Oil giant Chevron has embarked on a global push for fracking, often with the support of US diplomats. In Argentina, Chevron has used lobbying, political connections and intolerable tactics to push its fracking agenda and protect its interests in its only unconventional exploitation project outside of North America.
Eager to expand its shale gas and shale oil operations outside of North America, oil giant Chevron has been working hard to convince governments in Europe and South America to give it free rein to frack. But fracking has been linked to ground-water contamination, serious health impacts, seismic instability, and increased methane leakages leading to significantly higher carbon emissions overall than other fossil fuels, including coal.
In Eastern Europe, Chevron was able to call on Hilary Clinton and the US network of foreign embassies to ramp up domestic political pressure and push fracking at the highest level . Despite the introduction of local moratoriums and huge public opposition, the US stuck by Chevron. In Bulgaria, where Chevron had signed a $68m deal for concessions before public protest led to a ban, Hillary Clinton herself flew in to convince local politicians to overturn it. According to a Bulgarian diplomat, she offered to send in the best specialists to present “the benefits to the Bulgarian people.” It didn’t work, with opposition spreading to Romania. So special envoy for energy in Eurasia, Richard Morningstar, was sent in to push back. Private lobbying and public claims of massive cost savings saw the bans in both countries relaxed. Yet even with the US behind it, local resistance and disappointing findings have since seen Chevron abandon all Eastern European operations (Poland, Romania, Bulgaria and Ukraine) – although it is still actively lobbying against fracking regulation at the EU level.
In Argentina, however, Chevron has found a much more malleable ground for its fracking push. It is a key partner of the government’s and state-controlled firm YPF’s relentless efforts to develop unconventional oil and gas in Patagonia at any cost.
Government bowing down to Big Oil
With the 3rd largest shale gas and oil potential in the world according to US Energy Information Agency, Argentina, and particularly the Vaca Muerta formation in the Neuquén province (Patagonia) is being invaded by global majors, with Chevron emerging a clear frontrunner. Thanks to an agreement with YPF signed in 2013 – the exact contents of which still remains secret to this day despite several judicial demands – Chevron was able to grab some of the most promising shale concessions in the Vaca Muerta formation.
In parallel, Chevron asked the Argentinean government for a range of policy changes that were in total contradiction with existing laws, which it presented as conditions for investing in the country . After months of aggressive lobbying, these demands were eventually met in 2013 through a presidential decree, nicknamed the “Chevron decree”, as it was tailor-made for Chevron, and the agreement with YPF was signed just the day after its publication.
The decree among other policies included a higher guaranteed price for gas and fuels, a lift of taxes on imported equipment, public subsidies for infrastructure, a more favourable tax regime and longer concessions, among others. Chevron also demanded the introduction of a business-friendly dispute settlement mechanism (at the Paris-based International Chamber of Commerce), similar to the ISDS mechanisms included in many free trade agreements in order to protect itself against any attempt to change this policy framework. In the Neuquén province, legislative changes were also introduced to serve the interests of oil companies, such as the suppression of public consultations and the weakening of environmental controls.
Obtaining such favourable conditions for its operations in Argentina was not enough for Chevron; it also wanted impunity for its environmental devastation it has caused elsewhere. In 2013, it had been sentenced to a multi-billion fine by the top Ecuadorian court for its toxic legacy of oil pollution in the country’s Amazon region. The Ecuadorian parties had turned to Argentinean courts to have Chevron’s assets in the country frozen, so as to ensure the execution of the sentence, and had won in first and second instances.
When the case went to the Supreme Court in Buenos Aires however, Chevron threatened to give up its projected investments in shale oil and gas developments in Argentina, which it said would amount to several billion US dollars. Chevron vice-president said “the deal could not move forward so long as [the asset freeze] remained outstanding”. Even YPF’s CEO weighed in, condemning the Ecuadorian suit and its “negative effect on employment and investment in the country” and so did the National General Prosecutor. The Argentinean Supreme Court eventually ruled in favour of Chevron. A few weeks later, the Chairman and CEO of Chevron John Watson, the CEO of YPF and the President of Argentina Cristina Kirchner finally signed the agreement for the development of their joint shale project.
This chain of events triggered a wave of protests in Patagonia. Chevron’s project with YPF covers an area of almost 400 km2. The concession overlaps the traditional land of indigenous Mapuche communities, which, needless to say, were never consulted about the project, even though around 1500 wells are to be drilled there.
Because of the direct threat for local water sources and loss of sovereignty, among other issues, a wide coalition of indigenous people, local communities, unions and farmers came together in opposition to Chevron and to fracking in general. In August 2013, the day the agreement was approved by the provincial parliament, the protests were violently suppressed by the police. Some Mapuche homes were burnt down as part of the repression and a teacher was shot in the chest.
All through 2014 and 2015, even though no other shale project entered exploitation phase, Chevron and other oil giants were able to extract even more concessions from the Argentinean government. A reform of the Hydrocarbons law adopted in October 2014 included a host of new measures favourable to their interests. Earlier the same year, as yet another sign of the close alignment between the US administration and the interests of the country’s oil industry, the US and Argentina signed an agreement to extend bilateral cooperation on energy issues, including shale gas. “Both countries have been blessed with abundant natural resources and our interests are aligned”, said the US deputy Secretary for Energy at this occasion. Chevron is getting ready to reap the benefits.