Stands Firm Against Oil Drilling
October 10, 2003
Pacheco Stands Firm Against Oil Drilling
By David Boddiger
Tico Times Staff
The subject of oil exploration resurfaced in Costa Rica
this week, after a U.S. company filed for international
arbitration to settle a contract dispute for oil drilling
off the country's Caribbean coast.
The drilling project was deemed nonviable by environmental
officials last year.
Harken Costa Rica Holdings LLC (HCRH) President Brent
Abadie, in a press release issued earlier this week,
said his company asked the government of Costa Rica
on Sept. 16 to enter arbitration before the International
Center for Settlement of Investment Disputes (ICSID),
a Washington D.C.-based center associated with the World
Costa Rica became a party to the center after ratifying
the Convention on the Settlement of Investment Disputes
Between States and Nationals of Other States in 1993.
The press release said HCRH would seek to recover $57
billion in claimed investment and damages, a figure
that represents about four times the country's annual
Gross Domestic Product.
"Although (HCRH) had been operating on its 1.2-million-acre
oil-and-gas concession area since 1999 without incident
and in full compliance with all laws and regulations,
President (Abel) Pacheco declared that he would not
allow further petroleum exploration or mining in Costa
Rica," the release stated.
According to Abadie, the President's anti-oil stance
- made clear in May of last year when Pacheco issued
a decree that banned open-pit mining and oil exploration
- has made it impossible for the company to implement
a contract for the exploitation of four oil blocks granted
by the administration of ex-President Miguel Angel Rodríguez
Environment Minister Carlos Manuel Rodríguez
insists that because the Environment Ministry's Technical
Secretariat (SETENA) rejected the company's Environmental
Impact Study - necessary for the project to move forward
- the contract is no longer valid.
claims that, "Since May 2002, HCRH officials have
attempted to negotiate an amicable settlement of the
damages suffered by the company. Minister Rodríguez
has refused to even respond to any of the proposals
by the company, has refused to negotiate in good faith,
and has engaged in a campaign of delays and manipulation
of public opinion."
Pacheco and Rodríguez on Tuesday flatly refused
arbitration, saying the company had not exhausted local
administrative and judicial settlement methods called
for by the company's contract.
(company) did not comply with measures that would guarantee
(the project's) environmental viability, which is grounds
to terminate the contract," Rodríguez said
company claims to have lost the potential to exploit
2.3 billion barrels of oil and 6 trillion cubic feet
of natural gas, mainly off Costa Rica's Caribbean coastal
port of Moín. News of the company's plans helped
rally a massive international campaign against oil drilling
in Costa Rica, whose economy depends greatly on tourism.
Claiming the doors to his office have "always been
open," Rodríguez said the company could
either conduct studies on its three remaining blocks,
or appeal the administration's position through local
In a speech before Costa Rican deputies earlier in the
week, Pacheco reaffirmed his administration's stance
against oil exploration.
Constitution and the law form the basis of reasons why
we have prevented environmentally non-sustainable activities
from being developed in Costa Rica," he said.
called for "the most valiant and enthusiastic national
unity" against the company's arbitration request,
a call echoed even by some opposition party legislators.
"We should all stand firmly with the President,
who has shown statesmanship and a firm attitude - which
we must not only applaud, but adopt," said Citizen
Action Party deputy Rodrigo Alberto Carazo.
In an e-mail to The Tico Times, Abadie said that he
felt a fair hearing in Costa Rica would be impossible,
given the Pacheco Administration's open anti-oil policy.
Likening himself to the biblical figure of David taking
on the Costa Rican Goliath, Abadie said he "would
prefer to reserve the decision to the panel of unbiased
and fair international arbitrators," rather than
"engage in a propaganda campaign in the press."
Critics questioned the company's announcement this week.
"It's a bluff intended to give the company a stronger
negotiating position," said Mauricio Alvarez, representative
of Oil Watch Costa Rica.
The relationship between HCRH and Houston-based Harken
Energy also has begun to raise doubts among oil critics
here. While Abadie called HCRH a "joint venture"
between MKJ Xploration Inc. (60% shareholder and also
based in Metairie, Louisiana), and Harken Energy (40%),
Carazo claims that Houston-based Harken essentially
backed out of the Costa Rican endeavor in 2001 after
non-compliance with its agreement with MKJ, leaving
"only the name of the corporation."
According to Carazo, Harken Energy initially controlled
80% of HCRH and MKJ owned 20%. Harken was to pay $8
million for the shares and complied with the first payment.
However, sensing problems with completing the project
in Costa Rica, Harken failed to pay the second installment
and pulled out, Carazo said. In Dec. 2001, Harken Energy
wrote off its Costa Rican investment at approximately
$9 million, which included a $4-million lease payment
to MKJ in 1999.
Energy is out of the picture altogether," Carazo
told The Tico Times. "They remain as minority shareholders
in the corporations, but all the performance is done
by MKJ, which is a one-man show run by Abadie."
Pacheco's anti-oil stance caused HCRH shares to drop
from $12 to $4, causing significant capital problems
for the company, said Alvarez, from Oil Watch. A source
close to the process also said high-profile former U.S.
Senator Robert Toricelli, who has been hired by Harken
Energy to lobby the Costa Rican government on the company's
behalf (TT, Aug. 22), met with Rodríguez this
week and said the company would be willing to back down
for a $10-million settlement.
said he believed Harken might exert pressure on U.S.
lawmakers to take up the issue, particularly during
ongoing talks over a U.S.-Central American Free Trade
Since taking office, the administration of U.S. President
George W. Bush has done little to mask its affinity
with powerful energy sectors, including oil companies
looking to boost revenues abroad.
to Alvarez, 55% of U.S. petroleum imports are generated
in the Americas - 40% of which are exported from Latin
America. Harken - a company based in Bush's home state
of Texas - currently has a presence in countries from
Belize to Colombia, Alvarez noted.
the Pacheco Administration closed the door to petroleum
exploitation here, MKJ headed north of the border, where
Nicaraguan President Enrique Bolaños opened for
bidding in July of last year some 147,000 square kilometers
of offshore blocks in the Pacific and Atlantic oceans
(TT, July 19, Aug. 30, 2002).
June, Nicaragua awarded two of the Caribbean blocks
to MKJ (TT, June 6). Abadie, who also serves as MKJ's
senior vice-president, said he is currently in Nicaragua
working on that project.
Although so far successful at preventing companies from
drilling in Costa Rica, anti-oil activists say they
are equally concerned about other projects in the region.
"These oil companies are strongly positioning themselves
in the Atlantic, as part of a global effort to exploit
as much petroleum as possible before the world shifts
toward more renewable energy sources, which is already
happening," Alvarez said.
Still, despite Pacheco's anti-oil stance, Costa Rica's
Hydrocarbons Law - which allows for drilling concessions
- has yet to be modified in Congress.
reform package - currently stalled in a legislative
committee - would eliminate that opportunity, but lawmakers
so far have been cold toward the initiative, hoping
to leave the possibility open for future administrations.
Carazo said he hopes the move by HCRH and the response
generated by the Pacheco Administration will help breathe
new life into the measure.