Development Roast Giving international development a proper roasting
By: Lykke E. Andersen*
During this week’s Climate Change Conference in La Paz, several participants expressed concern about Bolivia’s plans for oil drilling in National Parks following the recent Supreme Decree 2366 of 20 May 2015, which explicitly permits oil drilling in some protected areas in Bolivia in the name of poverty reduction and integral development for the people living in these areas.
In the conference session on Climate Change and Ecosystems, the panelists were asked if it was not contradictory to allow oil exploitation in national parks, and if anybody knew of any examples anywhere in the World where it had been done successfully. One of the panelists, Stanley Arguedas, Co-President of the Commission on Environmental Management of the International Union of Nature Conservation (CGE-IUCN) from Costa Rica, admitted that he did not personally know of any successful examples, but that, in theory, oil exploitation could be done in protected areas without compromising the objectives of the national park.
This tiny theoretical opening, coming from a top conservationist, is what I would like to explore in this blog.
First, let’s check the objectives of Bolivia’s system of protected areas. According to SERNAP’s web site, the objectives of the National System of Protected Areas are the following:
- Conserve the natural and cultural patrimony of the Protected Areas and their surroundings.
- Contribute to integral development with identity at national, regional and local levels.
The following institutional objectives are mentioned in a key graphic on SERNAP’s website:
- Preservation and conservation of biological and cultural diversity
- Economically and socially sustainable development
- Social participation in the management of protected areas
- Linking with administrative, institutional, territorial and international political contexts
- Strengthening management capacity for relevant actors
- Secure sustainable financing.
The Supreme Decree 2366 says that exploitation in protected areas should use the cleanest and most modern technology, prioritizing isolation and installation by helicopter in order to prevent new human settlements within the protected areas. It also says that 1% of the investment should be used to strengthen the protected area.
This sounds quite compatible with the objectives of protected areas. With modern horizontal drilling methods, an area of up to 40 thousand hectares located about 5 kilometers below the surface level can be exploited from a single well site taking up less than 30 hectares of surface space.
According to petroleum experts, there are at least 500 million barrels of petroleum hidden under the Madidi National Park (one of the parks with most biodiversity on the planet), with a central estimate of 1500 million barrels. For comparison, last year Bolivia produced 19 million barrels of petroleum (1), barely enough to cover local demand. With modern 3D seismology techniques, these reserves can be located and extracted in an extremely precise manner, with minimal disturbance to vegetation and wildlife at the surface. With 50 wells, every inch of the almost 2 million hectares below Madidi could be exploited, with a surface disturbance of only 1500 hectares (less than 0.1% of the area of the national park), but most likely only a few wells over the biggest oil reserves would be built, causing a surface disturbance of less than 0.005%, which wouldn’t compromise biodiversity in any way.
At a price of USD 60 per barrel, 500 million barrels would be worth USD 30 billion, roughly the size of Bolivia’s entire GDP last year. If just 1% of the revenues would be used to strengthen the national park, that would mean USD 300 million to the park. That would cover the current budget for the park for at least a thousand years, so that would certainly help towards the objective of sustainable financing for the park. Indeed, with this money they could substantially increase investments in eco-tourism infrastructure and jobs for the local population, thus contributing to the objective of economically and socially sustainable development within the park. And with improved tourism infrastructure, many more people could get to enjoy one of the world’s most spectacular national parks. Of course it would be crucial to involve the local population in all decisions on whether to exploit the reserves and how to invest the revenues, because otherwise the objective of social participation in the management of the area would be violated.
If another 20% of the USD 30 billion were invested in hydroelectric power plants at appropriate places around the country, this would help Bolivia’s transition towards a very clean future energy matrix. Top of the line hydroelectric power plants cost about USD 5 million per MW of installed capacity (2), so USD 6 billion could finance 1200 MW of sustainable and very cheap energy that could last for the rest of the century. This corresponds to a 60% increase in current installed electricity generating capacity in Bolivia (3), and in that way the oil exploitation in Madidi could significantly contribute to sustainable development at the national level.
The government’s take of hydrocarbon revenues from large fields is at least 50% in Bolivia (4), so even after paying 1% to the park and 20% for future sustainable energy, there would be at least 29% of the USD 30 billion left to promote immediate poverty reduction and provision of basic services such as water, sanitation, electricity, health and education. Funds could also be directed at large reforestation projects and at increasing agricultural productivity on already cleared land, thus reducing the need for further deforestation.
So, potentially, oil exploitation in Madidi could be a fantastic win-win situation both for biodiversity, poverty reduction and sustainable development.
For the people who still don’t like the idea of oil drilling in protected areas: Don’t worry. With the current laws in Bolivia, which require producers to sell oil at only USD 14 per barrel, oil exploitation in Madidi (or anywhere else) is not profitable, and nobody – not even YPFB – would be interested in investing billions of dollars in such a venture. The selling price would have to be at least USD 60 per barrel in order for the Madidi project to become attractive, so as long as the Bolivian government insists on keeping oil and gas and electricity prices artificially low, our national parks should be safe.
* Dr. Lykke E. Andersen is the Director of the Center for Economic and Environmental Modeling and Analysis (CEEMA) at the Institute of Advanced Development Studies (INESAD), La Paz, Bolivia.
For your reference:
(1) Ministerio de Economía y Finanzas Públicas. Memoria de la Economía Boliviana 2014.
(2) https://www.irena.org/DocumentDownloads/Publications/RE_Technologies_Cost_Analysis-HYDROPOWER.pdf
The views expressed in this article are those of the authors and do not necessarily reflect the views of Fundación INESAD.
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