The state-owned Petróleos Mexicanos (Pemex) oil company is completing its seventh refinery on a 600-hectare site at Dos Bocas in the municipality of Paraíso, in the southeastern state of Tabasco. The plant will process some 290,000 barrels of fuels per day when it reaches full capacity. CREDIT: Erik Contreras-Gerardo Morales / IPS

By Emilio Godoy
PARAÍSO, México, Sep 26 2023 (IPS)

At the entrance to the municipality of Paraíso, in the southeastern Mexican state of Tabasco, there is a traffic circle that displays three things that are emblematic of the area: crabs, pelicans and mangroves.

But the monument lacks another element that has been vital to the region: oil, which has damaged the other three symbols through pollution. Marine animals have been affected by the oil and the mangroves have almost been cut down in a territory that had ample reserves of crude oil.

Despite the fading bonanza, the Mexican government decided to build the Olmeca refinery in the industrial port of Dos Bocas, in Paraíso, to refine some 290,000 barrels per day of oil from the Gulf of Mexico and thus reduce gasoline imports.“Their commitments are not credible. It is said there is no room for new fossil fuel projects, but the banks continue to support oil companies, like Pemex." -- Louis-Maxence Delaporte

It will be the seventh installation of the National Refining System in the country, in a port area that already has a crude oil shipping and export center of the state-owned oil giant Petróleos Mexicanos (Pemex), which controls the exploitation, refining, distribution and commercialization of hydrocarbons in the country.

Construction of the new infrastructure on an area of 600 hectares began in 2019, and although it was officially opened in 2022, the work has not been completed and it is expected to be fully operational in 2024.

But the plant has already provided revenue for the local economy, in the form of rents, transportation and food. However, there are also fears about its impact on a city of more than 96,000 inhabitants.

Genaro, a cab driver who preferred not to give his last name and is married with three children, said there is a sensation of risk. “We know what has happened in other places where there are refineries, with all the pollution. Besides, accidents occur,” he told IPS.

Near the plant is the Lázaro Cárdenas neighborhood, home to hundreds of people and named after the president who nationalized the oil and electric industry in 1936.

There is an uneasy feeling among the local population. Irasema Lozano, a 36-year-old teacher who is a married mother of two, is one of the residents who is apprehensive about “the newcomer” to the city.

“Look around, there are houses, schools, stores. The government says it is a modern plant and that there is no danger, but we don’t feel safe with this huge plant,” she said.

Cab driver Genaro owns a house in the area, which he rents out. But he is now seriously thinking of selling it.

Construction of the plant has altered the life of the sprawling city around Dos Bocas. The “orange people”, referring to the color of the uniforms worn by everyone who works at the facility, are a permanent reminder of the changes as they move around town.

Talking about oil in Tabasco is a delicate matter, since the state is used to living with the exploitation of a light, low-sulfur, cheap and easy-to-extract hydrocarbon. It is also the home state of President Andrés Manuel López Obrador, a staunch defender of fossil fuels.

Pemex has financed the Olmeca megaproject with public funds, through its subsidiary Pemex Transformación Industrial. Its subsidiary PTI Infraestructura y Desarrollo has overseen construction.

The project has already had a high cost overrun, as the initial investment was estimated at seven billion dollars, a figure that has climbed to 18 billion dollars, according to the latest available data.

On this occasion, PTI ID has not turned to the international market to finance the work, according to the response to a public information access request from IPS.

The Olmeca refinery has a cost overrun, escalating from a planned initial investment of seven billion dollars to 18 billion dollars. The Mexican government expects the plant, located in Dos Bocas, in the southeastern municipality of Paraíso, to be fully operational by 2024. CREDIT: Erik Contreras-Gerardo Morales / IPS

The support of international banks

Traditionally, Pemex has depended on financial flows from international private banks. Between 2016 and 2022, 17 institutions gave nearly 61.5 billion dollars to the state-owned oil company, according to annual reports under the heading of “Banking on Climate Chaos” produced by a group of NGOs.

The British bank HSBC was the main financial backer of Pemex during this period, contributing 7.6 billion dollars, followed by the U.S.-based Citi (6.9 billion) and JP Morgan Chase (6.0 billion).

Pemex’s data gives a broader picture, as it shows more players in its lending field. Through direct loans, bond issuance, revolving credits (with automatic renewals) and project financing, 16 financial institutions have granted it 78.9 billion dollars since 2015.

In doing so, the international markets allow Pemex to obtain money for its operations and development, but in exchange they have turned it into the oil company with the highest debt in the world, some 100 billion dollars, which poses a great threat to Pemex and, by extension, to the country.

The main mechanism used is the insurance coverage or underwriting of Pemex’s financial operations by charging a commission.

Maaike Beenes, leader of banking and climate campaigns at the non-governmental BankTrack, told IPS that the large flow of financing means that banks feel confident that Pemex can repay the debt.

“Apparently it is because they think there are guarantees because it is a state-owned company. There is a lot of financing for the expansion of fossil fuel activities,” she said from the Dutch city of Amsterdam.

In 2020, Mexico was the 13th largest oil producer in the world and 19th largest gas producer. In terms of proven crude oil reserves, it ranked 20th and 41st respectively, according to Pemex data.

Two flares burn gas in the Nuevo Torno Largo neighborhood, in the municipality of Paraíso, in the vicinity of the Olmeca refinery. The southeastern state of Tabasco, on the coast of the Gulf of Mexico, has suffered the effects of pollution generated by oil production for more than 50 years through spills, contaminating gases, and water, air and soil pollution. CREDIT: Erik Contreras-Gerardo Morales / IPS

Fueling the crisis

By raising Pemex’s debt rating, the international banks risk their own voluntary climate targets for greenhouse gas (GHG) emission reductions, since the Mexican company’s GHG emission reduction targets are low.

For example, HSBC aims to achieve zero net emissions – where neutralized emissions equal those released into the atmosphere – in its operations and supply chain by 2030 and in its financing portfolio by 2050.

The bank says it is working with its clients to help them reduce their emissions. Its energy policy states that it will not finance new oil and gas fields.

But HSBC’s net zero goal has some gaps. According to the international Net Zero Tracker platform, its strategy lacks a detailed plan to achieve it, and has no reference on equity investment and no specification on formal accountability for monitoring progress, even though it covers Scope 1 (A1), 2 and 3 emissions.

A1 emissions come directly from sources under the polluter’s control, A2 emissions are indirect emissions from purchased energy, and A3 emissions are those originating in the final use of energy, not covered in A1 and A2, according to the Greenhouse Gas Protocol standard, the most widely used in the world.

By 2022, Citi committed to achieving a 29 percent absolute reduction in emissions for the power sector and a 63 percent reduction in the intensity of its portfolio pollution for the electricity sector by 2030, addressing A1, A2 and A3 levels.

In this regard, Net Zero Tracker says the bank does not have a complete detailed plan for these decreases and makes no reference to investment in fossil fuel companies.

Another major player, JP Morgan Chase, has a target of a 69 percent reduction in the carbon intensity of power generation, which accounts for most of the sector’s climate impact, by 2030.

In the oil and gas segment, the company aims for a 35 percent decrease in operational carbon intensity, as well as a 15 percent drop in end-use energy carbon intensity for the same year.

But its net zero targets are in doubt, as Net Zero Tracker points out that they have shortcomings, such as a complete detailed plan, and no reference to equity investment and only partial coverage of A3.

Louis-Maxence Delaporte, fossil-free finance campaigner at the non-governmental Reclaim Finance, said that international financing for companies like Pemex is problematic as it is not aligned with the 2015 Paris climate change agreement, which sets out to keep global warming below 1.5°C.

“By not meeting these targets there is only greenwashing, like net zero. Their commitments are not credible. It is said there is no room for new fossil fuel projects, but the banks continue to support oil companies, like Pemex,” she told IPS from Paris.

Sandra Guzman, director general of the Climate Finance Group for Latin America and the Caribbean, says it is hypocritical for the banks to talk about the Paris Agreement, while continuing to invest in fossil fuels.

“In Mexico there are perverse incentives because the country depends on extractive activities. There is a vicious circle, as these activities demand a greater share of the public budget and the banks channel money into them,” she told IPS from London.

A photo taken at the entrance to the Olmeca refinery, which the Mexican government expects to start up by the end of the year and to be fully operational in 2024. The plant is located next to the Lázaro Cárdenas neighborhood which is home to hundreds of people, in the Paraíso municipality of the southeastern state of Tabasco. CREDIT: Emilio Godoy / IPS

Dirty money

Pollution from Pemex’s activities has grown since 2018, a reality to which its financiers turn a blind eye.

In 2019, the Mexican oil company released 48 million tons of carbon dioxide (CO2) equivalent into the atmosphere, an increase of 3.3 percent, compared to 2018 levels, according to the report that Pemex sent to the Securities and Exchange Commission, a requirement for the company to sell bonds in the U.S. market.

In 2020, that pollution increased to 54 million tons, a rise of 12.5 percent, and the following year, to 70.5 million, an increase of 7.1 percent.

The main drivers of these increases have been the expansion of exploration, production and refining activities, plus drilling and flaring.

As of October 2022, Pemex was not in compliance with the 10-point framework of Climate Action + 100, a platform dedicated to measuring companies’ approach to the Paris Agreement goals. These aspects are related to short- and long-term reduction targets (2025 and 2050), decarbonization strategy and climate policies.

Therefore, the oil company, the eighth-largest global polluter as of 2017, according to the ranking of the non-governmental U.S. Climate Accountability Institute, is in breach of the Paris Agreement, adopted in 2015 and in force since 2021.

This also makes Mexico a country in non-compliance, as Pemex accounts for 10 percent of its GHG emissions.

Pemex has projected the reduction of pollution from its oil and gas production and extraction from 22.9 tons per 1000 barrels of crude oil equivalent in 2021 to 21.5 in 2025. For oil refining, the target is 39.6 tons per 1000 barrels in 2035, compared to just under 45.2 tons in 2021.

Delaporte criticized these targets as weak and insufficient, as they address only exploration and production (A1) emissions and leave out A2 and A3, the latter being the most polluting.

The Olmeca refinery is located in a coastal area of southeastern Mexico prone to flooding and exposed to rising sea levels due to increasing temperatures, one of the consequences of burning fossil fuels. CREDIT: Erik Contreras-Gerardo Morales / IPS

The national buttress

Another facet of the financial movement is related to national development banks, which have been pushing fossil fuel expansion without respecting their own social and environmental safeguards.

What Pemex has not received from international banks, the National Bank of Foreign Trade (Bancomext), the National Bank of Public Works and Services (Banobras) and Nacional Financiera (Nafin) have provided: hundreds of millions of dollars since 2018.

Since 2019, Bancomext has delivered 895 million dollars to the oil and gas industry, including Pemex, although the specific amount that went to the company itself is not public knowledge.

Banobras has been a great support for the oil company. In 2021, it provided over 1.1 billion dollars for the total acquisition of the Deer Park refinery in the U.S. state of Texas, of which Pemex already owned half and Shell the other 50 percent.

In addition, the bank shelled out 299 million dollars for the renovation of the Miguel Hidalgo refinery in the central state of Hidalgo.

Nafin lent Pemex 200 million dollars to upgrade the plant in 2021.

One phenomenon is the participation of the National Infrastructure Fund (Fonadin), which until now had never financed the fossil fuel sector. Last year, the fund contributed 346 million dollars for the renovation of diesel and gasoline processing technology at the Hidalgo refinery and at the Antonio M. Amor refinery, located in the central state of Guanajuato.

The latest operation involves 2.5 billion dollars in financing for the acquisition of the 13 production plants owned in the country by the Spanish company Iberdrola, 12 gas plants and one wind farm, in what has been described as part of “a new nationalization process.”

This maneuver also shows that international banks are still interested in financing fossil fuels, as the Spanish banks BBVA and Santander, as well as the U.S. Bank of America, have expressed a willingness to provide financing for the already agreed acquisition.

Climate activists stress that Mexican development banks have had social and environmental standards in place since 2017, but argue that they have been reluctant to apply them when it comes to Pemex.

Banobras has no safeguards assessments with respect to oil and gas projects, according to responses to information requests submitted by IPS. The same applied to Nafin, which did not carry them out in 2022 and 2023. The bank conducted one in 2021, classified as a bank secret. Bancomext also keeps information on this matter classified.

In the municipality of Paraíso, when the refinery begins to fully operate sometime in 2024, the pace will slow down, contrary to what the government wants. “We hope it will be profitable because it has cost a lot. And we hope nothing serious happens,” said Lozano, the teacher.

Beenes said Mexican and foreign banks should respect the Paris Agreement and abandon fossil fuels.

“State-owned banks can offer guarantees or insurance for credits. That is worrying, it is a problem for the transition. We are asking them to support the transition with specific investment conditions. It is in their best interest to stay away from fossil fuels, because they run the risk of having stranded assets in their portfolios,” she said.

The expert believes that banks are aware of the need for change, but the question is how fast they can do it.

Delaporte said development banks should finance green and non-oil companies.

“The change must be global, including commercial banks, development banks and hedge funds. Shareholders should ask Pemex not to build more facilities. If it refuses, they should divest and put the money into renewable companies,” she said.

Guzman, for her part, warned that if the current trend continues, it will be difficult for Mexico not only to meet its own climate targets, but also its contribution to the overall goal of keeping the global climate increase down to 1.5 degrees Celsius.

“There is talk of the need to continue mobilizing financing through national development banks for climate change. They should take advantage of this to allow the channeling and mobilization of funds” for the energy transition, she said.

IPS produced this article with support from The Sunrise Project.

A gas flare at installations of the state-owned Pemex oil company in the town of Reforma Escolín, Papantla municipality in the southeastern Mexican state of Veracruz, on Jan. 11, 2023. More than 100 gas wells operate in the area, several of which release gas without controls and put the local population and their property at risk. CREDIT: Emilio Godoy/IPS

By Emilio Godoy
PAPANTLA, Mexico, Jan 23 2023 (IPS)

A dark mole dots the brown earth, among the green scrub at this spot in southeastern Mexico. A repetitive “glug, glug,” a noise sounding like a thirsty animal, and an intense stench lead to this site, hidden in the undergrowth, where a broken pipe has created a pool of dense oil.

The smell of fuel overpowers the usual aroma of the surrounding vegetation.

The oil and natural gas leak runs freely in a well belonging to the state-run oil giant Petróleos Mexicanos (Pemex) in Reforma Escolín, part of Papantla, a municipality in the southeastern state of Veracruz, in the vicinity of a natural gas flare that illuminates the semi-cloudy environment and warms the already high temperature.“The infrastructure is old, they do not maintain it. When there are leaks, you hear a ‘ssssss’ and the smell is unbearable, you can’t stay in your house.” -- Omar Lázaro

Far from the gaze of Mexico’s Agency for Security, Energy and Environment (ASEA), responsible for monitoring the fossil fuel industry in the country, and Pemex, the gas flares in an area dotted with oil and gas wells.

“The infrastructure is old, they don’t maintain it. When there are leaks, you hear a ‘ssssss’ and the smell is unbearable, you can’t stay in your house,” Omar Lázaro, a delegate to the municipality of the non-governmental National Indigenous Congress, which brings together native peoples and organizations, told IPS.

The local community all too vividly recalls the Jun. 4, 2022 explosion of a Pemex gas pipeline that put residents on edge and confirmed, for the umpteenth time, the potentially catastrophic impacts of fossil fuels.

Lázaro, a local musician, recalled that the leak flowed for two days, there were four fires in the affected area and the fire lasted two weeks, some 300 kilometers from Mexico City, in Papantla, (which means “place of abundant papán” – a local bird – in the Nahuatl language), home to just under 160,000 inhabitants in its extensive rural and semi-urban territory.

“In some places there was a smell of gas before the explosion. The problem was that the scrubland began to burn and there was no water to put it out. Pemex threatened that it would not take responsibility if people went in to put out the fire and something happened to them,” said Lázaro, who is also a member of the Assembly for the Defense of the Territory, which represents some 20 communities and five municipal organizations.

In essence, the gas is methane, 86 times more powerful at trapping heat than carbon dioxide (CO2) over 20 years, even though it spends less time in the atmosphere.

That means it is important to control it to curb the rise in the planet’s temperature to no more than 1.5 degrees C, according to the commitments made by the international community.

In the municipality of Papantla, in the southeastern Mexican state of Veracruz, oil and gas wells abound, emiting polluting gases, such as methane, a major contributor to global warming. The photo shows the “Escolín 238” well in operation. CREDIT: Emilio Godoy/IPS

Massive

The incident in the town of Reforma Escolín is part of a pattern of gas leaks from the extraction and transportation of oil and gas by Pemex and private companies in Mexico, without enforcement by the environmental authorities of the existing regulations.

IPS reviewed Pemex databases on leaks and its prevention plans, obtained through public information requests, which point to underreporting of gas emissions – composed mainly of methane – and confirmed the evidence that leaks devastate an area where gas wells abound.

Historically, Pemex has been the biggest culprit in the gas leaks, due to the size of its infrastructure in Mexico.

After a drop between 2017 and 2019, gas explosions have been on the rise since 2020. Most of the incidents occur at hydrocarbon facilities in the states of Campeche, Tabasco and Veracruz in southeastern Mexico.

In 2020, 78 gas leaks by Pemex and its subsidiaries were registered, 85 by private companies, and 32 by the National Center for Natural Gas Control (CENAGAS), which manages the gas pipelines that belonged to the state oil company, without estimates of the resulting methane emissions, according to ASEA figures.

A year later, Pemex reported 91 leaks, private companies 74, and CENAGAS 28.

These leaks come from gas pipelines, compressor stations and other facilities that transport, store and distribute gas, infrastructure that adds up to some 30,000 facilities and 50,000 kilometers of gas pipelines.

The face of Pastora García, one of the 11 members of the Municipal Council of Papantla, reflects concern about the leaks.

“Things are bad here, there are a lot of risks. This is how Pemex works and we’re screwed. It is worrisome, because people live here,” she told IPS while she was working in Reforma Escolín, a town of some 1,000 people.

García was a municipal councillor in the small town and submitted three requests for pipeline repairs in 2011 and 2020, obtaining no response, and the leaks continued.

In and around the town, local residents grow citrus fruit, beans and corn, and raise cattle, and the pollution harms their activities. In the area, the ground looks like Swiss cheese from which gas frequently emanates, as during the great leak of 2013.

Although ASEA does not record the volumes of leaks, Mexico ranked tenth in the world in methane emissions in 2021, a list led by China, India and the United States, and which also includes Brazil, according to data from the International Energy Agency (IEA), an intergovernmental grouping of large oil consumers.

In addition, since 2019 oil and gas infrastructure has released methane into the atmosphere in Mexico, according to satellite images.

In June 2022, a group of European scientists revealed that Pemex released 40,000 tons of methane in December 2021 from an offshore platform in the Gulf of Mexico.

In the case of Pemex, one of the aggravating factors is the deliberate venting or release and flaring of gas, which has been on the rise since 2017 due to the lack of capture technology and economic incentives for its use, since it is more convenient for the oil company to simply release and burn it off.

This practice grew from 3,800 cubic meters (m3) of gas in 2017 to 6,600 in 2021, according to the World Bank’s Global Gas Flaring Reduction Initiative (GGFR), made up of 20 governments, 12 oil companies and three multilateral organizations. Mexico forms part of the alliance, but Pemex does not.

The IEA measured Mexico’s emissions at 6.33 million tons of methane in 2021, equivalent to 1.8 percent of the world total, to which agriculture contributed 2.53 million, waste 2.28 million, and production and energy consumption 1.47 million. In this segment, venting and flaring represent the main factors, and in gas pipelines, leaks.

Itziar Irakulis, a researcher at the Polytechnic University of Valencia, told IPS from that Spanish city that “from the satellite we see that every time the gas flaring stops (the torch goes out), about 100 tons of methane per hour are vented. This turns the oil platform into what in the literature we call an ultra-emitter.”

The expert, co-author of a study on the release of gas from Pemex platforms, stressed that, in the face of the climate crisis, “the last thing we need is more ultra-emission events of this type.”

In November 2022, Pemex, which ranks 20th in the world in proven crude oil reserves and 41st in gas, produced 1.7 million barrels of oil per day and 4.7 billion cubic feet of gas per day (Bcf/d). Because domestic production is insufficient, it imported 555 million Bcf/d, mainly from the United States.

Pemex resorts to the practice of flaring gas due to the lack of technology for its retention and economic incentives for its use. The photo shows a pipeline in Reforma Escolín, Papantla municipality in the southeastern Mexican state of Veracruz, on Jan. 11, 2023. CREDIT: Emilio Godoy/IPS

Anaid Velasco, research coordinator at the non-governmental Mexican Center for Environmental Law (CEMDA), described the “important challenges” in accounting for and curbing methane emissions.

“There is more talk about methane, but there is still no public policy. This disconnect between what is said and what is done has to do with not creating more responsibilities that could be binding, in order to apply an energy policy based on fossil fuel sources. They don’t want to generate a greater regulatory burden” for the oil industry, especially Pemex, she told IPS.

ASEA partially applies the regulation to control methane emissions, which is why Mexico faces hurdles to meet its Nationally determined contributions (NDCs) to reduce greenhouse gas emissions.

The regulation was supposed to enter into force in December 2019, after it was drafted in 2018. But in July 2020, under the pretext of the COVID-19 pandemic, ASEA postponed its application for 19 months, until the end of January 2022.

As of August 2022, 18 companies, including the subsidiaries Pemex Exploración y Producción (PEP) and Pemex Logística, had presented to ASEA their program for the prevention and comprehensive control of methane emissions from the hydrocarbons sector, the fundamental component of the regulation.

The state Federal Electricity Commission (CFE) had not delivered its plan.

Between 2017 and October 2022, ASEA imposed 26 fines on state-run and private companies totaling 3.83 million dollars, of which they have paid 3.29 million, without specifying the reason, which means it is not clear if the fines targeted methane emissions.

From 2017 to 2021, it fined Pemex Transformación Industrial three times for undisclosed reasons, which the company appealed.

But ASEA did not investigate the two fires on the surface of the ocean in the Gulf of Mexico, caused by methane leaks in July and August 2021, according to its own records. After the explosion in Reforma Escolín, a group of residents filed a complaint with ASEA, to no avail.

Pemex abandoned its plan to reduce gas flaring in its fields and the ministry of energy blocked the application of regulations in this regard, as reported by the British news agency Reuters throughout 2022.

In August, the state-run National Hydrocarbons Commission, the regulator of the oil industry, fined Pemex about two million dollars for excessive gas flaring at the Ixachi oil and gas field in Veracruz.

Gas deals

In 2021 Mexico signed the Global Methane Pledge, aimed at cutting emissions by 30 percent in 2030, from 2020 levels. But the country has not yet set a specific goal.

Along these lines, President Andrés Manuel López Obrador, who supports fossil fuel energy over renewables and promotes Pemex, announced in June 2022 that the oil giant would invest two billion dollars, with international aid, to cut methane emissions by 98 percent.

But there is no detailed plan to reach that target, beyond Pemex’s previous program to curb them.

In its methane control plan, obtained by IPS through Mexico’s freedom of information act, the oil company set an annual reduction goal in the Cantarell field, the country’s biggest, in the Gulf of Mexico, of four percent between 2017 and 2022. and calculated that emissions totaled 27,175 tons per year. But it is not known how much progress has been made towards this target.

However, the oil company uses an emission factor – the average amount of a pollutant coming from a specific process, fuel, equipment or source – instead of a measurement at the source site.

For the Ku Maloob Zaap field, the country’s second-largest, there are no measurements. The highest estimate comes from the Macuspana-Muspac deposit, located between the states of Chiapas and Tabasco, which emit 199,222 tons, followed by the Poza Rica Altamira Reynosa deposit – between Veracruz and Tamaulipas – with 73,352 tons; the Nejo Olmos field in Tamaulipas (53,395 tons); and Samaria-Luna in Tabasco (52,669 tons).

These emissions come from equipment, gas pipelines, compressors, leaks and venting. Pemex, which did not include infrastructure in other areas of the country, estimates decreases between four percent and 25 percent over a period of six years.

Throughout 2023, public and private companies must submit their annual reports to ASEA.

For the Cantarell deposit, the oil company ordered a halt to the flaring of 80 million Bcf/d, equivalent to 72.74 tons of methane. In addition, PEP applied measures to reduce flaring by 291 billion Bcf/d.

As natural gas for consumption in Mexico continues to be imported via pipelines and burned in combined-cycle power plants that also use steam, methane emissions will also continue, as occurred in the United States.

In places like Reforma Escolín, people have not gotten used to living among time bombs and are only asking that the leaks be repaired, although opposition by the local community is waning.

Lázaro lamented that “After the accident, some community assemblies were held, but the social mobilization dwindled, undermined by the local authorities.”

Without fighting methane emissions, Mexico will have a hard time reaching its Nationally determined contributions, presented to comply with the Paris Agreement on climate change, signed in 2015.

Velasco the environmentalist doubts that Mexico will meet its commitments. “They set goals because there is a lot of international interest. It is good that they make commitments, because it gives us tools to monitor the situation and demand compliance. If Pemex receives financing, we don’t know how it will execute it. Transparency and traceability are needed,” she said.

Spanish researcher Irakulis said maintenance and continuous flaring prevent ultra-emissions.

“It is true that the flares already have other types of emissions associated with them, and there are more environmentally friendly ways than flaring to treat the excess gas obtained from oil extraction. A significant reduction in emissions can be realistic as long as they invest in improving the maintenance of the facilities,” she stated.

In Reforma Escolín, the only option seems to be the dismantling of the gas infrastructure, which is impossible. “Pemex says there is no money. We have not seen machinery to replace the pipeline, they are not doing anything. Where are we going to go? We live here, and we’re staying here,” said García the town councillor.

The oil industry contracts granted by the Mexican government since 2014 have not included the social impact assessments required by law. The photo shows the Abkatun-A Permanente shallow-water platform in the Campeche Sound, where a fire broke out on Apr. 1, 2015 off the coast of the state of Campeche in southeastern Mexico. Credit: Courtesy of PEMEX

By Emilio Godoy
MEXICO CITY, Dec 23 2015 (IPS)

Mexico’s hydrocarbons law stipulates that oil contracts must include a social impact assessment. But this has not been done in the case of the oilfields granted to the country’s former oil monopoly, Pemex, or to private companies since the industry was opened up to private investment.

Civil society organisations argue that concessions that do include a social impact asessment are illegal.

“The authorities have the obligation to carry out the consultations,” Manuel Llano, the founder of Cartocrítica, a Mexican NGO, told IPS. “One interesting detail is that the law says the evaluation must be conducted prior to the public tenders.”

Article 120 of the hydrocarbons law in effect since August 2014 states that the energy ministry must organise consultations to obtain free, prior and informed consent from indigenous communities that will be affected by oil industry projects in their territories.

And article 121 establishes that those interested in obtaining a permit for oil industry activity must present a social impact assessment (SIA) to the energy ministry. The energy reform opened up oil exploration, extraction, refining, transportation, distribution and sale of oil and its by-products to local and foreign private investment.“With respect to the shallow water projects, the government argues that there is no social impact, which is why the SIAs weren’t conducted. But one of the long-time conflicts is with fisherpersons because of the damage they suffer due to oil industry activity.” -- Aroa de la Fuente

After Pemex’s monopoly was broken up by the new law in August 2014, the state oil company was allowed to keep 83 percent of the country’s probable reserves and 21 percent of the prospective reserves, equivalent to 20 billion barrels of crude. This selection process was known as Round Zero.

On Jul. 15, the Mexican government opened up Round One and assigned two contracts for the exploration and drilling of deep sea oilwells off the coast of the southeastern states of Campeche, Tabasco and Veracruz. The contracts were signed on Sept. 4.

On Sept. 30, the energy ministry assigned three more contracts, and on Dec. 15 the third public tender was held.

“They haven’t done the assessments,” Aroa de la Fuente, a researcher with the FUNDAR Centre for Research and Analysis, told IPS. “With respect to the shallow water projects, the government argues that there is no social impact, which is why the SIAs weren’t conducted. But one of the long-time conflicts is with fisherpersons because of the damage they suffer due to oil industry activity.”

She questioned the argument that there are no social impacts, if no studies have been carried out to demonstrate this.

Since March, the guidelines for the SIAs have been open to public consultation in the Federal Regulatory Improvement Commission (COFEMER).

According to the “general administrative guidelines on social impact assessments in the energy sector”, drawn up by the energy ministry, the evaluations must assess the likely social impacts from oil industry activity and outline the social impact plans and measures to mitigate potentially adverse effects.

The guidelines require a baseline, representing a starting point for companies to compare actual with projected impacts. The baseline should be established before any oil industry activity begins. It should provide statistics in the following areas: demographic, migration, households and families, education, health services, jobs and labour conditions, social security, housing, main economic activities, local public finances, and tangible and intangible cultural heritage.

The company must also include the results from the analysis of stakeholders – individuals, communities, groups, organisations and institutions – taking into consideration their rights, interests and expectations, as well as their levels of involvement, importance and influence regarding the project.

The SIA must specify whether the impacts are short, medium, long-term or permanent; whether the adverse effects are mild, moderate or severe or the benefits are mild or strong; and whether the impacts are low, moderate, high or very high.

The comments about the SIA process reflect the resistance of companies, especially in the storage and distribution sectors, to conduct them.

The energy ministry estimates 176 million dollars in losses from the cancellation of projects due to the lack of SIAs.

The government argues that the first two public tenders did not require SIAs because they involved shallow water drilling. But the law does not make any such distinction.

Llano said SIAs are important for the defence of territory and for those who wish to legally challenge the areas that have been granted in concession.

The position taken by the government “is serious, because many of the wells are on land,” he said. “They are not complying with the law. They say the first two tenders are in offshore areas, which means no assessment is needed, but there is no legal foundation for this argument. What about the issues of the environment and fisherpersons?”

The expert complained that the government assumes that there are no affected groups, “when it is the assessment that must determine this.”

The government has already suffered its first setbacks. On Dec. 11, a federal judge ordered the permanent suspension of the construction of a wind park in the municipality of Juchitán, in the southern state of Oaxaca, after accepting a legal plea for protection filed by Binnizá indigenous communities.

Native groups and NGOs have fought the Energía Eólica del Sur wind park project by the company of the same name, which would generate 396 MW to be fed into power grids in the region. Their argument is that no free, prior and informed consent was sought.

The SIAs can be a useful tool for local populations. “In the public tenders for oil wells on land, the situation will become more complex, because people are going to try to defend themselves, and this is a mechanism that allows them to do so,” said de la Fuente.

Edited by Verónica Firme/Translated by Stephanie Wildes

A cocktail of polluting chemicals is used in hydraulic fracturing, the method used to extract shale gas, for example at this fracking well in the U.S. state of Texas, on the border with Mexico. Credit: United States Government

By Emilio Godoy
MEXICO CITY, Jun 28 2014 (IPS)

The new legal framework for Mexico’s oil industry has not placed controls on the use of harmful chemicals in the extraction of unconventional fossil fuels, and environmentalists and experts fear their consumption will increase in an industry that is opening up to private capital.

The energy reform “will exacerbate the use of chemicals. The new laws do not address this problem. We need to know what is used, because otherwise we cannot know the consequences. That’s why we want a ban on ‘fracking’ (hydraulic fracturing),” activist Claudia Campero, of Canada’s Blue Planet Project, told IPS.

A package of nine initiatives, including eight new laws and modifications to 12 others on fossil fuels, water, electricity and oil funds, came before the senate in the last week of June, after being debated since Jun. 10 by the Energy Commission.

On Dec. 11, 2013, Congress reformed articles 25, 27 and 28 of the Mexican constitution, opening up exploration, extraction, refining, transport, distribution and sales of hydrocarbons to private, local and foreign investors.

This reform dismantled the foundations of the 1938 nationalisation of the oil industry.

“Many chemicals have not been tested, and new ones are being developed all the time. Companies use trade secrets as an excuse to withhold information." -- Claudia Campero, of Canada’s Blue Planet Project
Analysis of the projects of state oil giant Petróleos Mexicanos (PEMEX), as well as reports from the U.S. Congress and the local oil industry, give an idea of the amount of chemicals used to extract shale gas.

Natural gas trapped in underground shale rock is released by the process of drilling and injecting fluid into the ground at high pressure, which fractures the rocks. The method is known as hydraulic fracturing, or “fracking.”

The gas extraction and recovery process requires large amounts of water and chemical additives, some of which are toxic. Drilling and horizontal fracking generate enormous quantities of waste fluid.

The waste liquid contains dissolved chemicals and other pollutants that need to be treated before they are disposed of, and even afterwards, according to experts and environmental organisations like Greenpeace.

PEMEX’s enviromental impact study for the 2007-2027 Regional Project in Cuenca de Sabinas Piedras Negras, in the northern states of Coahuila and Nuevo León, says that “the liquid wastes generated will be sludges.”

The document says that drilling and fracking will require harmful chemicals like bentonite, lime, calcium carbonate, sodium chloride, caustic soda, additives, emulsifiers and soaps. These substances can damage skin, lungs, liver and eyes.

The project would allocate 34,000 hectares out of the total of 4.5 million hectares in the Sabinas Piedras Negras basin for gas exploration and exploitation. Gas extraction would take place on an area of 21,270 hectares, within which 8,035 hectares would be reserved for drilling.

The Poza Rica Altamira y Aceite Terciario del Golfo 2013-2035 regional oil project, in the states of Veracruz (southeast), Hidalgo (centre) and Puebla (south), is planning to use similar chemicals.

In March, PEMEX presented the environmental impact study for this project to the environment ministry, but withdrew it in May because it would have affected natural protected areas in Puebla. It is expected to reintroduce the project on a more limited geographic scale.

The state-owned company has drilled 18 shale gas wells, five of which are about to complete their exploratory phase, in Coahuila, Nuevo León, Tamaulipas and Veracruz. PEMEX plans to operate a total of 6,500 commercial wells over the next 50 years, but shale gas exploitation may end up in private hands because of the energy reform.

PEMEX has identified five regions with potential shale gas reserves, from Veracruz to Chihuahua, on the border with the United States.

The U.S. Energy Information Administration (EIA) ranks Mexico sixth in the world for technically recoverable shale gas resources, after China, Argentina, Algeria, the United States and Canada, in an analysis of 137 reserves in 41 countries.

PEMEX had no information on how the levels of chemical substances they use compare to Immediately Dangerous to Life or Health (IDLH) concentrations.

According to Greenpeace, the fracking fluids used during the life of one well require 380,000 litres of additives.

The Endocrine Disruption Exchange, a U.S. organisation that compiles and disseminates scientific information about health and environmental problems caused by exposure to chemicals that interfere with hormone actions, identified 944 products containing 632 chemical substances, many of which are potential endocrine disruptors, that are used in hydraulic fracturing.

The U.S. national hydraulic fracturing chemical registry, FracFocus, reports over 72,000 fracking wells in the country and lists 59 chemicals, consistent with those injected by PEMEX in its wells, including methanol, isopropanol, carbonates and acids.

Mexico’s National Hydrocarbons Commission (CNH) has drafted regulations for shale gas operations, but IPS ascertained that these contain no limits on the use of chemicals.

“The problem with the chemicals is the leftover waste, which must be removed from contact with persons and treated to prevent harm to people and the environment. We are going to specify that it must be treated,” Néstor Martínez, a member of the CNH, told IPS.

The CNH draft regulations cover water use and pollution, use of dangerous chemicals and production of earth tremors. They seek to reduce work accidents, prevent pollution by waste fluids and chemicals, and reduce the environmental footprint.

The regulations refer to types of drilling slurries, the quality of well sealing, hydraulic fracking methods and the discharge of fluids and solids.

PEMEX’s contractors will have to present the CNH with a good management plan that includes specifications to be complied with in those areas.

“Many chemicals have not been tested, and new ones are being developed all the time. Companies use trade secrets as an excuse to withhold information,” Blue Planet’s Campero said.

The Environment ministry is due to begin reviewing the regulations for drilling wells and discharging waste in October.

(END)