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Steve Horn's article originally appearing on DeSmogBlog.com was published in the print edition of the fall issue of Green Social Thought.
Titled, "Mexico’s Looming Fracking and Offshore Oil and Gas Bonanza," the piece was published online on May 12, 2014. URL for the original can be seen here:
http://www.desmogblog.com/2014/05/12/no-turning-back-mexico-looming-fracking-and-offshore-oil-and-gas-bonanza
Originaltitel
Mexico’s Looming Fracking and Offshore Oil and Gas Bonanza
Steve Horn's article originally appearing on DeSmogBlog.com was published in the print edition of the fall issue of Green Social Thought.
Titled, "Mexico’s Looming Fracking and Offshore Oil and Gas Bonanza," the piece was published online on May 12, 2014. URL for the original can be seen here:
http://www.desmogblog.com/2014/05/12/no-turning-back-mexico-looming-fracking-and-offshore-oil-and-gas-bonanza
Steve Horn's article originally appearing on DeSmogBlog.com was published in the print edition of the fall issue of Green Social Thought.
Titled, "Mexico’s Looming Fracking and Offshore Oil and Gas Bonanza," the piece was published online on May 12, 2014. URL for the original can be seen here:
http://www.desmogblog.com/2014/05/12/no-turning-back-mexico-looming-fracking-and-offshore-oil-and-gas-bonanza
18 Green Social Thought 65: A Magazine of Synthesis and Regeneration, Fall 2014
Mexicos Looming Fracking and Offshore Oil
and Gas Bonanza by Steve Horn After generations of state control, Mexicos vast oil and gas reserves will soon open for business to the international market. In December 2013, Mexicos Congress voted to break up the longstanding monop- oly held by the state-owned oil giant Petroleos Mexicanoscommonly called Pemexand to open the nations oil and gas reserves to foreign companies. The constitutional reforms appear likely to kickstart a historic hydraulic fracturing (fracking) and deepwater offshore oil and gas drilling bonanza in the Gulf of Mexico. This reform marks a major breakthrough in Mexicos economic history only comparable to the signing of the North America Free Trade Agreement (NAFTA) in 1992, international investing and banking giant Banco Bilbao Vizcaya Argentaria (BBVA) wrote in a J anuary 2014 economic analysis. What does this mean for the oil and gas indus- try in Mexico? And for the workers and those who live above these oil and gas plays or along the pipe- line routes that will funnel the liquids to refineries? And how about the Earths atmosphere? Can Mexicos fossil fuel infrastructure handle the boom? Can the country spare the precious fresh- water supplies needed for thirsty fracking operations in an era of increasingly severe droughts and drink- ing water shortages? Can environmental, safety and public health regulations possibly keep up with this industrial boom? Full circle: History of Mexican energy reforms The contemporary history of Mexicos energy industry started in 1938 when the federal govern- ment kicked out foreign oil companies and national- ized the oil and gas sector under the Pemex banner. As a recent report published by the Congres- sional Research Service explains, nationalization occurred in the aftermath of a bitter labor dispute between Mexican workers and the international oil and gas firms who wanted to gain a foothold in the country. The report explains: Tensions culminated in President Lzaro Crdenas historic 1938 decision to abandon efforts to mediate a bitter labor dispute between Mexican oil workers and foreign companies and instead follow through on his threat to expropriate all U.S. and other for- eign oil assets in Mexico. Upon its creation in 1938, Pemex became a symbol of national pride andunited a disparate Mexican society against foreign intervention. For 75 years, Pemex alone had access to Mex- icos massive oil and gas reserves. Mexico is the worlds ninth largest producer of oil, and revenues from developing the resource fund roughly one-third of the countrys budget. But Enrique Pea Nieto of the Institutional Revolutionary Party (PRI), elected in J uly 2013, has made the open door energy reformson top of reforms in a whole host of other policy spheresa top priority for his administration as part of his Pact for Mexico. Theres some historical irony at play here: Nie- tos PRI is the party that nationalized the Mexican oil industry to begin with. And the constitutional amendments also bring labor relations full circle, as the new board of direc- tors for Pemex wont include union representation, even though a labor dispute served as the rationale for nationalization back in 1938. All five union representatives have been re- moved from the board of Pemex, which is shrinking from 15 to 10 members. Gold rush Proponents for Mexicos energy reforms envi- sion a gold rush. They argue the constitutional amendments and accompanying secondary legisla- tion still up for debate in the Mexican legislature could add as much as $35 billion in outside invest- ment into the national coffers. Pemex says $25 to $60 billion could come its way as a result of joint ventures it can now sign with international oil and gas companies, while the indus- try-funded Manhattan Institute says 2.5 million jobs and more than $1 trillion in revenue could be created by 2025. Texas Observer investigative journalist Shan- non Young is skeptical of the figures being tossed around, however. [E]ven without the details, the business press has predicted energy reform could Can the country spare the precious freshwater supplies needed for fracking? the new board of directors for Pemex wont include union representation. Green Social Thought 65: A Magazine of Synthesis and Regeneration, Fall 2014 19 bring in [billions of dollars] in private investment in Mexico, Young wrote in February 2014. How that figure was reached is unclear, as is how much money investors expect to take out of Mexico. Regardless, the reforms seem certain to boost oil and gas production, which have lulled in recent years. Since reaching an all-time high in 2004, oil production has fallen by 25%, down to 2.5 million barrels per day currently. Contrast that to Texas, just across the border. There, production increased by more than 150% during those same 10 years, accord- ing to Daniel Yergin. Texas gains are tied primarily to fracking, which has allowed drilling companies to tap into the Eagle Ford Shale and Barnett Shale basins. We can see what is going on in the United States. Shale gas in the United States created a sense of urgency for us, Pemex CEO Emilio Lozoya told Yergin in an article appearing in The Wall Street Journal. The Oil and Gas Journal pegged it at 10.2 billion barrels at the end of 2011. But thats just what they know they have. The countrys unexplored oil reserve potential is second only to the Arctic Cir- cle, according to Bloomberg and others reporting on the reforms. Pemex estimates, as reported by Bloomberg, that deep-water Gulf of Mexico prospects could be as large as 26.6 billion barrels of oil. Onshore, there are potentially 60 billion barrels yet un- tapped. So where exactly are the goods? While new companies looking for a foothold in Mexico are likely to explore and develop oil pros- pects in all regions, to some degree, the big prizes and most attention will likely center around: the deep-water offshore oil plays in the Gulf of Mexico; the shale gas plays in the Burgos Basin; and the tight oil and shale gas plays in the Chicon- tepec field. The players Speaking at the recent CERAWeek energy con- ference in Houston, Lozoya invited the oil and gas industry big boys into Mexico with open arms. Capital from all over the world is welcome in Mex- ico, he said. We hope to have hundreds of compa- nies operating in any type of rock formation, be it shale, or shallow water, or mature fields, or deep water projects. So what companies are likely to accept Lo- zoyas invitation and cash in on the bonanza? ExxonMobil Chevron, Shell, BP EOG Resources Eni S.A. Anadarko Petroleum Lukoil ConocoPhillips Chesapeake Energy GDF Suez In its J anuary 2014 report on the energy reform, investing and banking giant Banco Bilbao Vizcaya Argentaria (BBVA) listed a number of American, foreign and multinational companies that could potentially get involved in Mexican expansion. On top of some listed above, BBVA named: Hess (for deep offshore drilling); Diamond Offshore, Na- tional-Oilwell Varco, Cameron, FMC, Trico Ma- rine, SeaDrill, TransOcean, Geoservies, Baker- Hughes, Smith International and Schlumberger (for offshore logistics and drilling); Schlumberger, Baker-Hughes, Halliburton and Weatherford Inter- national (for oilfield services). No turning back The reform laws are currently undergoing nego- tiations for another round of secondary legislation, which will formalize how the contracts will be awarded and how royalties and revenues will be cal- culated. Recently, Pemex chose the oil and gas fields it wants to control, a process known as round zero, with The Wall Street Journal and Bloomberg report- ing Pemex wants to keep 83% of Mexicos techni- cally recoverable reserves to itself or to be shared between Pemex and other companies as part of joint ventures. Pemex also wants all of Mexicos proven and productive reserves. To the chagrin of some, Pemex didnt publicly disclose which fields it desired to keep under its wings. The fact that Pemex didnt reveal [the list] speaks badly about the practices of this government in terms of transparency, and its a very bad prece- dent for what comes next with the reform, Miriam Grunstein, an energy specialist who works at the Mexico City-based Centro de Investigacin y Do- cencia Econmicas, said in an interview with Reuters. Reuters reported the first international bid- ding process will likely take place in summer 2015, covering 25,000 square kilometers. [Thereafter], Mexico is expected to launch an international bid round for oil and gas development rights each year through 2019, each one covering about 20,000 square km, explained Reuters. [T]here could be additional shale bid rounds in a given yearin line with international best prac- tices. On March 12, J uan Carlos Zepeda Molina, president of Mexicos National Hydrocarbons Commission, said Mexico was ready to release years of oil exploration testing data. Its a major step for- The countrys unexplored oil reserve potential is second only to the Arctic Circle. Pemex wants to keep 83% of Mexicos technically recoverable reserves to itself or to be shared 20 Green Social Thought 65: A Magazine of Synthesis and Regeneration, Fall 2014 ward as Mexico moves to open its oil and gas indus- try to the international players. DeSmogBlog will be monitoring the coming bonanza closely and will cover the developments and especially the risks, dangers and oil/gas industry wheeling and dealingthroughout this revolution- ary time in the history of the North American oil and gas industry. In particular, well be investigating: Public opposition to the energy reforms as a whole, and local opposition to drilling; Ecological threats to ecosystems, wildlife, rivers and waterways; Does Mexico have enough water to support frack- ing operations, particularly in this time of long-term drought (or desertification)? How will Mexico move all this oil and gas? Exam- ining the infrastructure: pipelines, refineries, ship- ping terminals; What regulations will be enacted and enforced to protect the local environment, public health and safety? How will such an influx of shale gas and oil impact the global economics of liquid fossil fuels? How does this extend the lifeline of the popping of the shale gas bubble? As the Atlantic Council wrote ominously in its December 2013 report titled Mexico Rising: Energy Reform at Last? The scale of the reform is breath- taking in its scope and ambitionIt will be a bumpy road, but these reforms mean there is no turning back. Steve Horn is a Madison, WI-based freelance investiga- tive journalist and Research Fellow at DeSmogBlog, where this piece first appeared. Horn previously was a reporter and researcher at the Center for Media and De- mocracy. Globalization: Ideology and Reality review by R. Burke Capitalist Globalization: Consequences, Resistance and Alternatives, by Martin Hart-Landsberg, Monthly Review Press, New York, 2013, 223 pages, ISBN-978-1-58367-352-2, $15.95. For the past three decades, the world has been subjected to the ideology of free trade. Remove all bar- riers to trade, and a consumerist paradise would be the international result. Or so we were promised. Three decades later this ideology rings hollow; not only have the promised benefits failed to materialize, but those who have benefited have been overwhelmingly the ruling class, the 1%, while the rest of us have been forced to face a grimmer reality. Fortunately we have writers such as Martin Hart-Landsberg on our side to examine the actuality of capitalist globalization, as he does in his book by the same name. Mr. Hart-Landsberg begins by investigating the internationalization of production. Using an abun- dance of statistics he shows how production chains have been extended across the globe. Increasingly, consumer goods are not being produced in one country, but components from many loca- tions are assembled. Often this process involves the creation of intermediate products which are then shipped elsewhere for final assembly. Over the past 3 to 4 decades the global economy has been increas- ingly dominated by transnational corporations (TNCs) whose activities are carried out in several different countries. The development of an international architec- ture of trade was not something that happened spon- taneously. It is instead the result of years of interna- tional agreements bringing down tariffs, import quo- tas, and other barriers to trade that individual coun- tries had erected in order to safeguard their national development. These agreements have often been used to free up controls on flows of capital across borders. One result of the globalization of production has been the rise of East Asia, and particularly China, in the worlds economy. Much of Capitalist Globalization is focused on this area of the world. Mr. Hart-Landsberg demonstrates that this economic development has been the result of demands of global capitalism rather than the needs of national development, so that the development these countries undergo is largely oriented to production for export. They are reduced to serving the needs of the developed world rather than their own. Developing world coun- tries economic development is being neglected in favor of the demands of the larger world market and the TNCs which dominate it. Capitalist Globalization takes on the myths that have become widely accepted about free trade and its supposed superiority. Hart-Landsberg shows that the theory of comparative advantage, which plays an important role in providing intellectual justification for free trade policies, is based on unrealistic as- sumptions. These include the assumption of perfect competition, that labor and capital do not move across borders, and that market prices always reflect the true social costs of production. Obviously, none of these conditions is actually met, and in the case of capital great effort has been They are reduced to serving the needs of the developed world... Green Social Thought 65: A Magazine of Synthesis and Regeneration, Fall 2014 21 made in recent decades to remove barriers to the free flow of capital across international borders. The em- pirical evidence regarding trade liberalization does not justify the claims made by the advocates of free trade. The neo- liberal era has been marked by slower eco- nomic growth and reduced progress on so- cial indicators for the vast majority of low and mid- dle income countries when compared with the pre- vious decades. For a system that is based on the demand of endless growth, this is a fatal weakness. Trade lib- eralization contributed to the deindustrialization of many third world countries, thereby increasing their import dependence. Under pressure from the Inter- national Monetary Fund and the World Bank many of these countries have been forced to impose aus- terity measures, such as cuts to social programs, as well as to privatize and deregulate their economies for the benefit of international investors. While China is seen as something of a success story for globalization, Hart-Landsberg demon- strates that this success has been one-sided. Much of the development has been not for Chinas own needs but those of the global market. The beneficiar- ies of Chinas growth have been a relatively small but numerically significant upper-income group of Chinese, who enjoy greatly expanded consumption opportunities. Chinese work- ers have largely not benefited from the growth of Chinas economy. Mr. Hart-Landsberg places the drive for globaliza- tion within the context of the capitalist world system and its dynamics. He argues that it is not simply neoliberalism but capitalism itself which must be challenged and overcome. The rise of capitalist globalization is the result of economic insta- bilities within the developed world, along with the third world debt crisis of the 1980s. These, as well as new tech- nologies which made interna- tional production a possibility, such as container ships, com- puters and expanded commu- nication, were factors contrib- uting to the development of globalization. One chapter of Capitalist Globalization is devoted to examining free trade agree- ments between the US and South Korea. Hart-Landsberg emphasizes the role that such agreements play in further ex- tending capitalist globalization. The fight against such agreements is for him a vital area of resistance in the struggle to challenge and overcome capital- ism. Far from simply analyzing globalization, Capi- talist Globalization gives ample space to the discus- sion of what is to be done. One chapter, written in the aftermath of the WTO protests in Seattle in No- vember 1999, investigates the possibilities for strug- gle that this event opened up. Our attention and organizational efforts should be focused on develop- ing campaigns that speak directly to workers con- cerns in the United States and other countries, and that promote rather than weaken international worker solidarity. To this end he advocates, among other things, the revitalization of the May Day tradi- tion in the US as a way of promoting greater interna- tional solidarity. The final chapters in the book look toward Latin America and the attempts by left-leaning gov- ernments in the region to promote a program of co- operative development as an alternative to capitalist globalization. In particular he focuses on ALBAthe Bolivarian Alliance for the Americasand the proposed Bank of the South, a potential source of investment for national devel- opment. While the efforts do not explicitly set out an anti-capitalist agenda, they provide possible alterna- tives to projects that exist primarily in order to bene- fit TNCs and the ruling class of the developed world. Capitalist Globalization is a good, down to earth inves- tigation of the phenomena of economic globalization and the internationalization of production. It is a book that is less theoretical and more prac- tical in its aim. Martin Hart- Lansberg has aimed at produc- ing a useful sourcebook for those engaged in challenging capitalist globalization. He has largely succeeded in this. Capitalist Globalization is filled with useful facts and promotes activities that are helpful in building a success- ful movement against global- ization. Above all he displays his desire to help those crushed by trade liberalization to fight back. Capitalist Glob- alization: Consequences, Re- sistance and Alternatives is a book for activists. R. Burke is an activist, artist, teacher and writer living in St. Louis
free trade is based on unrealistic assumptions. Capitalist Globalization is a book for activists.