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Felicity Bradstock

Felicity Bradstock

Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK.

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South America Struggles To Balance Oil Economy And Environment

  • Ecuadorians voted against oil drilling in the Yasuní ITT oilfield (block 43), located in the Amazon, despite economic pressures.
  • Brazil's President Lula faces scrutiny for supporting oil operations while advocating for the protection of the Amazon rainforest.
  • South American nations weigh the immediate economic benefits of oil and gas development against long-term environmental consequences and global climate concerns.
Amazon Rainforest

The populations and leaders of several South American countries are determining the fate of their natural resources, as the question of a green transition and deforestation loom over them. In both Ecuador and Brazil, state powers are deciding whether to approve new oil and gas licenses or put the health of the rainforest first. While many Latin American states have the potential to develop their oil and gas sectors further, some are questioning the value of their natural resources, as pressure mounts for a global green transition. But will they decide to keep drilling or focus on protecting the environment?

Last week, Ecuadorians were asked to vote in a referendum on new drilling that could affect the Amazon rainforest. On Sunday, Ecuadorians voted between eight presidential candidates in the general election, as well as on whether drilling should go ahead at the Yasuní Ishpingo-Tambococha-Tiputini (ITT) oilfield, known as block 43. The field is situated in the Amazon national park, Ecuador’s largest protected area and home to a major indigenous community, the Waorani people.

The population voted against the development of block 43, with around 6 in 10 voters against the move, meaning that the state oil company Petroecuador must end their operations in the Amazon reserve. This goes against Ecuadorian President Guillermo Lasso’s hopes to continue drilling for oil to bring in revenues to support the country’s economy. Ecuador has been struggling to boost its finances in the last year, with oil revenues declining from around $2.3 billion from January to July 2022 to just $991 million in the same period this year. 

This is not the first time that Ecuador – and the rest of the world – has had to choose between the protection of the rainforest and the exploitation of the country’s oil reserves. In 2007, then-president of Ecuador, Rafael Correa, offered to leave around 850 million barrels of oil in the ground if countries would contribute to a fund at half the estimated value of the reserves, around $3.6 billion. However, this plea to support the country’s economy and natural environment was unsuccessful, with the drilling of the field later approved in 2013 across a 2,000-hectare patch of rainforest. 

second referendum will decide whether mining in the Chocó Andino in the capital of Quito should go ahead. The region is home to around a dozen copper, gold and silver mining concessions that are in the early stages of exploration, with six awaiting regularisation. The projects cover around 27,000 hectares of land. 

Meanwhile, the future of Brazil’s oil and gas resources has come into question in recent months following the election of socialist president Lula da Silva, known as Lula, replacing right-wing nationalist president Jair Bolsonaro. Brazil has caught the eyes of several international organisations and climate groups in recent years due to Bolsonaro’s complete disregard for the protection of the Amazon rainforest, with over 3,980km2 of the Amazon cleared in the first six months of 2022 alone. Continued deforestation activities, which reached a fifteen-year high in 2021, have made the rainforest less resilient against droughts, fires, and landslides. 

This month, environmental campaigners protested plans by the state-owned oil and gas company Petrobras to drill at the mouth of the Amazon River. This follows Petrobras’s appeal to Brazil's environmental protection agency Ibama, which denied it permission to drill an exploratory well in the location. Last week, Environment Minister Marina Silva said that Ibama was expected to assess the oil company’s request to place a drilling rig off the coast of Amapá to conduct oil exploration activities in the region where the Amazon River meets the Atlantic. The minister stated, “Ibama does not make things more difficult or easier. It reaches a technical opinion that must be obeyed.” 

Despite pledging to bring an end to the deforestation of the Brazilian Amazon, Lula continues to support oil operations in the country, as a means of bringing in revenues and supporting Brazil’s economy. In May, Lula stated that he found it “difficult” to imagine that oil exploration in the Amazon basin would cause environmental damage to the rainforest, following Ibama’s initial ruling on Petrobras’s project proposal. This month, President Lula plead with other countries around the globe to develop a common strategy to bring an end to the deforestation of the rainforest. Yet, he refuses to call for the phasing out of fossil fuels, which Colombian President Gustavo Petro has argued is essential for the forest's protection, stating “Even if we get deforestation under control, the Amazon faces dire threats if global heating continues to climb.” 

Several South American countries are now having to decide the fate of their natural resources, choosing between continuing to develop their oil and gas resources to bring in much-needed revenues and protecting the environment to help curb the effects of climate change. With little financial support from foreign actors, many political leaders in the region must decide on what is needed for their countries as they decide on how best to develop their energy industries.  

By Felicity Bradstock for Oilprice.com

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