Plunging Oil Prices Won’t Kill Vaca Muerta

The Loma Campana camp where YPF and Chevron produce shale oil in the southwest Argentine province of Neuquén. So far, the plunging of oil prices has not modified the costely development of this unconventional fuel. Credit: Fabiana Frayssinet/IPS

The Loma Campana camp where YPF and Chevron produce shale oil in the southwest Argentine province of Neuquén. So far, the plunging of oil prices has not modified the costely development of this unconventional fuel. Credit: Fabiana Frayssinet/IPS

By Fabiana Frayssinet
BUENOS AIRES, Apr 10 2015 (IPS)

Despite the precipitous fall in global oil prices, Argentina has continued to follow its strategy of producing unconventional shale oil, although in the short term there could be problems attracting the foreign investment needed to exploit the Vaca Muerta shale deposit.

The uncertainty has come on the heels of the initial euphoria over the exploitation of shale oil and gas, of which Argentina has some of the world’s largest reserves.

Is the Vaca Muerta shale oil and gas field in intensive care, now that the price of a barrel of oil has plummeted from 110 dollars to under 50 in just seven months? That is the question repeated by financial and oil industry experts.

Argentina’s energy trade deficit climbed to almost seven billion dollars in 2014, partly due to the decline in the country’s conventional oil reserves.

Eliminating that deficit depends on the development of Vaca Muerta, a major shale oil and gas deposit in the Neuquén basin in southwest Argentina. At least 10 billion dollars a year in investment are needed over the next few years to tap into this source of energy.“Conventional oil production has peaked, so to meet the rise in demand it will be necessary to develop unconventional sources. And Argentina is one of the best-placed countries to do so.” — Víctor Bronstein

“In the short term, it would be best to import, rather than exploit the shale resources,” Víctor Bronstein, the director of the Centre of Studies on Energy, Policy and Society, told IPS.

“But taking a more strategic view, investment in and development of these resources must be kept up, since oil prices are going to start climbing again in the near future and we have to have the capacity to produce our own resources when that happens,” he added.

That is how President Cristina Fernández saw things, he said, when she set a domestic price of 72 dollars a barrel – “40 percent above its international value” – among other production incentives that were adopted to shore up Vaca Muerta.

According to the state oil company Yacimientos Petrolíferos Fiscales (YPF), Vaca Muerta multiplied Argentina’s oil reserves by a factor of 10 and its gas reserves by a factor of 40, which will enable this country not only to be self-sufficient in energy but also to become a net exporter of oil and gas.

YPF has been assigned 12,000 of the 30,000 sq km of the shale oil and gas deposit in the province of Neuquén.

The company admits that to exploit the deposit, it will need to partner with transnational corporations capable of providing capital. It has already done so with the U.S.-based Chevron in the Loma Campana deposit, where it had projected a price of 80 dollars a barrel this year.

“Who is going to invest in unconventional oil and gas at the current prices?” the vice president of the Grupo Moreno, Gustavo Calleja, commented to IPS.

“We have to hold on to Vaca Muerta and continue studying its deposits in just a few pilot wells, to see how deep they are and what kind of drilling is necessary to keep down costs and curb the environmental impacts,” said Calleja, who was the government’s undersecretary of fuel in the 1980s.

YPF technicians working on one of the shale oil drilling rigs in the Loma Campana shale gas field in Vaca Muerta in southwest Argentina. Credit: Fabiana Frayssinet/IPS

YPF technicians working on one of the shale oil drilling rigs in the Loma Campana shale gas field in Vaca Muerta in southwest Argentina. Credit: Fabiana Frayssinet/IPS

Hydraulic fracturing or “fracking”, the technique used to extract shale oil and gas, involves the high-pressure injection of a mix of water, sand and chemical additives into the parent-rock formations at a depth of over 2,000 metres, in order to release the trapped oil and gas which flows up to the surface through pipes.

Besides being very costly, fracking poses environmental risks, as it requires huge volumes of water, pollutes aquifers, and can cause earthquakes.

The shale boom that began in the United States in 2008 was driven, among other factors, by high oil prices, which provided a profit margin.

“At the current prices only those who have cutting-edge technology can develop their shale reserves,” said Calleja.

The cost of producing a barrel of shale oil is based on variables such as extraction, exploration, investment amortization and the payment of taxes and royalties. In the United States, the cost is calculated at between 40 and 70 dollars.

That fact, explained Bronstein, led to an over 30 percent reduction in drilling activity since prices fell, “which will bring down production over the next few months.”

In Argentina, shale development is just starting, which means costs are high “due to a question of scale and problems of logistics and infrastructure,” said the expert.

In the United States, “developing a shale well, including fracking, costs around three million dollars,” while in Argentina “it costs more than twice that,” he said.

“The cost of extracting conventional oil in Argentina ranges between 20 and 30 dollars a barrel, while it costs around 90 dollars to extract a barrel of shale oil, although that will gradually go down as Vaca Muerta is developed,” he said.

Argentina does not yet produce shale gas on a commercial scale, as it still has large reserves of conventional gas. YPF’s shale oil production represents 10 percent of the company’s total output, and between three and four percent of the oil extracted by all operating companies in the country.

Canada and China produce unconventional oil on a commercial scale. But due to their geologic and operative characteristics, the United States and Argentina are seen as having the greatest potential in terms of future production of shale oil and gas.

YPF argues that with the gradual reduction in production costs, a rise in output, and higher domestic oil prices, Vaca Muerta is still profitable.

The industry is waiting for the collapse in prices to bring down the costs of international inputs and services, thus reducing the high domestic industrial costs.

YPF has also signed agreements for the joint exploitation of shale deposits with Malaysia’s Petronas and Dow Chemical of the United States, while other transnational corporations have announced their intention to invest in Vaca Muerta.

Bronstein believes the investments will continue to flow in because they were planned with an eye to “significant production in five years.”

“This means investors don’t take the current price of crude oil into account as much as the future price. And virtually all analysts agree that oil prices will rally within a few years,” he said.

“Conventional oil production has peaked, so to meet the rise in demand it will be necessary to develop unconventional sources. And Argentina is one of the best-placed countries to do so,” Bronstein added.

Cristian Folgar, who was undersecretary of fuels last decade, said “any snapshot of the market today would be distorted because the costs of different oil industry services have not yet settled.”

“YPF will continue to forge ahead and will not slow down investments that depend on its decision because the company currently channels its entire flow of investment into Argentina,” he told IPS.

In his view, international corporations will reduce their investments at a global level, which means “YPF is not at all likely to reach new joint venture agreements with other oil companies until the situation stabilises.”

But “those who have already started to invest are not going to back out,” he added.

“Argentina continues to pay for crude and gas at the same prices as before the start of this downward price trend,” Folgar said. “Since a change of government lies just ahead, new developments will probably wait for the next government to send signals indicating what its plans are in the energy sector.”

Calleja is worried that Saudi Arabia, the world’s leading oil exporter, and the country that according to experts is pulling the strings of the current price collapse in order to – among other goals – push shale out of the market, “may drive prices even further down.”

In the face of what he describes as a global “war of interests”, he believes it is a good time to start looking to energy sources other than fossil fuels.

Calleja argues in favour of hydroelectricity and nuclear energy, which currently represent just 14 percent of Argentina’s energy mix, but have “lower economic and environmental costs.”

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

Opinion: Moment of Truth for the Nobel Peace Prize

In this column, Norwegian lawyer Fredrik S. Heffermehl* and Swedish civil servant Tomas Magnusson* argue that in recent years the recipients of the Nobel Peace Prize have not reflected the hope of the award’s founder – Alfred Nobel (1833-1896) – that the world be freed of weapons, warriors and war, or promoted the vision of preventing future war by what Nobel called “creating the brotherhood of nations”.

By Fredrik S. Heffermehl and Tomas Magnusson
OSLO, Apr 10 2015 (IPS)

The Nobel Peace Prize is about to bow out to critics. As of Jan. 1, the Oslo-based Norwegian Nobel Committee that selects the winners has a new secretary, Olav Njølstad, who announced that “changes loom” in a recent interview.

However, Njølstad added, the changes “will not be dramatic”, making it unlikely that they will satisfy the full makeover demanded by The Nobel Peace Prize Watch, a newly-formed advocacy group wishing to reverse and undo international militarism.

Fredrik S. Heffermehl

Fredrik S. Heffermehl

In a letter sent in February to the Nobel Prize awarders, the group pointed to the purpose Alfred Nobel actually had in mind and presented a selection of candidates among the 276 nominated for the 2015 prize who are actually qualified to win. The Nobel Prize awarders have promised to respond to the letter, which, along with the valid candidates, is posted on the group´s website.

The group has chosen to ignore the wishes of the Nobel Committee that has a policy of strict secrecy around candidates and the selection process. By publishing, for the first time, the full nominations of the 25 “valid candidates”, the group has made it possible for everyone to see what types of peace work Nobel actually intended the prize to promote and its “imperative urgency” in the current period.

For over one hundred years, the secrecy rule has shielded the awarders from being held responsible for its neglect of the true Nobel “champions of peace” and they have been able to get away with assertions that the winners Nobel had in mind no longer exist.

According to the group this is untrue. It says that the committee ignores the simple, indisputable – and never disputed – evidence showing that when he designated his prize to the “champions of peace”, Nobel “meant the movement and the persons who work for a demilitarised world, for law to replace power in international politics, and for all nations to commit to cooperating on the elimination of all weapons instead of competing for military superiority.”

Tomas Magnusson

Tomas Magnusson

To make the prize comply with its actual purpose will require a dramatic change of the award policy. The Nobel Peace Prize Watch therefore doubts that the impending changes, described as “undramatic”, will be sufficient to satisfy the legislation on wills and foundations and the decisions of two public agencies in Sweden tasked with overseeing that foundations spend their funds in accordance with the law.

Even if the nominations are secret, The Nobel Peace Prize Watch was able to identify 24 names properly nominated for the 2015 prize. The list of valid candidates for 2015 is dominated by Americans and by people involved is nuclear disarmament, with nominees like Japanese hibakusha (nuclear survivors) Samiteru Taniguchi and Setsuko Thurlow; U.S. lawyer Peter Weiss and the International Association of Lawyers against Nuclear Arms (IALANA), David Krieger and the Nuclear Age Peace Foundation.

Further candidates are David Swanson, the U.S. activist for full disarmament; whistleblowers Kathryn Bolkovac, Daniel Ellsberg, Chelsea Manning and Edward Snowden, all from the United States; veteran organisers of a law-based world order, such as lawyers Benjamin Ferencz and Richard Falk, also from the United States; and the Womens´ International League for Peace and Freedom, formed during the First World War.

It seems as if Norwegian politicians, imbued in Western militarism and loyalty to the North Atlantic Treaty Organisation (NATO), are unable to understand Nobel´s idea of peace: to liberate the nations of the world from weapons, warriors and war. The idea to be supported by his will was that all nations must cooperate on disarmament.

Laureates like U.S. President Barack Obama in 2009 and the European Union in 2012 both believe in military means and clearly are not the type of winners to whom Nobel dedicated his award.

If the world succeeded in realising the Nobel peace plan, this would release enormous funds to cater to human needs. It would cost only a tiny fraction of the world´s military expenditure to secure everyone access to food, clean water, housing, education, health care. It would become possible to secure decent circumstances for all people, all over the globe, poor and rich, East and West, North and South – and make them more secure in the bargain.

To a realist it must be obvious that a world filled with weapons and warriors, even nuclear weapons, is inherently an unsafe world.

In the letter requesting changes, The Nobel Peace Prize Watch refers to basic rules of law regarding wills and foundations and furthermore invokes decisions passed by two Swedish public agencies during the last few years.

The authorities expect the purpose of the Nobel testament to be respected and also that the Nobel Foundation in Stockholm will keep its Norwegian sub-committee for the peace prize under strict and effective supervision and also refrain from paying the prize amount to a winner outside the purpose Nobel actually had in mind.

The Norwegian Nobel Committee, elected by the Parliament of Norway, now has until Apr. 17 to decide whether it will serve the great mandate that Nobel entrusted to it, to illuminate and promote the vision of preventing future war by what Nobel in his will called “creating the brotherhood of nations”.

Governments and citizens all over the world should unite in demanding that Norwegian parliamentarians respect Nobel and help liberate us all from the very dangerous common enemy called militarism. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

* Fredrik S. Heffermehl is a Norwegian lawyer, author of books on the Nobel Peace Prize and former vice-president of the International Peace Bureau (IPB). Tomas Magnusson is a Swedish civil servant in immigration and integration issues, and former president of the International Peace Bureau (IPB). The two are founding members of the Lay Down Your Arms Association and organisers of The Nobel Peace Prize Watch)

781 Million People Can’t Read this Story

A student at the Hazi Ibrahim Government Primary School in Bangladesh’s capital, Dhaka, raises her hand in response to her teacher’s questions. Credit: Shafiqul Alam Kiron/IPS

A student at the Hazi Ibrahim Government Primary School in Bangladesh’s capital, Dhaka, raises her hand in response to her teacher’s questions. Credit: Shafiqul Alam Kiron/IPS

By Kanya D’Almeida
UNITED NATIONS, Apr 10 2015 (IPS)

If you are reading this article, consider yourself one of the lucky ones; lucky enough to have received an education, or to be secure in the knowledge that your child will receive one. Lucky enough to be literate in a world where – more often than not – the ability to read and write can mean the difference between a decent life and abject poverty.

In the 15 years since the landmark World Education Forum in Senegal’s capital Dakar laid out six ambitious education targets agreed upon by 164 governments, a lot has changed.

“There are still 58 million children out of school globally and around 100 million children who do not complete primary education.” — UNESCO
For one thing, 34 million more children have attended school as a result of policies rolled out under the Education for All (EFA) initiative; the number of children out of school has been halved since the year 2000; and many countries have made great strides towards bringing as many girls into classrooms as boys.

But dig a little deeper and the good news gives way to a bleak reality. According to the most recent EFA Global Monitoring Report released Thursday by the United Nations Educational, Scientific and Cultural Organisation (UNESCO), “There are still 58 million children out of school globally and around 100 million children who do not complete primary education. Inequality in education has increased, with the poorest and most disadvantaged shouldering the heaviest burden.

“The world’s poorest children are four times more likely not to go to school than the world’s richest children, and five times more likely not to complete primary school,” the report stated, adding, “Despite all efforts by governments, civil society and the international community, the world has not achieved Education for All.”

Six goals: A mixed report card

Given the vast spectrum of cultures, economies and political ideologies represented by the 164 governments in Dakar in 2000, the six targets agreed upon reflected some of the most urgent and universal challenges facing the world today: early childhood education and care; universal primary education; youth and adult skills; adult literacy; gender equality; and the quality of education.

Although the pre-primary school enrolment rate has improved by two-thirds since 1999, and the primary net enrolment rate is set to reach 93 percent by the end of the year, the fact remains that one in six children in low or middle-income countries – roughly one million kids in total – will not be in school at the time of the 2015 deadline.

Only 69 percent of countries studied will have achieved gender parity at the primary level by 2015, a number that falls to just 48 percent for secondary education. Although governments agreed in 2000 to halve the global illiteracy rate by 2015, a four-percent reduction is all that has so far been achieved.

Katie Malouf Bous, a policy advisor for Oxfam International based in Washington DC, told IPS the results of the monitoring report showed “a mixed bag, very uneven across different countries.”

She stressed that the widening of inequalities in education access and outcomes was a worrying trend, adding that there is an urgent need to “redouble investments in public education and make sure those investments are being targeted at the right communities and children.”

According to a March 2015 UNESCO policy paper, “The annual total cost of achieving universal pre-primary, primary and lower secondary education in low and lower-middle income countries is projected to increase from 100 billion dollars in 2012 to 239 billion dollars, on average, between 2015 and 2030.”

The policy brief went on to say that “the total annual financing gap between available domestic resources and the amount necessary to reach the new education targets is projected to average 22 billion dollars between 2015 and 2030.”

This funding gap proves that most governments are failing to allocate the required 20 percent of national budgets, or four percent of annual gross national product (GNP), on education.

Asia-Pacific: Is the region pulling its weight?

According to Oxfam’s Bous, “One of the things we’re really worried about is the trend we see of the state pushing some of its responsibilities on to the private sector, and focusing on low-cost private schools or public-private partnerships to deliver education.”

“We believe this is only deepening educational inequalities, particularly in the Asia region, where a lot of donor-driven initiatives are supporting low-cost private schools, which are basically profit-making schools that charge fees from poorer families […],” she explained.

Home to four of the world’s six billion people, the Asia-Pacific region is rife with inequality, a situation that will only worsen unless governments take the necessary steps to educate this massive population. Currently, one-third of all students between six and 18 years of age in South Asia attend private rather than public schools.

A 2015 study by the United Nations Children’s Fund (UNICEF) revealed that over 40 percent of all out-of-school adolescents live in South Asia, with Pakistan alone accounting for one-half of that figure.

In a 2014 regional report tracking progress on Education for All, UNESCO noted that five of the so-called E-9 countries, defined as the world’s most populous developing nations, were in Asia: Bangladesh, China, India, Indonesia, and Pakistan.

Together, they accounted for some 45 percent of the total global enrolment in primary education and 80 percent of the Asia-Pacific region’s total enrolment in 2009, according to UNCEF.

While these states have made great strides in bringing children into the classrooms, they account for millions of out-of-school youth, most of whom will never receive a proper education.

This has major implications for the economic health of the entire region, which already hosts 64 percent of the world’s illiterate adults – roughly 497 million people as of 2014.

While 10 countries in the region have achieved universal (99 percent or more) participation in primary education, with nine countries on track to achieve the goal by the end of the year according to UNESCO, survival rates remain a challenge, with nations like Bangladesh, Cambodia, Lao PDR, Myanmar, Nepal, Pakistan and the Solomon Islands experiencing difficulty in retaining students up until the last year of primary school, let alone ensuring that they will enroll in – or complete – a secondary education.

As the U.N. moves closer to finalising its Sustainable Development Goals (SDGs), education experts around the world are pushing urgently for policies that direct all necessary funds, energy and action into the classrooms – where the futures of many developing nations will either be made or broken in the coming decade.

Edited by Kitty Stapp