Costa Rica nixes exploration, wants Chinese refinery

Costa Rican President Oscar Arias, reversing earlier statements of his own government, declared his opposition to any oil and gas exploration in his country, recently described as a "biogem" by environmentalists.

May 4th, 2009

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, May 4 -- Costa Rican President Oscar Arias, reversing earlier statements of his own government, has declared his opposition to any oil and gas exploration in his country, recently described as a "biogem" by environmentalists.

"We will continue with our commitment to not permit oil exploration on Costa Rican soil," Arias said in a speech before the Costa Rican Congress. "It is a decision I made some time ago, to not have oil exploration."

The statement apparently reverses a long-standing policy of the Arias government to encourage exploration in the Central American country.

In May 2006, Arias said Costa Rica's Refinadora Costarricense de Petroleo (Recope) was in accord with Brazil's state-run Petroleo Brasileiro SA (Petrobras) "in studying the feasibility of oil exploration 50 miles off the coast."

At the time Luiz Furlan, minister for development, industry and commerce, underlined Aria's view: "The technology for deepwater exploration is available to Costa Rica, and we will meet in order to see where we can cooperate…Costa Rican technicians will go to Brazil in order to understand the process."

In January 2008, Environment and Energy Minister Roberto Dobles announced plans by China National Oil & Gas Exploration & Development Corp. [now known as China Southern Petroleum Exploration & Development Corp., based in Guangzhou and a subsidiary of China National Petroleum Corp.] to explore Costa Rican territorial waters.

"The matter of petroleum exploration was always one of the possibilities for us, even before the current government," Dobles said, adding that a bilateral panel was already at work drafting a formal proposal for prospecting off Costa Rica's Caribbean coast.

Dobles said any exploration would be guided by a policy mandating "any energy project must also be environmental and social" and that "no one will be able to explore in protected areas or in indigenous reserves, and high environmental standards will be demanded."

Still, Dobles said, "We cannot put the country's energy at risk." He noted unless Costa Rica discovers oil at home, it would likely be forced to import the kind of heavy crude coming out of Venezuela, which is expensive to refine and generates more pollution than lighter grades of oil.

Aria's turn-around echoes statements by Costa Rica's former President Abel Pacheco [2002-06] who declared a "moratorium on all petroleum exploration and production" and who said his country would become an "environmental leader and not a petroleum or mining enclave."

At the time, Pacheco declared, "Costa Rica's true petroleum and true gold are the water and oxygen produced" by its rainforests.

The Pacheco moratorium prompted Harken Energy Corp. to file suit against the Costa Rican government over a 1998 contract that allowed it to explore for oil in the Caribbean, an agreement that was revoked by Pacheco in 2005.

Costa Rica becomes 'biogem'
In February, the Natural Resources Defense Council named Costa Rica as a "biogem," and said it is working with government officials "to help the country meet its commitment of becoming the world's first carbon-neutral nation by 2021."

NRDC signed an agreement with Costa Rica's national electric utility Instituto Costarricense de Electricidad on energy efficiency and renewable energy projects.

In partnership with the Centro Agronomico Tropical de Investigacion y Enseanza in Costa Rica, NRDC launched a rainforest rejuvenation project to plant 30,000 trees to restore a natural rainforest. "These actions will help Costa Rica reaffirm its position as a global environmental leader and reduce pressure on its biodiversity and other natural areas," NDRC said.

While Costa Rica may eschew exploration for oil and gas, it remains in negotiation with Venezuela for admission to the PetroCaribe program under which Caracas allows countries to receive oil at discounted prices.

Earlier this month, moreover, Costa Rica affirmed the validity of a contract signed by Chinese President Hu Jintao on a 25-year agreement to help expand Costa Rica's Moin refinery to 60,000 b/d by 2013 from the current 25,000 b/d.

Additionally, CNPC and Costa Rica's Recope are jointly evaluating plans to set up a $6 billion Costa Rican refinery with a processing capacity of 200,000 b/d (OGJ Online, Dec. 1, 2008).

According to one industry analyst, Costa Rica's agreement with China for the refinery "left the door open" for CNPC to explore for oil off Costa Rica's Caribbean coast—a door that for now at least has now been firmly shut.

Contact Eric Watkins at hippalus@yahoo.com.

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