought to let everybody know about them."

"Our industry doesn't know how to communicate our accomplishments on the environment."

Sometimes that inability lies in how some business communications are structured as part of fiduciary obligations, Meriage noted: "For example, (at Block 15 operations), 12% of our production cost is produced-water injection. In our financial reporting, we show that as an operating cost, not as an environmental cost,which in fact it is."

ARCO's plan

Other companies also are undertaking community outreach initiatives as a fundamental part of their work plans in the rain forest (see related article, p. 50).

ARCO's Ecuadorian unit, ARCO Oriente Inc., is implementing a wide-ranging community outreach program as part of its proposed development of Villano oil field in Ecuador's Oriente region.

It has incorporated input from local communities and "moderate" local and international NGOs to help the company address environmental and community concerns under the field development plan, said Sixto M?ndez, ARCO Oriente manager of health, safety, and environmental protection.

ARCO and the NGOs set up a committee "to help us visualize how to implement the environmental programs...(and) develop the scope of environmental contractors," M?ndez said. "This will serve as a vehicle to understand what the concerns are of all these organizations and help us set up a liaison with the local organizations to help resolve any conflicts.

This "technical committee" includes representatives from the three major indigenous associations of Pastaza province-Asodira, Fippra, and Opip-the government, and ARCO.

During the last 4 years, while awaiting government approval of the Villano development plan, ARCO maintained a program of educational, medical, and commercial support for the area's indigenous people. These programs will continue as development begins, and local natives will be hired in support of ARCO operations.

Self-sufficiency

As Oxy has on Block 15, ARCO is trying to incorporate natives' self-sufficiency as part of its sustainable development initiative, helping them develop their own long-term, self-sustaining ventures to minimize their dependence on ARCO operations and provide for generations to come.

"We want to find other avenues for when we leave the block that they can have to fall back on," M?ndez said. These could include eco-tourism, biological research, ranching, and fish farming, among others.

This kind of initiative is intended to eliminate "paternalism," says Herb Vickers Jr., ARCO Oriente resident manager. "It's not enough to just hand over money or buy a native a chainsaw. These (local NGOs)...just don't buy that any more."

"A key difference is the role the government plays. In the past, the government saw itself fulfilling a paternalistic role. (Under the new initiative), attitudinally, we've started well." he said.

"There's a lot of distrust with some of these organizations-of us, of the government, and among themselves," Vickers said. "They may think that if one organization gets something out of us, it's at the expense of others; there's still a tremendous learning curve. So we try to work with all the local NGOs, to resolve our differences with them and to iron out the various groups' differences."

What's at stake

What's at stake here is far more than just whether or not a project gets off the ground or is successful.

Oil and gas companies are continuing an uphill battle around the world to regain the respect and trust of the public after being battered by charges in some quarters of pollution, greed, discrimination, and disregard for any value other than profit.

Winning this battle means more than making a profit, adding shareholder value, or replacing production; more than creating jobs or wealth; more than guiding the growth and evolution of a company.

What's at stake here is nothing less than the survival of an industry. As the new millennium approaches, forecasts call for a huge rise in oil and gas demand fueled by the dramatic growth of developing economies. Much of this oil and gas will come from developing countries, in sensitive ecosystems facing environmental pressures.

At the same time, efforts to develop substitutes for these commodities continue to advance and proliferate. Initiatives are being sought at the governmental and NGO level to curb or even eventually eliminate the use of hydrocarbons in the name of long-term environmental preservation (such as the Rio summit on global warming).

How the petroleum industry is perceived by the various publics and governments in the way it conducts its operations may well decide its future. There is already a battle for the hearts and minds of these stakeholders under way with groups whose agenda often is decidedly hostile to the industry.

The front line of the battle is now in South America's rain forest, and even those companies without an investment in that region cannot afford to ignore the outcome.

Environmental concerns guide ARCO project

ARCO Oriente Inc. Villano Oil Field developement project has been designed from the start with rain forest indigenous people and environmental imperatives uppermost in mind.

ARCO discovered the 160-175 million-bbl oil field in 1992 in southern Ecuador. ARCO and partner Agip Petroleum (Ecuador) SA, will develop and operate the field under contract to state oil company Petroecuador. Production is expected to begin at midyear 1997 and reach 30,000 b/d of 21? gravity oil.

Plans call for a pipeline to link with the Transecuadorian line that will first carry 30,000 b/d but be designed for 80,000 b/d to take oil from a Villano increase and other developments in the area.

To avoid colonization in the forest, ARCO will not build a road; instead, the entire operation in the rain forest will be supported solely by helicopter.

ARCO's development plan entails a single production site with extended-reach wells to minimize the site footprint. Wells will be operated remotely, with oil sent via flowline out of the rain forest to a developed area where the main processing facilities will be located. The flowline will be laid above ground to minimize possible disturbance to tree root systems as well as to keep the need to cut major trees to a minimum.

Where the flowline emerges from the forest, it will be installed underground by adapting directional drilling techniques developed for pipeline river crossings, avoiding any surface disturbance and eliminating visible evidence of the line, thus avoiding any temptation to follow the line and impinge upon the forest.

From the main process facilities, Villano oil will be transported by the "secondary" 81-mile pipeline to be laid along an existing highway to link with the Transecuadorian trunk line. It will incorporate the latest technology for monitoring leaks.

ARCO will conduct an environmental impact assessment of the development plan that will help in developing more programs to protect the environment.

ARCO also has begun efforts to work with "recognized" international and local environmental groups to solicit their review of its development plan and their counsel regarding environmental management.

Leaders of the Rio Jivino, Santa Elena, San Antonio, and Limoncocha Indigenous Association, responding to an environmentalist group's charges against Occidental of environmental degradation and disregard for indigenous peoples
"The interest shown by you and the personnel working at Occidental, maintaining our environment is worthy of admiration and gratitude, because we could see that money is not the only goal and that you have been interested in the health of our families. These actions will let us reach a balance between the state and the foreign investment, which would lead us out of the economic crisis that we live in...We are attentive toward false accusations and personal interests that go against the truth of our actions; notwithstanding, we-Occidental and the communities-are conscious that these organizations that claim they know and defend the environment, have never been in the Amazon region, especially in our communities. "For these reasons, we reject these false accusations against Occidental, and they do not know the truth, and we affirm that they are not authorized to represent us."

Campaign against BP continues despite exoneration of human rights abuse charges

A BRITISH LABOUR MEMBER OF THE EUROPEAN Parliament (MEP) has continued a campaign of allegations linking British Petroleum plc to human rights violations and environmental damage in Colombia.

This comes despite the fact that Colombia's highest prosecutor, Alfonso Valdivieso Samiento, has upheld BP's innocence of charges the same MEP made last fall.

MEP Richard Howitt in February traveled to Colombia and gathered what he contends is fresh evidence of alleged BP links to human rights and environmental allegations in Colombia, pledging to put that evidence before the European parliament. He called on BP to review its operations in Colombia and condemn human rights abuses, according to U.K. press reports.

BP continues to deny the charges.

Colombian exoneration

In a recent written statement to John Doust, BP's chief executive for Colombia, Valvidieso denied that an interinstitutional report dealing with human rights in Casanare and Arauca departments criminally implicated the company.

That report, prepared in mid-1995 by nongovernmental organizations (NGOs) and representatives of the Colombian government, together with a few eyewitness testimonies, became the basis for denunciations against BP made by Howitt in late October 1996.

Doust also requested that Colombia's highest law official investigate charges made against BP in the press in the wake of Howitt's visit to Colombia last September. Valdivieso agreed to the request and told BP that he had instructed investigators to be assigned for this purpose. BP had sought to be formally exonerated of the allegations.

The many allegations essentially focused on two areas: a suggestion of BP's complicity with death squads that had purportedly silenced or killed peasant and environmental activists in Casanare department and a claim that BP was responsible for serious environmental damage in Casanare, where it produces crude oil from the supergiant Cuisiana-Cupiagua oil field complex.

Death squad links?

Howitt, in response to OGJ queries, termed the supposed link with death squads a "very serious charge" against BP and, in a press release sent to an OGJ correspondent, contended that the interinstitutional report "seems to confirm" allegations that BP passed on "photographs of protesters into the hands of the military."

However, a review of the report shows it does not name BP specifically in these allegations. What is actually referred to are comments by the chief of intelligence for the military command that defends the oil fields in both Arauca and Casanare departments, where a large number of companies are operating. The intelligence officer was questioned while both he and the commission were in Casanare and spoke as intelligence liaison for nearly the entire oil-producing regions, not just Casanare, where he just happened to be at the time of the commission's visit.

BP referred to this and other charges as "absurd allegations" that Doust vigorously denies.

BP is required by the Colombia's environmental ministry to provide evidence of public meetings between the firm and the local communities in order to ensure that the company's commitments to the communities are carried out.

BP said these are public meetings that anyone may attend and can film as well. It rejected the charge that such videos or stills were given to the army, however, and pointed out that the practice was deemed desirable to prevent serious misunderstandings after commmunity hearings are held.

Environmental claims

Accusations against the firm on environmental grounds include claims of being responsible for the death of fish and the blinding of livestock. Environmental specialists at state oil company Empresa Colombiana de Petroleos and the Ministry of the Environment as well as with the regional environmental authority Corpiorinoquia, however, blamed these incidents on pesticide runoff, deleterious peasant fishing practices, and "calculating locals" seeking money for spurious damage to livestock rather than on any activities by BP in the region.

Doust also noted the frequent guerrilla pipeline attacks as the major source of environmental degradation in oil-producing regions of Colombia. According to one specialist at Ecopetrol, these attacks often have resulted in spills of 200-300 bbl of crude oil into nearby streams and water bodies, with subsequent accumulation of lead, zinc, cadmium, and arsenic contamination.

Copyright 1997 Oil & Gas Journal. All Rights Reserved.