THE HYDROCARBONS INDUSTRY IN

LORETO PERU

OIL SPILLS, DISCOURSES ON SABOTAGE AND

TRANSPARENCY

Wetenschappelijke verhandeling

Aantal woorden: 24867

Steven Vits

Stamnummer: 01608492

Promotor: Dr. Hanne Cottyn

Masterproef voorgelegd voor het behalen van de graad master in de richting Conflict and

Development

Academiejaar: 2016 – 2017

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Contents Acknowledgements ............................................................................................................... 7

Abstract ................................................................................................................................. 8

1. Introduction ....................................................................................................................... 9

2. Methodology .....................................................................................................................11

3. Theoretical framework ......................................................................................................13

3.1 Oil and the making of Western capitalism ...................................................................13

3.2 The resource curse .....................................................................................................14

3.2.1 Economic explanations .........................................................................................15

3.2.2 Political explanations ............................................................................................15

3.3 The political ecology of oil ...........................................................................................16

3.3.1 Oil and democracy ................................................................................................17

3.3.2 Oil at the center ....................................................................................................18

3.3.3 Peak oil ................................................................................................................20

3.4 Oil infrastructure ..........................................................................................................21

3.4.1 Disentanglement and enclaves .............................................................................22

3.4.2 Infrastructural violence .........................................................................................22

3.4.3 Materials and information production ....................................................................23

4. The Peruvian Case ...........................................................................................................25

4.1 Oil and Amazonia ........................................................................................................25

4.1.1 History of oil extraction .........................................................................................25

4.1.2 Economic perspectives .........................................................................................28

4.1.3 Environmental threats and regulations ..................................................................30

4.1.4 Health impacts ......................................................................................................33

4.1.5 Conflicts and indigenous organization ..................................................................34

4.2 Framing development .................................................................................................37

4.2.1 Indigenous discourse ............................................................................................37

4.2.2 Government discourse..........................................................................................39

4.2.3 Sabotage discourse ..............................................................................................40

4.2.4 Transparency and information production .............................................................41

4.3 Socio-technical analysis of the ONP condition ............................................................43

4.3.1 Industry standard and legislation ..........................................................................44

4.3.2 Oil spills and technical reports ..............................................................................46

4.3.3 Discussion ............................................................................................................49

4.4 Alternative strategies for cooperation ..........................................................................51

5. Conclusions ......................................................................................................................53

Tables ..................................................................................................................................55

Figures .................................................................................................................................56

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Bibliography .........................................................................................................................64

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Acknowledgements Met het schrijven van deze thesis is er een definitief einde gekomen aan mijn academische

carrière. Daarom zou ik graag nog die mensen willen bedanken die mij deze laatste

maanden gesteund en geholpen hebben.

Allereerst wil ik mijn promotor, Hanne Cottyn, bedanken om mij dit interessante onderwerp

aan te bieden. Verder heeft zij mij steeds waar mogelijk bijgestaan met goede raad en het

aanbieden van nuttige bronnen of contactpersonen. Verder zou ik graag mijn ouders

bedanken die niet alleen de afgelopen maanden, maar de afgelopen zes jaar mij in de best

omstandigheden hebben laten studeren en vooral van het studentleven hebben laten

genieten. Ten slotte, bedank ik mijn vriendin, Rebecca, voor haar immer enthousiaste

aanmoedigingen waardoor ik steeds met hernieuwde kracht het schrijfproces kon hervatten.

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Abstract As one of the most culturally and biologically diverse regions on Earth, the Peruvian Amazon

is of great value for Peru as a country but also for the world in general. In the past decades

this richness has been threatened by the arrival of international oil companies that have

contracted ever-larger pieces of land for their exploration and exploitation activities. The

indigenous communities that populate these areas, have gotten little support from the central

government in their attempts to minimize the impacts. The Northern Peruvian Pipeline,

constructed in 1974 and running straight through the Amazon region, has acquired a central

position in the conflict. A growing number of oil spills related to the pipeline has resulted in

the formulation of two contradicting discourses. The companies and government institutions

attribute the leakages to sabotage by indigenous actors, whereas the indigenous federations

point to the deteriorated state of the pipeline and the lack of maintenance by regulator

Petroperú.

This thesis first applies the wider literature on the political ecology of oil. It extends the

traditional rent-seeking motivations of the resource curse with an understanding of the

technical, discursive and political agencies through which specific modes of oil production in

Peru are regulated. Next, we will assess the validity and intentionality of both discourses to

identify which mechanisms contribute to the exercising and exploitation of the existing power

relations. Here, it is important to look at the transparency initiative that the oil industry has set

up and how it works together with the discourse on sabotage to abdicate responsibility for the

spills. The goal is to reveal some of the information gaps that hamper adequate response to

ameliorate the lived environmental and health situation in Loreto.

(DUTCH)

Als één van de meest cultureel en biologisch diverse regio’s op deze planeet, is het

Peruaanse Amazonegebied van grote waarde voor het land, maar ook voor de wereld in het

algemeen. In de voorbije decennia werd deze rijkdom echter bedreigd door de komst van

internationale oliebedrijven die steeds grotere stukken land hebben gecontracteerd voor het

zoeken naar en het ontginnen van olie. De inheemse gemeenschappen die deze gebieden

bevolken, krijgen weinig steun van de centrale overheid in hun pogingen om de gevolgen in

te perken. De Noord Peruaanse Pijpleiding, aangelegd in 1974 en pal door het

Amazonegebied lopend, heeft een centrale positie in het conflict verworven. Een groeiend

aantal olielekken in de pijpleiding heeft geresulteerd in de formulering van twee tegenstrijdige

discours. De bedrijven en de overheidsinstituties wijten de lekken aan sabotage vanwege de

inheemse bevolking, terwijl de inheemse organisaties in de richting wijzen van de

verouderde staat van de pijpleiding en het gebrek aan onderhoud door regulator Petroperú.

Deze thesis past eerst de bredere literatuur omtrent de politieke ecologie van olie toe. Ze

breidt de traditionele rentetheorieën van de resource curse uit met een begrip van de

technische, discursieve en politieke motiveringen die de specifieke productiewijzen van olie

in Peru reguleren. Vervolgens, beoordelen we de feitelijkheid en de beweegredenen van

beide discours om de mechanismen die bijdragen aan het beoefenen en uitbuiten van de

bestaande machtsrelaties te identificeren. Hier is het belangrijk aandacht te besteden aan

het transparantiebeleid dat de olie-industrie heeft opgestart en hoe dit beleid samenwerkt

met het discours van sabotage om de verantwoordelijkheid voor de lekken van zich af te

schuiven. Het doel is om de kennishiaten bloot te leggen die een gepast antwoord op de

verslechterde levensomstandigheden in Loreto verhinderen.

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1. Introduction Recently the Andes region and by extension the whole of Latin America has experienced a

new resource exploration boom. This is also the case for the Peruvian Amazon, where

previously unexplored swaths of land have been granted as concession to different oil

companies. These lands often overlap with native communal territories, protected nature

reserves and important water resources. It is therefore not surprising that the pressure on

environment and the livelihood of native communities in the area has increased immensely.

One major object of conflict is the presence of the Northern Peruvian Pipeline (Oleoducto

Norperuano - ONP), a forty-year-old pipeline running through the Loreto and Amazonia

regions. Since 1997, over one-hundred-ninety oil spills have been reported in Peru of which

at least ninety occurred in Loreto where two of the most important oil blocks, block 192 and

block 8, are located. In 2016 alone, fourteen spills were detected that were directly related to

failures of the ONP. Although many of these spills have been attributed to natural causes,

such as corrosion and material fatigue, and operative faults, the Peruvian government and

the oil companies have also accused the local native communities of sabotaging the pipeline.

The strong focus on sabotage in the media and official statements not only undermines the

social movement that wants to see their rights protected, but also ignores the poor physical

state of the pipeline and diverts the attention from more pressing measures concerning

environmental remediation and pipeline maintenance that have to be taken. Furthermore, the

industry has created a transparency narrative that works together with the discourse of

sabotage to abdicate responsibility for the spills. The central question in this thesis therefore

is the following. How, why and with which consequences does the government frame the oil

spills as an act of sabotage? Accordingly, the goal of this thesis is to reveal and recommend

some strategies for the native communities to counter these accusations and to increase

democratic participation in decision-making on oil development projects.

In order to answer the central question, one first needs to understand the wider

circumstances of the conflict and why it has such a long-lasting and compelling history. To

understand what it is about oil that fuels conflict we have to identify the global economic and

political drivers that regulate the oil industry, but also look at the national and regional

networks that are built around oil. How does an extractive economy shape the socio-

economic, territorial and environmental relations in a country and why does this often give

rise to conflict? Which physical or psychological properties does oil possess that might

facilitate this process? After analyzing the broader political ecology of oil, one can look into

more specific manifestations of the conflict. As we will see later, one of the central

manifestations is the controversy over the ONP. We can ask why an infrastructure such as a

pipeline can be such an important catalyst for conflict? Here, it is crucial to recognize that an

object is not a neutral thing but can instead play an active role in the dispute. Much of this

emotional and strategic quality derives from the narratives that are constructed around the

infrastructure. This is where framing, information production and transparency come into

play. How are frames used by the government to transfer accountability for the oil spills and

the decline the Peruvian oil industry as a whole? How does the practice of transparency

simultaneously reveal and obscure particular pieces of information and how does this

reinforce the effect of the applied frames? How does technical information production

contribute to the imagery of transparency, but also which properties of the pipeline that go

beyond the technical aspect play a part? Finally, how should we evaluate the discourse of

sabotage and what are the socio-economic and environmental implications?

Part of these questions will be answered in the final part of the thesis where we will look

deeper into the industry standard for regulations on pipeline maintenance to assess whether

Petroperú, the ONP operator, has complied to the existing environmental adaptation plans.

This analysis will put the sabotage discourse in a different perspective and demonstrates the

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need for an in-depth evaluation of the industry practices and the ONP condition. This would

be a first step in moving away from a purely confrontational ‘framing-war’ to let common

interests form the basis for constructive co-operation between both parties. Specifically, I will

suggest two policy interventions that will allow effective implementation of the transparency

initiative and state-of-the-art pipeline surveillance. These include the creation of

decentralized indigenous surveillance teams and the installation of an interactive digital

information platform on oil spills and pipeline supervision and maintenance.

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2. Methodology Many scholars have reverted to the resource curse principle to explain the links between a

nation’s strong reliance on income from extractive industries and weakened democratic

institutions (Ramsay, 2011) (Shaxson, 2007). We will however go further than the traditional

rent theories and put oil at the center of the discussion. The work of Timothy Mitchel and

especially Michael Watts illustrates how the constitutive properties of oil have resulted in

particular historically formed relations of production and how oil as a source of immense

economic and political power has had a profound impact on ideological or cultural notions of

development. This understanding helps to explain the evolution of the hydrocarbon

development in the Peruvian Amazon and the government’s continued attempts to pump

new life into a struggling industry, despite the recent economic and environmental

downturns. The general socio-economic and environmental situation of the Peruvian case

will be lined out in section Oil and Amazonia (Chapter 1). The discourse analysis (Chapter 2)

then serves a two-fold goal. First, it will pinpoint the essence of the conflict on the radically

opposed indigenous and western conceptions of development. A discourse is here not

merely a form of communication, but it is a tool to start understanding the world, and perhaps

influencing others into seeing the world differently. Discourses are therefore interactive and

through their interactions “power is exercised, contested and negotiated” (Scoville-Simonds,

2009). Second, it will highlight how the pipeline infrastructure has acquired a central position

in the discussion and how the production and disclosure of technical information has formed

new spaces for dispute. Andrew Barry here gives insight in how material structures such as

the ONP can give rise to so-called “knowledge controversies” and how transparency

emerges as a tactic for “crowd management” (Barry, 2013).These theories will be applied on

a socio-technical analysis of the ONP (Chapter 3). The initial idea was to analyze the ONP’s

condition based on scientifically determined technical data from inspection reports. However,

it soon became clear that this type of data is not easily accessible, despite the imagery of

transparency the industry has produced. Therefore, the focus shifted to the implications of

and reasons behind this information gap. To conclude, building on Participatory Action

Research (PAR) and the work of Marti Orta-Martinez, I will introduce an alternative strategy

for cooperation (Chapter 4), which proposes measures to install a best practice of

transparency and answers to the requirements of Free Prior and Informed Consent (FPIC) as

established in the ILO 169 Convention.

Different spatial scales can be identified in this research. The renewed exploration boom and

the dependence of industry on resources such as oil and gas is of course a worldwide

phenomenon and influenced on a global scale. On a smaller scale we have to take into

account the political, economic and social structures of Peru into account. The main focus of

the research however remains on the Peruvian Amazon and more specifically on Loreto

since this is the region where most of the oil spills occur and where the important blocks 192

and 8 are situated. Historically the conflict in Loreto is rooted in the colonial past of Peru.

Many of the native territories still belong to the most backward regions of the country and this

is also the case for Loreto. When the oil companies came in the ‘70s, the lion’s share of the

concession rents were transferred directly to Lima, whereas the local communities that had

to carry the real costs of the oil exploitation were far from sufficiently compensated. Chapter

1 will look at the conflict through an historical lens that includes its colonial past but primarily

focuses on events after 1970. The oil spills themselves have a more recent history. The

majority of reported spills occurred in a timespan between 2006 and 2016. Chapter 3 will

specifically deal with the spills that occurred in this time period.

Since this thesis tries to take on a rather multidisciplinary strategy, many different types of

sources will come in handy. To sketch the overall situation in Loreto I will make use of official

documents issued by government institutions and the industry, including laws, decrees and

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resolutions. These will be primary sources. As indicated before, the theoretical framework will

draw from the work of several prominent scholars that have written about the political

ecology of oil. Furthermore, there exists a significant body of previous literature on the

Peruvian oil conflict with links to the scope of this thesis, on which we will base many of our

conclusions. Where needed we will also take information from websites and newspaper

articles. In general this will be avoided as much as possible, except in the discourse analysis

of Chapter 3, since it is often through these media that a discourse is communicated to the

outside world. We have to keep in mind that these articles take on strong ideological and

political overtones and often lack objective references. Finally, Chapter 4 will also refer to

technical reports and audits that Petroperú has released. All of these will be considered

secondary sources.

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3. Theoretical framework When investigating the ongoing conflict in the Peruvian Amazon, we first need to situate it in

the larger debate on oil exploitation to understand why conflict over oil-related issues may

emerge. As the planet is currently facing a growing energy crisis and reserves of fossil fuels

are rapidly declining, oil has grown to be what is perhaps the “most controversial and

influential commodity in the world” (O'Rourke & Connolly, 2003). Although more and more

energy-progressive countries seek to increase investments in alternative ‘green’ sources of

energy, most superpowers, such as the USA, China, Japan and Russia, still heavily rely on

crude oil consumption to fuel their economies (Global Fire Power, 2015). This is reflected by

the fact that crude oil trade totaled over a trillion dollars in 2015, being the first commodity to

cross this trillion dollar barrier.1

Due to its central political, economic and strategic position, it is not surprising that nations

and major private concerns have clashed over who controls and has access to this resource.

Many examples can be found. The Cacho War between Bolivia and Paraguay (Cote, 2013),

the Iran-Iraq war (Swearingen, 1988), the conflicts in the Niger Delta (Ikelegbe A. , 2001) and

the South Sudan-Sudan border conflict (Billon & Savage, 2016) all have oil as one of their

main motivations. Although the oil-related causes for these conflicts can be rather easily

discerned and analyzed on a macro-scale, it is often more interesting to look at how specific

political and strategic connections are engineered around the oil, at how it is extracted,

processed and transported, at how it is embedded in social relations and at how it is linked to

the building of capitalism and democracy. This is certainly the case when analyzing disputes

on the domestic level. Here it is sometimes far from obvious why a certain development

strategy involving oil exploitation is pursued or what political and socio-economic

consequences this has for an oil-exporting country.

The Peruvian case is no exception here. Its oil sector is of course of economic importance for

the country but more than that it is part of a political network with an historically produced

ideology on development and extractivism. Furthermore, we will see that Peru’s specific

geography and demography have shaped the different technical and social structures that

make oil production possible. The following sections will provide some of the building blocks

through which we can analyze this complex construction.

3.1 Oil and the making of Western capitalism The discovery of the potential of coal to power steam engines was one of the main drivers of

the Industrial Revolution in the 19th century. From this moment onwards, fossil fuels have

come to dominate the global economy and have led to the arrival of a particular economic

model, which is Western capitalism. Mutual reinforcement of both oil extraction and

capitalistic production have brought an era of unprecedented exponential economic growth

and energy consumption. Today’s applications of oil are plentiful and there are virtually no

present-day consumer goods that do not have oil in their production chain. Its primary use is

the fueling of cars (43%). It is not by chance that the car industry has long been and still is

one of the flagship industries of many developed countries. Crude oil is also processed into

distillate fuel oil which is used as heating oil in agricultural machinery and for electric power

generation (23.5%), into kerosene jet fuel (9.2%), into petroleum coke used in the chemical

and metal industry (4.9%) and into asphalt (3%).2

1 This number is estimated from BP’s annual Statistical Review of World Energy (2016). 2 These percentages are calculated from American Petroleum Institute, "There’s a lot of life in a barrel of oil"

(2006) and reflect the percentual of the USA in 2005, which is the largest consumer of petroleum in the world and therefore assumed to be a good representative.

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Throughout the past century oil has thus been a major producer of wealth and has shaped

human civilization as a whole. It has created the governance institutions that ultimately

secured the world into an imaginary path of linear and endless growth. The result is that the

capitalistic machinery has developed into a system that needs ever-increasing amounts of

energy in order to survive. The fact that more than half of fossil fuels consumed in the last

one-hundred-fifty years has been burned in the last three decades adequately reflects this

constant craving for energy.3 However, as we live in a finite world with finite resources, coal

and oil are gradually becoming more scarce and more difficult to extract. Furthermore, the

effects on the environment of carbon gas emissions have become increasingly clear and

might be irreversible (Solomon, Plattner, Knutti, & Friedlingstein, 2009). The era of fossil

fuels is inevitably coming to an end and it remains to be seen whether the political and

economic apparatus will be able to adapt to these new circumstances.

We currently see a trend that is markedly different from the one you would expect. Instead of

diverting investments away from oil exploration to renewable energy projects, we see that

many countries put their hopes in the continuation of the oil economy by pushing new, more

dangerous and more costly techniques of oil production. New technologies such as ‘hydraulic

fracturing’ or ‘fracking’ have gained popularity in the USA, whereas many developing

countries such as Peru are reverting to large-scale exploration in remote and environmentally

sensitive areas. Both strategies contain high risks and are damaging to the environment

(Howarth, Ingraffe, & Engelder, 2011) (Orta-Martínez & Finer, 2010). This is an indication

that the current capitalistic markets are as yet unable or unwilling to adapt to the new energy

landscape.

The world seems to be addicted to oil, even though different environmental, economic and

statistical indicators warn for its long-term detrimental effects. Likewise, the Peruvian oil

industry has not been able to live up to the high initial expectations and has been disturbed

by numerous boom-bust cycles. The observation that the presence of natural resources

might negatively affect a country’s economy has been summarized in the resource curse

thesis. The next chapter will briefly discuss some economic and political explanations that

have been given to this theory.

3.2 The resource curse The term ‘resource curse’ has been first proposed by Richard Auty in 1993, although the

debate on whether an abundance in natural resources is a blessing or a burden for a

country’s economic development has been going on since the 1950s (Ross, 1999).

Economists have since long recognized that countries with natural resource wealth such as

oil and minerals tend to perform badly. Furthermore, most policy-makers of resource-

exporting countries are well aware of this situation. In a famous quote OPEC founder Juan

Pablo Pérez Alfonso referred to oil as “the devil’s excrement”.4 In one of the more recent and

most comprehensive studies, researchers performed a regression analysis on ninety-seven

countries over a nineteen-year time period. The authors show that economies with a high

ratio of natural resource exports to GDP in 1971, were likely to have low growth rates

between 1971-89 (Sachs & Warner, 1995). To date, there is little agreement on why we see

3 Another striking number is given by Jeffrey S. Dukes in his paper Burning Buried Sunshine: Human Consumption of Ancient Solar Energy in which he states that organic matter equivalent to 400 times all of the earth’s current biota was required to produce the fossil fuels we burned in the year 1997. 4 Juan Pablo Pérez Alfonso voiced his concerns about Venezuela’s increased reliance on oil for its economy in 1973. Paradoxically, the Venezuelan government that year collected more revenue than all previous years combined. Perez Alfonso’s words now seem prophetic, as Venezuela has since known several unstable periods of serious economic decline. In 2015, the country had an inflation rate of above 250%. Reference: Timmerman, K. (2012). Understanding the resource curse: why some get more sick than others.

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these kinds of results. Many hypotheses have been produced over the last decades and we

will try to connect some of them to the Peruvian case. Initially these theories focused more

on the peculiarities of the economics of primary commodities. Later more focus was given to

the role of policy-makers and how political actors attempt to use the resource windfalls to

their advantage.

3.2.1 Economic explanations Backward states in the 1950’s faced some structural production imbalances such as a

surplus in labor power and a lack of investments (McConnell, 2009). Economists thought

developing states would be able to overcome these problems by exporting primary

commodities. This would enable them to attract new investments and to reinvest their

revenues into different economic sectors and public projects. However, several objections

have been raised to this early optimism.

First of all, primary commodities suffered from declining terms of trade, meaning that their

relative price compared to manufactured goods dropped. This is also called the Prebisch-

Singer hypothesis. A paper issued in 2010 has proven this negative trend in the last 4

centuries for a variety of primary commodities (Harvey, Kellard, Madsen, & Wohar, 2010). A

second issue is that commodity markets and the oil market in particular are exceptionally

unstable. Although there is strong agreement among scholars that commodity prices are

highly fluctuating, several studies have contradicted each other on the question whether this

has adverse effects on economic performance (Ross, 1999). For a better understanding on

how these price fluctuations might influence oil production output, see the section on Peak

oil. A final economic argument for the existence of the resource curse is the so-called Dutch

Disease. This term points to a causal relationship between the booming of a specific sector

(often extraction and export of natural resources) and the decline of other sectors such as

the manufacturing or agricultural sector. Corden and Neary have discussed the mechanics of

such deindustrialization in great detail (Corden & Neary, 1982) (Corden, 1984).

Like many other developing states, Peru has always heavily relied on foreign investment to

boom their extractive sectors. This means that the central government usually does not

assert much control over how this money is spent and it has granted many privileges to

international companies out of fear for capital flight. Although, instability of the oil price

market has heavily influenced the evolution of Peruvian oil operations, as will be explained in

section History of oil extraction, it is the lack of prescient political leadership that explains

why the industry has not been able to anticipate these price shocks. The next section will go

deeper into the political motivations that could lead to structural flaws in the decision-making

processes and priority-setting.

3.2.2 Political explanations Governments have important mitigating or promoting roles to play in the resource curse issue. For example, directed policies are able to address the problem of declining productivity by creating linkages between sectors, by diversifying production and exports and by taking appropriate fiscal measures. Therefore, it is argued that it is mainly the difference in political action taken by the respective governments that explains the wide variety in economic performance among developing resource-exporting states. Ross distinguishes three different types of political explanations: cognitive, societal and state-centered (Ross, 1999). The cognitive explanation blames policy failures on the short-sighted views of policymakers, who ignore the long-term effects of their actions or are uniformed about the pitfalls of resource booms. This can lead to either laxness in economic planning or irrational optimism creating a boom-and-bust mentality. This has certainly been an issue in the Peruvian Amazon, where the government has contracted the majority of the rainforest territory to oil

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companies with little regard for long-term externalities. Societal factors linked to resource wealth often contribute to this kind of tunnel-visioning. Resource booms can enable private actors to pressure governments in maintaining growth-impeding policies. As primary example, several authors point to the unwillingness of many Latin American countries to move away from import-substitution industrialization to export-promotion strategies, as was done in South Korea and Taiwan. They suggest this move was impeded by labor unions and manufacturers empowered by subsidies from the resource sector (Mahon, 1992). On the level of the state, we see how governments depending on external or ‘free’ rents often create very specific institutional relationships of accountability and democracy. The rentier state is one of the most popular versions of this theory. Beblawi defines the rentier state as a state with an economy relying on substantial external rents, whereby only a few actors are engaged in the creation of this rent, with the majority being involved in the distribution or utilization of it (Beblawi, 1987). Furthermore, the government as the principal receiver of the generated rents, plays an essential role in the distribution of this revenue to the population. One important aspect here is the creation of a certain ‘rentier mentality’ among different layers of the economic apparatus, whereby a disconnection between work and reward establishes itself. Socio-political and economic privileges derive directly from your allegiance to the central power. The absence of taxation and the provision of large welfare programs prevent the creation of democratic institutions and blurs the lines between the public and private sphere. Peru is not a rentier state pur-sang, since it only relies for about 9.5% of its Gross Domestic Product (GDP) on the mining and hydrocarbons sector.5 Nevertheless, the central government generates significant rents from there extractive industries and several remote jungle regions such as Loreto and Ucayali are heavily reliant on rent distributions.6 The regional government officials are therefore careful to condemn the practices of the oil industry or to promote economic alternatives, as they risk to lose a significant part of their operating budget. Due to this economic and political dependence, there is a lack of democratic control over the oil industry. An effect that is enhanced by the welfare programs that are installed by oil companies to the benefit of the neighboring indigenous communities. The lack of local capacity, arbitrary investment decisions and practices of corruption in funds allocation are thus some of the major problems which the Peruvian state needs to tackle if it wants to reverse the negative perception on its resource development policies (Vasquez, 2011). However, if we want to fully understand the nature of oil exploitation in Peru and how forms of access and control to this resource have been established, one needs to look further than these centralizing rentier effects.

3.3 The political ecology of oil Many modern comprehensive interpretations of the resource curse follow a hybrid method, combining cognitive, societal and state-centered elements with theories of resource economics. Terry Lynn Karl in her The Paradox of Plenty: Oil Booms and Petro-states for example draws on a variety of principles such as the rentier state, the dependency theory and myopic rent-seeking to explain how oil-exporting governments as different as Venezuela, Iran, Nigeria, Algeria, and Indonesia chose common development paths and suffered similarly disappointing outcomes. Although Karl to some extent recognizes the mythical quality of an oil discovery, she also still views petroleum as “nothing but a viscous black mass” (Karl, 1997). All too often when questions about the resource curse arise people have little to say about the specific nature of oil and through which mechanisms it is extracted, processed and distributed. They rather discuss how the oil is converted into ‘free’ government revenue and how this revenue is used to repress democratic claims or buy political support. Authors such as Mitchell in his Carbon Democracy and Watts try to nuance

5 Numbers retrieved from the Instituto Nacional de Estadistica e Informatica (INEI). 6 See section 4.1.2.

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the direct linkage between the resource curse and democracy. Alternatively, they concentrate on the mechanical properties of oil and the socio-economic and political relationships that enable the producing, processing and selling of oil, to explain the linkage between oil and democracy.

3.3.1 Oil and democracy Mitchell specifically focuses on the simultaneous creation of a carbon economy and democratic institutions. In his book democracy and oil are not treated as two separate entities. He describes “democracy as oil – as a form of politics whose mechanisms on multiple levels involve the processes of producing and using carbon energy” (Mitchell, 2011, p. 5). The discovery of large concentrated reservoirs of energy, which could only have been possible due to the very unique process in which millions of years of organic material has been compressed and stored into aggregations of coal and oil, is taken as the starting point of democratization. With the discovery of coal, railways, bridges and canals were constructed, to build the equally important transportation lines that supplied cities and manufacturing sites with ever-increasing amounts of energy. The forms of collective life associated with the organization and concentration of the flow of huge quantities of fossil fuels, made possible the mobilization of new democratic political forces. The narrow channels through which these great volumes of energy flowed were vulnerable to actions that could disrupt or slow the supply of energy. Coal miners played a crucial role in this matter, as coal-mining strikes could effectively paralyze a nation’s economy and force demands for better working conditions and political representation. As new unskilled employees were often brought in to break the strikes, mineworkers decided to work as slowly and inefficiently as their new colleagues. This popular method proved to be very successful and was later termed ‘sabotage’.7 What is even more important than coal as the harbinger of democratization is how the gradual switch from coal to oil as main energy supply affected this democratic potential. Oil could be extracted from the ground with a much smaller workforce per quantity of energy produced, workers could be more closely supervised and new means of transportation, such as pipelines and ocean shipping became available. Furthermore labor laws could be evaded by registering ships under special jurisdictions and by creating offshore refineries (Appel, 2012b). This is how workers lost the capability to perform acts of ‘sabotage’ and to exert pressure on governments and oligarchs. Or how Mitchell puts it “these changes in the way forms of fossil energy were extracted, transported and used made energy networks less vulnerable to the political claims of those whose labor kept them running” (Mitchell, 2011, p. 38). At the start of the 20th century, the oil companies acquired new methods of what we could call ‘capitalist sabotage’.8 With the arrival of the oil tanker, the large oil fields in the U.S. and Great Britain faced increased competition from cheaper oil produced elsewhere in the world. By introducing intentional small delays and disruptions regulations, they could manipulate a shortage and as a result maintain high prices for their product. This is, according to Mitchell, the reason why it took until after the WWII before significant amounts of oil started to flow from the Middle East, although the oil had already been discovered in 1908 (Owen E. , 2008). Delaying the oil development in these regions was typically done by controlling the means of transportation. Contracts for building pipelines and railways were often exclusively negotiated, and by delaying construction or by making strategic connections, the Western oil

7 The term was first used by Emile Pouget and he commented rigorously on this practice in his transcript Le Sabotage (1911). Therefore, the word ‘sabotage’ was initially used to describe collective action by industrial workers and only later did it come to refer more generally to a deliberate action to obstruct certain critical processes. 8 For a (colored) discussion on the implications of the term ‘capitalist sabotage’, see https://www.jacobinmag.com/2016/09/pipelines-explosion-sabotage-disaster-fracking-bp-iww/.

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companies could maintain control over oil production in the Middle East.9 The League of Nations mandate system provided a second tool for enhancing this control, as it allowed the Europeans powers to take up a mandate to supervise the Arab population and their oil in the ‘interests of civilization’.10 The valuable lesson here is how Mitchell starts from the properties of oil itself and how as a consequence its networks of (democratic) control, production and distribution are built, in contrast to most other accounts, that see oil as merely a source of monetary revenue. Mitchell speaks of several forms of ‘sabotage’, which here gets the more abstract meaning of ways to control the means of transportation and the channels that are used to bring oil to the market. Mitchell points to the importance of this control on global oil development and in relation to the huge Arab oil reserves. However, these dynamics can also be discerned on a more limited territorial scale, such as the Peruvian Amazon, where controversy is centered on the specific social, economic and infrastructural connections that the industry has created to market its oiI in the most profitable way. In order to understand the relationships around oil that shape spaces for contestation, it is important to put oil at the center of the discussion. By starting from oil and its basic constitutive properties, one can gradually recognize and interpret these sociotechnical layers and connections.

3.3.2 Oil at the center Michael Watts adheres to such an approach, while strongly focusing on the violent aspects of oil exploitation in his books and papers. Three theoretical levels can be distinguished in his work: the level of extraction and the types of violence associated to this activity, the level of rents and the final level of the natural resource itself, which analyses the biophysical features of oil and its political and discursive uses (Watts, 2001). In total, he identified eight essential properties of oil that are important to address. Oil is money (1) and, related to this, oil has an El Dorado Effect (2). Oil as one of the most easily tradable commodities in the world can almost instantly be converted into dollars. It therefore creates an eagerness to develop society to a standard that befits this new-found wealth and puts it to good use. Mohammed Reza Shah’s White Revolution, which started around 1963 in Iran, is an appropriate example. With a series of large-scale reforms, which included land-reform, privatization of businesses and education of the illiterate and which was mainly paid for by oil money, he attempted to westernize Iranian society. Ironically, it were the expectations created by the oil windfall and the following economic overcommitment that contributed to the Iranian Revolution and the downfall of the Shah in 1979 (Keddie, 1983). This shows how this ambition often evolves into an illusionary desire, where oil gains the mythic dimensions that gold used to have for the Spanish conquistadores in the 16th century. It shapes an atmosphere where out-of-proportion public expenditure can be easily justified11 and which ultimately starts influencing cultural life12 in its different aspects. As this phenomenon drives a country’s ruling class to execute a quick modernization, Watts also calls it “the shock of modernity” (Watts, 1992). On a similar note,

9 See Chapter 2 of Carbon Democracy. 10 See Chapter 4 of Carbon Democracy. 11 In Angola from the starts of its oil boom in 2002 over 100 billion dollars backed by Chinese loans has been spent on road construction, airports, railways, universities, hospitals and other infrastructure. Meanwhile tens of billions of dollars yearly were spent on imports of goods due to Angola’s low national productive capacity and failure to diversify economy. This uneven spending resulted in one of the worst economic crises in its history. See De Oliveira, R. S. (2015). Magnificent and beggar land: Angola since the civil war. 12 Fouad Ajami has coined the term ‘Petro-Islam’ to describe the emergence of Wahhabi Islamism in the 1970s in Saudi Arabia. This Islamic doctrine includes strict implementation of the Sharia in the political, moral and cultural arena and is promoted throughout Islamic world with the use of Saudi petro-dollars. See Abu-Rabiʻ, I. M. (1996). Intellectual origins of Islamic resurgence in the modern Arab world.

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Churchill talked about “the prize from fairyland beyond our wildest dreams”13 and Kapuscinski named it the “illusion of a completely changed life”, because of a substance that ‘anesthetizes thought, blurs vision and corrupts’ (Kapuściński, 1982). As a third feature Watts takes the notion of the petro-state (3) from Hausman, who defines the term with a different focus compared to Karl. He theorizes that oil creates special forms of state-landed property that mediate the social relationships by which the oil is produced. The oil lands are managed through concessions, joint ventures and production sharing agreements. Furthermore, the state ensures access to the international market. While mediating these social relations the state has to deal with territorial claims and identities which result in claims over the commodity itself. These claims are regulated through a valorization of space (4). For example, concessions granted by the state often overlap with indigenous territorial property rights. We now see how conflicts arise between national and local interests, and how this relates to customary law, identity rights and citizenship. Therefore, as the petro-nation seeks to control the production and trade of its oil resources, it continuously highlights national qualities of its extractive resources.14 A fifth important property of oil is that it is liquid (5). This means that it holds the possibility of creating an enclave economy with very limited local linkages. It is usually transported from the enclave by pipeline. This leaves the local population that is faced with the environmental threats with little effective means of maintaining pressure on firms and government. Moreover, in gaining national control over its natural resources, (less-developed) states inevitably have to step into alliance with transnational capital, which makes their oil industry vulnerable to international economic fluctuations, OPEC pricing and the boom-and-bust mentality of partner corporations. Watts calls this Petro-imperialism (6) or also a ‘Faustian Pact’ since the promotion of the national project of modern development is sold for the nation’s sovereignty and tradition. To conclude, the Rentier-state (7) and the Dutch Disease (8) have already been covered in the Resource curse section. Watts in his analysis of the oil conflicts in the Niger Delta, also wants to highlight the nation-building power that oil entails, as a counter-argument to the statement that the presence of oil hinders democracy. He explains this power by introducing different governable spaces that originate from the ‘oil complex’, an oil-related network of firm, state, and profit. These governable spaces can be thought of as “processes in which a real and material governable world is composed, territorialized and populated” (Rose, 1999). Watts, distinguishes 3 types of governable spaces in Nigeria: the space of chieftainship, the space of indigeneity and the space of the nation-state. Especially the latter two spaces are important for our analysis. The space of indigeneity is constructed by claims for autonomy in self-determination based on ethnic mobilization of indigenous minorities, using international instruments such as the 169 ILO convention for indigenous and tribal peoples (Fontana & Grugel, 2016). The space of the nation-state on the other hand, is strengthened and made more visible by the presence of oil as a centralized state-owned revenue and simultaneously weakened by rent-seeking logic and state multiplication that often accompanies oil windfalls (Watts, 2004). The space of indigeneity thus also works as a mechanism of state multiplication and helps to undermine the space of the nation-state. Although Watts’ report show many similarities with Karl and Ross, he shows that one should always keep in mind that oil by itself also has transformative psychological capabilities. Furthermore, Mitchell and Watts show how the physical capacities of oil define how economic and political relationships are engineered around this substance. The next section

13 Churchill declared this after Britain was able to seize control over Iran’s oil industry. 14 For example, in a speech in 2005 Chavez said the following: “The United States government would very much like to keep all our oil for itself. But our oil reserve does not belong to Mr. Bush. The oil belongs to the Venezuelan people.”

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gives a textbook example of how oil can be used as an instrument of economic and political calculation to forward certain interests by carefully framing its modes of production.

3.3.3 Peak oil The question on when the planet’s oil reserves will ever completely run out is not a

particularly interesting one. Long before this will happen, we will have reached the point

where the cost of extraction will have exceeded its return on investment and where oil

production will start its permanent decline. The important question however, is whether this

consideration will be made before we lose the capability of maintaining a sustainable future

for our planet. The concept of peak oil was first introduced by M. King Hubbert (Hubbert,

1956) and is essential to understand the boom-bust cycles that characterized the history of

the Peruvian oil industry, as well as the advertising strategies that the Peruvian government

employs. Hubbert proposed that the production curve of a single oil well can be modeled by

a bell-shaped Gauss curve, with at its highest point, the point of peak production. Now, by

aggregating the bell-curves of already known and future oil wells, and by adjusting for

increases in consumption and declines in new discoveries, provided this information is

available, one can estimate the time of this peak in a certain region. This is how Hubbert

predicted American oil production would peak in the 1970s, which it did at 9.6 million barrels

per day in 1970.15 He later predicted that world oil production would peak around the year

2000 (Hubbert, 1971).

These predictions are highly dependent on the quantity of newly discovered oil reserves and

it is mainly this variable that the major oil consortiums have tried to manipulate. To enhance

the discovery of new oil reserves, the industry has resorted to ever more costly techniques to

prospect ever more difficultly accessible and lower quality oil. When defining the cost of

extraction, one should not only take into account monetary costs but also energy costs,

which grow due to increasing amounts of energy required to drive the processes that are

needed to bring the oil to the surface. These energy costs are perhaps best represented by

the ‘Energy Return on Energy Investment’ (EROEI) (Hall & Murphy, 2009). When the energy

invested to extract a certain quantity of unused energy becomes too high, it is naturally no

longer worth the effort.

In order to distinguish between the more readily available forms oil and the oil that has only

recently been accessible due to new technological advancements, the terms ‘conventional’

and ‘unconventional oil’ have been introduced (Sorrell, Speirs, Bentley, Brandt, & Miller,

2010). Conventional oil can be produced through traditional drilling and pumping techniques

and flows without additional stimulation due to the reservoir’s natural pressure.

Unconventional oil is produced through more advanced techniques and includes ‘tight oil’

from low-permeability rock layers harvested using hydraulic fracturing or ‘fracking’ (King,

2012); synthetic oil, which is produced from the oil precursor kerogen, that is extracted from

crushed shale rocks or ‘oil shales’ (Andrews, 2006); and oil from ‘oil sands’, a very viscous

crude bitumen, which is mainly found in Canada in unconsolidated sandstone and which

requires heavy processing (Gosselin, et al., 2010).

Despite the higher costs and risks for the environment, these techniques are developed to

boost the quantity of proven oil reserves. The need for new reserves is high, since every year

the yield from conventional oil fields already in production is declining (rate of decline of 4.5%

in 2006) (Höök, Hirsch, & Aleklett, 2009). Therefore, each year oil producers need to find an

additional supply of over 3 million barrels per day, which is equivalent to the production of

15 From the U.S. Energy Information Administration’s reports on the U.S. field production of crude oil it is clear that oil peaked in 1970, but has risen again from 2008 onwards. The reasons for this sudden increase are explained further in the text.

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Saudi Arabia, in order to fill this downturn from existing sources (Sorrell, Speirs, Bentley,

Brandt, & Miller, 2010). Moreover, to avoid losing investments to alternative renewable

sources of energy, the oil industry needs to uphold the image of a sustained future for carbon

energy.

Apart from developing unconventional oil and adding these often unreliable estimated yields

to the world’s proven reserves, there is another mechanism to uphold this image:

(introducing) uncertainty in the measuring and reporting of oil reserves. Estimating oil

reserves is in itself a difficult operation. Researches make use of geophysical data and

seismic prospecting, sampling irregular and inaccessible spaces, to come to a statistical

model which gives probabilistic rather than certain results (Lee, 2008). Furthermore, there is

a lack of internationally binding standards and there are ambiguities in the classification of

commercially exploitable reserves. For example, oil reserves are classified, depending on the

probability of commercial exploitability and taking into account the current technological state

of the art and market prices, into proven (≥ 90%), probable (≥ 50%) and possible (≤ 10%)

reserves. Most exploration surveys report P1 (= proven + probable), P2 (= proven +

probable) and P3 (= proven + probable + possible) values. Much of the public debate on oil

reserves has been caused by confusion on P1 and P2 reporting (Bentley, Mannan, &

Wheeler, 2007). Also, there have been events of intentional misreporting and withholding of

information by OPEC countries, which supported their political and economic agendas and

significantly inflated reported reserves (Owen, Inderwild, & King, 2010). Finally, these

estimations are further complicated because they have to address variables such as future

production costs and demands, technical feasibility of certain strategies and political factors

like armed conflicts, regime changes and environmental regulations.

Paradoxically, oil advocates also use these arguments to their own advantage, stating that

the exploitation of new oil reserves is merely a question of creating the proper political and

economic conditions. The availability of oil then becomes a question of human choice and

does no longer rely on biophysical facts. Still, one has to be very aware that a proven oil

reserve is in fact “a virtuality” (Barry, 2013), it is an instrument of economic and political

calculation that can be used to direct investments, influence oil pricing and allow the major oil

companies to continue expanding their increasingly costly and harmful operations. Generally,

these operations are led by technological advancements and involve the building of new

infrastructural networks. Moreover, it are often infrastructures that entail threats to the

environment and through which social abuse in the oil industry is effected. This infrastructural

organization and its implications will be discussed in more detail in the next sections.

3.4 Oil infrastructure An infrastructure often appears to us as something very boring, something non-human and technical, there to sustain certain other more important processes. Even to such extent that it becomes almost invisible to us. However, recently more and more scholars have taken an interest in studying infrastructures as part of human organization and therefore as a relational structure (Star, 1999). Infrastructures are networks built to allow the circulation of goods, knowledge, people and ideas. This makes them into more than just a ‘thing’, but something that provides a connection between things and therefore also regulates a possible disconnection. They form a boundary between the material and immaterial, but this boundary is often blurry and shifting. The different technical standards and specifications tell us something about the socio-political conceptualizations that came before their construction or about the ideology behind the infrastructure. Mitchell already demonstrated how infrastructures contain a technical vulnerability through which political claims can be forwarded, or how pipeline networks and wells are constructed to extend or limit political control in the Middle East (see section 3.3.1). Larkin in this context

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proposed the concept of ‘poetics of infrastructure’ and talks about how an infrastructure is “loosened” from its purely technical function (Larkin, 2013). As is the case with oil, infrastructures can emerge as a form of desire or fantasy. They can reflect the creation of a modern liberal society and bring the promise of change. In order to be modern one has “to live with and by means of infrastructures” (Edwards, 2003). Furthermore, tracing infrastructures can uncover certain political rationalities and modes of governance. These rationalities can be discerned through the location, the function, the financing, the time-frame and the associated geographical, cultural and social linkages of the chosen infrastructural project.

3.4.1 Disentanglement and enclaves Railways, tankers, pipelines, (offshore) oil rigs and refineries all form part of the infrastructure that is needed to produce and transport oil and distribute it to the world market. Apart from their technical character these structures have profound socio-political implications as they regulate dynamics of control, authority and responsibility. In most developing oil-exporting countries, oil production takes place in enclaves, both onshore and offshore. These oil enclaves are possibly the most meaningful example through which we can explain these infrastructural dynamics. An enclave in its more formal meaning is ‘a detached part of a country surrounded by another state’. An enclave in oil context is a segregated space in which a private transnational company invests to establish oil production facilities. In return for these investments the government grants the enclave a special legal status, which often involves exceptional labor laws and tax regimes and the permission to install private security measures. Usually this site is fenced and walled off to create a clear distinction between the enclave and its surrounding (Sidaway, 2007). Most notably the enclave becomes a space through which oil companies perform the works of entanglement and disentanglement. The project of disentanglement constitutes an efficient way for oil companies to generate oil revenue, while abdicating responsibility for the country’s local social, economic and environmental conditions (Reed, 2009) (Ferguson, 2006). These infrastructural borders however, do not delineate a pre-existing separation. They are part of a framing project that creates an apparent distinction between the compound and the outside world. Corporate Social Responsibility (CSR) programs thereby strengthen the illusion that the companies are not responsible for the poverty-struck, polluted and corrupted society that surrounds them, while they are still willing to help those on the outside. Simultaneously, these programs also reflect the deep entanglements of the company with the country’s social, economic and environmental fabric. Entanglements that become visibly clear if one perceives the steel pipes that run from walled oil enclaves to the coastal refineries, as a symbol for (dis)connection. The enclave thus constitutes a negotiated and contracted space through which to enact particular forms of “infrastructural violence” (Appel, 2012a). The next section will briefly discuss some other examples of infrastructural violence that can later be linked to practices in the Peruvian Amazon.

3.4.2 Infrastructural violence What the oil tanker is to the offshore rig, the pipeline represents for the onshore enclave. It allows for an undisturbed transportation of the liquid oil out of the enclave, thereby breaking the local linkage. For the population in the surrounding communities it poses a double threat. First, they see the oil wealth pumped and moved away from underneath their feet, undermining their bargaining position and limiting the possibility for making claims over ownership of the land or the natural resources it contains. Second, the pipeline is a constant reminder of a potential environmental disaster due to explosions or leakages. On the other

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hand, pipelines provide opportunities since they form a “tactical node”16 where the flow of oil is concentrated. The pipeline setup is therefore vulnerable to sabotage by activists or terrorist groups. This is how pipelines can become important catalysts for conflict and form sites of political contestation. In Nigeria for example, different indigenous families compete to derive small benefits from the presence of oil activities on their lands. They organize themselves in so-called “oil-bearing communities” (presence of flow stations and oil platforms) and “pipeline communities” (presence of an oil pipeline) and use claims of ownership over land to win the privilege of being contracted by the oil companies for different maintenance jobs as compensation (Adunbi, 2011). Not only does this pitch the different families against each other to gain control over strategic pieces of land, but Shell also claims that the youth of the area frequently sabotages the pipelines in order to forward their political claims. On the other hand the ‘host families’ suffer from serious environmental degradation due to numerous oil spills, that may or may not have natural or structural/mechanical causes.17 All of these dynamics point to the forms of disequilibrium that exist between communities and multinational corporations. Apart from these more direct forms of infrastructural violence caused by oil spills, there are also many other secondary effects attributed to oil operation infrastructure. Researchers have calculated a modified Landscape Infrastructure Footprint (LIF) of the oil operations in Venuezuela’s heavy oil belt. Primary and secondary oil-related facilities such as roads, wells, pipelines and so on “increase landscape fragmentation and degradation, reduce biodiversity, disrupt important ecosystem services and attract informal settlements that further alter the landscape, deplete area resources and lead to social conflict” (Baynard, 2011). Another paper reported on the negative effects of road building in the Peruvian Amazon due to deforestation of road margins (Mäki, Kalliola, & Vuorinen, 2011). The next section explains how the oil industry has tried to alleviate some of these damages. It is a process that in itself uses infrastructures as a framing device as a way to earn goodwill from the local population.

3.4.3 Materials and information production The oil industry has since some time promoted the minimization of the disruptive effects of

materials and persons or has at least actively tried to create such an image. The start of the

21st century marked a conversion to CSR for many important oil companies such as BP,

ExxonMobil and Royal Dutch/Shell, after decades of neglecting social and environmental

hardships (Wells, Perish, & Guimaraes, 2001). Due to external public pressure, but also due

to resulting competitive advantages, these companies have engaged with the local

population to implement different community development schemes, such as the building of

hospitals, educational programs and the joint alleviation of environmental problems, although

these schemes have not always produced the promised results (Frynas, 2005). Furthermore,

these pressures have driven the industry and national governments towards the installation

of a ‘best practice’ of transparency, which has been complemented by an increased

production of information on the environmental, geological, technical, financial, legal and

social aspects of oil exploitation projects (Gillies, 2010). This kind of transparent provision of

information enables outsiders “to have an informed voice in decisions and/or to assess the

decisions made by insiders” and has also been formulated as the ‘right to know’ (Florini,

2007).

16 Michael Watts talks about ‘tactical nodes’ for holding up supply and the enclave character of the industry in his paper Resource Curse? Governmentality, Oil and Power in the Niger Delta. 17 According to Hammer, J. (1996). Nigeria crude. Harper's Magazine, just in Ogoniland one-hundred-eleven oil spills occurred between the years 1985 and 1994 and there are yearly about three-hundred spills in the Delta since the 1970s.

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In his book Material politics: Disputes along the pipeline Barry shifts his focus specifically to the production of information on the construction and maintenance of infrastructures. Recently, large infrastructural projects such as pipelines are increasingly accompanied by preliminary studies on environmental impacts and reviews on material quality and compatibility. Furthermore, new wireless sensor networks help to continuously asses the stability and integrity of the pipeline after completion (Jawhar, 2007). However, Barry argues that “the implementation of transparency, along with the growing salience of other core principles of transnational governance and social and environmental responsibility, foster new forms of dispute” (Barry, 2013, p. 5). In this light, objects should be brought back into the center of political life, as objects can offer us new ways of achieving closure even if we’re not agreeing on much else. There is a hidden coherence in the material surroundings we are attached to and objects can therefore form an important starting point of discussion and (dis)agreement (Latour, 2005). However, this means that in a technological society, more often than not, decisions are made without experts agreeing on what is the issue at stake or on how it has to be solved. Therefore it is crucial that we acknowledge that “material objects should not be thought of as the stable ground on which the instabilities generated by disputes between human actors are played out; rather, they should be understood as forming an integral element of evolving controversies” (Barry, 2013, p. 8). The controversies concerning material objects are however not limited to disagreements about the evidence itself. These controversies also include the relevance of the perceived evidence, the methods and instruments used to produce the evidence and finally, the theories that are used to interpret the evidence (Collins, 1981). Furthermore, the nature of expertise, meaning the qualifications, interests and credibility of the experts (Collins & Pinch, 1998); the degree to which the work has been peer-reviewed (Power, 1997); the transparency and accountability of the research; and opinions on what does and does not count as expertise or on the validity of contributions of non-experts (Wynne, 1996), can also be controversial. Moreover, since the aim of these material studies is to evaluate the impact of the oil industry and its appendages on society as a whole, one cannot exclusively rely on natural scientific knowledge, but also needs to draw on social research and political evidence, such as public interests and the organization of public participation, financial, political and colonial power imbalances and the relationships between knowledge and democracy (Jasanoff, 2004). Transparency is often seen as something normative, impartial and naturally leading to better conflict resolution. In reality this is not the case. This is because “the very exercise of transparency informs the way that certain processes and events, such as environmental and social impacts, become the objects of public dispute, while others do not” (Barry, 2013, p. 17). The exercise of transparency thus learns us something about how corporations manage flows of information, to reveal and highlight certain parts of their operation while hiding others and thereby externalizing a specific version of the internal dynamics of the organization (Neyland, 2007). The ever-growing publicly available body of information does not necessarily make the oil business more transparent, but on the contrary creates new areas of discussion where the significance and truthfulness of this information is put into question. This scrutiny will then shed light on the possibly violent or corrupted links between companies and government and the real socio-economic impact of the industry. In the sections 4.2 and 4.3 we will further clarify how the practices of transparency and information production are used by the Peruvian government agencies to avoid taking up responsibility for the oil spills and to hamper the negotiation processes with indigenous communities.

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4. The Peruvian Case

4.1 Oil and Amazonia The Peruvian Amazon covers about 60% of the Peruvian land area, which makes Peru the

country with the third largest portion of tropical rainforest in the world, after Brazil and the

Democratic Republic of Congo. The forest is known for its high degree of biodiversity

because of its varying altitudes, containing around 10% of the world’s known wild fauna and

flora (Rodríguez & Young, 2000). It spreads over five large regions of which Loreto is by far

the biggest one, as it covers an area of 368,851 km².18 Numerous important rivers cross the

region, such as the Amazon, the Putumayo River and the Marañón. The Peruvian Amazon is

sparsely populated compared to the rest of the country and is home to a population of 3.6

million, including 300.000 indigenous people originating from fifty-nine different ethnic

groups. (INEI, 2007) Apart from indigenous peoples, also many ‘mestizos’ reside in the area.

The thousand-eight-hundred-and-nine communities accommodate sixteen different linguistic

families and are represented by sixty-five indigenous federations.19

Like in most parts of Latin America, the indigenous peoples have suffered from a long history

of colonial repression. Colonization also heralded Peru’s protracted engagement with

extractivism. In order to finance Spain’s national debt and empirical ambitions, and incited by

the myths of El Dorado, the Spanish conquistadores put the natives of Peru to work as

forced laborers or slaves in the silver and gold mines of the Peruvian Andes. The Amazon

region initially experienced a less profound colonization process, but the 19th century rubber

boom intensified migration of workers and corporations to the jungle areas (Barham &

Coomes, 1994). Over the past couple of centuries, the original population has endured

systematic land-grabbing, persistent violence and cultural and social discrimination. Even

after the formal independence of Peru, colonialism continued in domestic form; with the

mestizo leadership pursuing a “state-sanctioned civilizing project” to promote the

establishment of a national extractive economy and a unified Peruvian people (Dean, 2002).

This strong will to organize society and to alter the production of knowledge itself to fit the

Western model of civilization is what Mignolo calls the “darker side of Western modernity”. It

is a force that constantly produces and reproduces the mechanisms of colonialism, as if

modernity and coloniality are two sides of the same medal (Mignolo, 2007).

The extractive economy has often been perceived as an opportunity through which to

achieve this modern society and it is therefore been the vanguard of colonial encroachment.

From 1850 to 1920, the rubber industry has been the symbol of neo-colonial oppression

(Hvalkof, 2000). Later, this role was gradually taken over by the coca and mining industry

and finally by the international oil companies.

4.1.1 History of oil extraction According to the Peruvian constitution the state is the sovereign owner of all the subsoil

natural resources, even if the land has been entitled to individual citizens or indigenous

groups. Furthermore, the state has the power to grant concessions and licenses to private

individuals or transnational companies for exploration and exploitation of these resources.20

Peru’s petroleum history begins in 1963 when a first commercial well was drilled in the

Tumbes basin to produce oil from the Zorritos field. Large-scale oil exploration in the Amazon

18 See Figure 1. 19 See AIDESEP, La Asociación Interétnica de Desarrollo de la Selva Peruana: http://www.aidesep.org.pe/quienes-somos/. 20 See Article 66 of the Peruvian constitution published by the Congress of the Republic in 2009: http://www.congreso.gob.pe/Docs/files/CONSTITUTION_27_11_2012_ENG.pdf.

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jungle only started much later in 1971 due to the difficult accessibility of the region.21 After

some promising discoveries by state-company Petroperú and the private company

Occidental Petroleum Co. (OXY), many other companies started an aggressive exploration

campaign, triggered by the new El Dorado of black gold. These operations were never as

successful as the early findings of 1971 (Santos-Granero & & Barclay, 2002).

At the peak of Peru’s first exploration boom in 1973, the state had granted companies

nineteen exploration and three exploitation contracts.22 Block 1AB (later extended to block

192), operated by OXY and block 8, operated by Petroperú, were soon identified as the two

most promising concessions. For a geographic overview of the oil blocks in the Peruvian

Amazon see Figure 2. Both blocks are part of the subandean hydrocarbon megatrend that

runs from the north of Venezuela to the south of Argentina and are situated in the central

Maranon basin in Loreto that produces medium heavy oil.23 Block 192 is located in the higher

parts of the Pastaza, Corrientes and Tigre river, which provide the block with convenient

ways of access. Block 8 is located in the lower basins of the Corrientes and the Tigre.24 This

region is mainly populated by Achuar, Quechua and Urarina indigenous people. Both blocks

are connected to Peru’s northern coastal refineries by the ONP.

Due to the nationalization of some large oil fields, oil production significantly increased near

the end of the 1970s. In 1979, block 1AB became Peru’s most productive oil site with a peak

production of 109.000 barrels per day, whereas block 8 had a daily production of 21.000

barrels. National oil production peaked at a year total of 69 million barrels.25 Even at its

heyday the Peruvian oil industry was still a minor player on the oil market, with only 1.9% of

the production capacity of major oil states such as Saudi Arabia.26 After 1980 however,

production started to decline due to lack of investments, difficult accessibility of the oil

production sites and unsuccessful exploration activities. To reverse this trend the

Hydrocarbons Law (Law N° 26221) was passed in 1993, establishing a new state-owned

company, Perupetro. This agency was tasked with overseeing new investments, contracts

and contracted firms, including Petroperú which was to be privatized. Petroperú remained

the country’s pipeline regulator, but would gradually transfer its oil fields to the private sector

and is now mainly engaged with downstream activities, such as transportation, distribution

and marketing of hydrocarbons.27 These reforms marked a significant increase in

investments and concessions contracts, with a peak in 1998 when twenty-six exploration and

fifteen exploitations concessions granted.28 However, despite the reforms overall crude oil

production kept declining in the years after 1998. This resulted in an increased focus on the

exploitation of natural gas. The discoveries in Camisea and the following Camisea Gas

Project in the Cuzco region for example, boosted Peru’s proven natural gas reserves and

resulted in new rounds of investment in blocks 88 and 56.29

The massive increase of oil prices from 2002 onwards, marked the start of a second and

much bigger exploration boom, with an unprecedented amount of exploration and

21 See PERUPETRO S.A. Presentation, Bidding round 2010, Lima / Peru (May 2010), Hydrocarbon Exploration and Exploitation Activities in Peru. 22 See Figure 3. 23 See PERUPETRO S.A. Presentation, Colorado Convention Center – SEG 2014, Denver / USA (October 2014), Hydrocarbon opportunities in Peru. 24 See Figure 2 for a map of the different concessions in the Peruvian Amazon. 25 See Petroleos del Peru, Memoria Annual (1979). 26 Calculated from http://www.geddis.org/bets/peakoil/eia-doe-1960-2006.html. 27 See Law N° 26221 – Organic Law for Hydrocarbons. 28 See Figure 3. 29 See PERUPETRO S.A. Presentation, XXIII La Jolla Conference on Energy, San Diego / USA (May 2014), Spotlight on the Camiseo Project at 10: Reflections and the Outlook for Peru’s Historic Natural Gas Project and the Country’s Hydrocarbon Sector.

27

exploitation concessions. Because of these new contracts, oil and gas concessions covered

41.2% of the Peruvian Amazon in December 2009, compared to 7.1% in 2003 (Finer & Orta-

Martínez, 2010). It is remarkable how well the intensity in exploration matches the

international oil pricing (excluding the 2008 drop due to the financial crisis). Furthermore, it is

remarkable how exploration contracts more than quadrupled between 2002 and 2009, while

the exploitation contracts did not even double in the 2002-2015 timespan (given that

exploitation naturally lags behind exploration).30 High oil prices ensure high return on

investments, therefore motivating companies to pursue riskier exploration activities, which

explains the huge increase in exploration contracts after 2005. However, these operations

have not provided the hoped for results, which is reflected by the difficulties Perupetro has in

contracting exploitation of new wells and the continuously declining overall oil production.31

High oil pricing has two other effects on the economic calculation of oil exploitation: it allows

for unconventional oil production and alters the classification of proven, possible and

probable oil reserves. This explains the jump in probable reserves that we observe in 438 to

692 million barrels in 2005.32 This increase was due to the addition of reserves in block 67,

that were first discovered in the late 1990s, but were deemed commercially uninteresting at

that time. The oil found in block 67 is mainly unconventional heavy oil, as are most other

reserves that are under consideration of exploitation.33 34 High oil prices however, made this

concession into a financially feasible project (Orta-Martínez & Finer, 2010). The gradual

collapse of oil prices after 2008, prevented this field from reaching its estimated potential of

100.000 barrels per day.35 In the period from 2005 to 2013, we also observe a nearly

doubling of the proven reserves. In 2015 however, we see that the amount of proven

reserves and especially the amount of probable reserves has collapsed. This basically

means that a large portion of the reserves that were classified as probable or proven before

2015 have been re-classified. This could be due to dropping oil prices or due to over-

optimistic calculations that were later reevaluated. We have to keep in mind as well that

reporting on these reserves has its own political agenda, as these reports determine the

investment potential of a country’s oil industry (see section 3.3.3). Therefore it is likely that

these estimations are often exaggerated. The major increase in possible reserves does not

provide Peru with a stable perspective on the future, as these are mostly reserves that are

extremely difficult to exploit and oil prices are still not on the rise.

In 1996 block 8 and in 2001 block 1AB were transferred to the Argentinian company

Pluspetrol Corporation S.A. from OXY and Petroperú respectively. When Pluspetrol’s

concession in 1AB expired in August 2015, the company did not renew its contract because

of several reasons. First of all, oil production in the block has been continuously declining.

While average production between 1971 and 2008 reached 70.000 barrels per day, it only

amounted to about 8000 barrels per day by 2015.36 Experts project that production could

expand back to 25.000 barrels per day, but to achieve this new investments are needed to

perform new exploration activities and to remediate environmental liabilities. Even though

block 192 (including 1AB) has 71 million barrels proven reserves , these are risks not many

30 See Figure 3 and Figure 4. 31 See Figure 6. 32 See Figure 7. 33 The energy needed to produce and upgrade a barrel of heavy oil can be as high as 40% of the harvested energy, therefore heavy oil exploitation needs high oil prices to justify its operations. 34 See PERUPETRO S.A. Presentation on the World Heavy Oil Congress 2014 in New Orleans / USA (March 2014), A Focus on New Heavy Oil Developments – Peru. 35 See Barrett Resources LLC Presentation, Block 67. 36 See Petroperu, Estadistica Petrolera (2008).

28

companies are currently willing to take.37 Secondly, negotiations with indigenous federations

did not go as planned.38 A third reason is the very precarious condition of the outdated ONP,

where more than one-hundred oil spills have been reported since 2007.39 Finally, the

government was able to negotiate a two-year service contract with Pacific Exploration and

Production as an intermediate step while awaiting the final bidding on the new thirty-year

contract that was first under auction. However, due to a major oil spill on 03/02/2016 the

ONP has been closed for the remainder of 2016 and will most likely only come back in

operation in the second half of 2017.40 This resulted in a nearly total halt of production in

block 192.41 On January 31, 2017 Pacific E&P reassumed activities in block 192.42

Meanwhile, Perupetro is still trying to advertise block 192 and twenty-six other previously

unexplored blocks, while putting more focus and stating the necessity of production of heavy

oils in those areas.43 The company advertises Peru as an “underexplored country”, because

“98% of the wildcats44 drilled are concentrated in just four basins”. But what they forget to

mention is that these basins cover 37% of Peru’s total land surface and that two of these

basins (Marañón and Ucayali) cover 58% of the Peruvian Amazon. As Orta-Martinez and

Finer pointed out, 69,1% of the Peruvian Amazon has been under concession at some point

between 1970 and 2009. (Finer & Orta-Martínez, 2010) The fact that the Peruvian oil industry

is slacking is therefore not owing to Peru being an underexplored country. The reasons for

the disinterest of suitable oil companies are more likely to be found in the complexity of

Peru’s oil reserves, their difficult accessibility, rather poor quality and environmental and

sociopolitical sensitivity. Together with the recent decreases in easily exploitable

conventional reserves and the complete collapse of production in blocks 8 and 1-AB, these

are some clear indications that the future of the petroleum industry in Peru does not look too

bright.

4.1.2 Economic perspectives There are two main sources of government revenue linked to hydrocarbon licensing in Peru:

royalties and income taxes. Royalties are paid as a percentage of the gross hydrocarbons

output. By lowering the royalty percentage, a country can attract more investment to the

sector, since companies can retain more of the production value. Usually, fixed and variable

royalties apply based on collected revenues and made expenses for production. In the

Hydrocarbons Law of 1993, the government agreed to reduce the average royalty

percentage from 50% to a negotiable percentage between 15% and 35% (Kuramoto, 2008).

Rafael Zoeger, president of Perupetro, has even been planning to reduce royalties to a mere

5%, to attract more investments in the context of low oil prices.45 Income taxes are regulated

according to the general tax laws at a rate of 30% (Kuramoto, 2008).

Figure 10 shows a chart of the government revenue the gas and oil industry generated

through income taxes and royalties and how much this contributed to the general

37 See La producción de petróleo en la Selva Norte y Central: Retos y oportunidades by Eleodoro Mayorga Alba. 38 See section 4.1.5 and http://www.perusupportgroup.org.uk/article-915.html. 39 See section 4.3. 40 See Table 3 for an overview of the different oil spills. 41 See Figure 6. 42 See Pacific E&P, Management Discussion and Analysis (May, 2017) 43 PERUPETRO S.A. Presentation on the World Heavy Oil Congress 2014 in New Orleans / USA (March 2014), A Focus on New Heavy Oil Developments – Peru. 44 A wildcat well is an exploratory well that is drilled in an area that has no known production records and has been unexplored as a site for potential oil and gas output. 45 See http://gestion.pe/economia/perupetro-negocia-reduccion-regalias-petroleras-impulsar-produccion-2181690.

29

government revenue of Peru in the time period from 2003 to 2016. Hydrocarbons

government revenue has seen a significant increase from 2003 to 2011 (the years of high oil

prices), but in 2016 Peru is back on the level of 2005. Oil and gas revenue had a maximal

contribution of 2.10 % and a minimal contribution of 0.68% to the general government

revenue in 2011 and 2016 respectively, with an average percentage of 1.47 %. The

hydrocarbons sector’s Gross Value Added (GVA) amounted to 0.75% of GDP, compared to

4.18% for the mining sector, 7.40% for the agricultural sector and 1.35% textile.46 These

numbers make clear that the hydrocarbons sector is actually a fairly small sector in terms of

GVA. The sector still amounts to a significant portion of government revenue, as the

government can levy extra royalty taxes on top of the regular income taxes.

Government revenues are further divided among the national government, regulating institutions and local and regional governments. The ‘canon petrolero’ to local and regional governments was established in 2001 through the Canon Law N° 27506. With this canon the regions where the natural resources originate from, can collect part of the revenue generated by their production. As is defined in Law N° 29693 (a modification to the Canon Law), the canon consist of 15% of the production value and 50% of the income tax revenue on both service and exploitation operations, while the departments Loreto, Ucayali, Piura and Tumbes receive an additional sobrecanon of 3.75% of the production value. Further distribution in each of the regions is determined ad hoc and is therefore different for each region. The distribution in Loreto is according to Table 1. Figure 11 gives an overview of the revenues Loreto collected through the canon and sobrecanon over the past fourteen years. Between 2004 and 2014, the money transferred by these canons represented around 30% of the total amount transferred to the department.47 Although the regional government of Loreto is obliged to spend 5% of this money on programs in the communities where the oil is produced, these funds have often been mismanaged in the past.48 Despite the (historical) economic importance of block 1-AB and 8, Loreto still remains one of the most backward regions of Peru. In 2013, only 25% of the population had access to clean drinking water. Only half of the children have attended secondary school.49 Furthermore, in 2015 the average family income per capita was 392 soles, compared to a country average of 554 soles. Loreto ranked nineteenth out of twenty-six regions.50 Figure 8 and Figure 9 indicate how investments have evolved in block 8 and 1-AB and in the

overall sector since 2005. The second exploration boom ensured a steady increase in

investments until the crisis of 2008. From that point we observe that Pluspetrol did no longer

invest in block 1-AB and investments in block 8 were minor. The lack of investments in 1-AB

can be explained by the fact that Pluspetrol’s contract would expire in August 2015, which

means that part of the investment would be lost if the contract would not be renewed,

something, as we have seen, the company was hesitant to do. Furthermore, production

results from these blocks were gradually deteriorating, so that the company redirected

investments to the much more promising Camisea Project.51 The Camisea blocks 56 and 88,

46 See INEI, Producto Bruto Interno por Sectores Económicos 1950 - 2016. 47 See Grupo Propuesta Ciudadana, Informe de Ingresos y gastos por canon Petrolero - Loreto, January 2015 48 For example, in 2008 and 2009 the communities only received respectively 21% and 47% of the money they were entitled to. See p. 13, Comisión de Justicia y Derechos Humanos (Legislatura 2012-2013), Informe de Representación, Vulneración de derechos fundamentales de los pueblos Amazónicos asentados en las cuencas de los Ríos Pastaza, Tigre, Corrientes, Marañón. 49 See Chaikuni Institute, Oil Dependency and the Peruvian Amazon. 50 See INEI, Evolución de la Pobreza Monetaria en el Perú (2015). 51 See Petroperu, Memorias Anuales 2005-2016.

30

which produce natural gas, accounted in 2015 for around 55% of Peru’s hydrocarbons

production, whereas block 8 and 1-AB only accounted for 10%.52

The Camisea Project is one of the only recent success stories in Peru. This might be a

reason why we now see a complete collapse of investments, despite efforts by the

government promoting new exploration activities in the jungle areas and new natural gas

concessions and reducing royalty taxes. Furthermore, Petroperú is being reorganized to

again take up exploration and exploitation activities, something it hasn’t done since the mid-

1990s when the company was privatized. 53 In this way Petroperú looks to enter into a deal

with Pacific E&P, when the 192 concession will expire. One of the proposed models sees the

concession transfer to Petroperú and be jointly operated by both companies. In exchange for

investments, Pacific E&P would get a 75% stake, whereas Petroperú can use the oil to

supply its Talara refineries that will receive a 3.5 billion dollar upgrade.54

At the same time, spurred by the recent natural gas discoveries and the projected future

natural gas consumption, Peru is looking to diversify its energy matrix.55 By 2025, it wants to

achieve an energy mix of 65.7% natural gas and NGL, 20% renewable energy, 13.8%

petroleum and 0.5% carbon energy.56 All in all this is a good evolution, since natural gas is a

much cleaner source of fuel than gasoline or coal. The problem remains in the plans that are

being made for continued exploitation of the relatively small jungle reserves, since these

plans do not sufficiently take into account the unpredictable and possibly irreversible effects

on environment and public health. Forty years after the start of exploitation in the Peruvian

Amazon, these effects are only now starting to become clear and will most likely lead to high

new costs in health expenditure, social development and environmental rehabilitation.

4.1.3 Environmental threats and regulations Oil exploration and exploitation involves high risks for the surrounding environment and

performing these activities in remote, environmentally sensitive areas such as the Peruvian

Amazon is a complex task that needs to be carefully evaluated and monitored. The impact of

the exploration phase is usually limited, since recent development in 3D seismic high

resolution surveys and other remote sensing devices has reduced the need for extensive

drilling of exploratory wells. Nevertheless, exploratory and production wells produce

contaminated drilling muds and fluids. The wellbores can provide a path for contaminants to

reach groundwater reservoirs or vice versa for subsoil formations or petroleum residues to

pollute waterways and rivers. The greatest impact during exploitation of the well arguably

comes from toxic produced water. Produced water is water that is extracted to the surface

along with oil and gas. It can comprise up to 98% of the waste generated by the oil industry,

especially for oil wells at the end of their productive lives (Veil, Puder, Elcock, & Redweik Jr,

2004). The water is typically disposed of by reinjection into disposal wells or into oil recovery

wells to increase pressure and produce more oil. If not reinjected, it is often discharged into

surface waters (O'Rourke & Connolly, 2003). Produced water is very saline, containing high

concentrations of chloride, sodium, calcium, magnesium, and potassium. Furthermore, it

contains heavy metals such as barium, cadmium and iron. The water is usually treated

before discharge in order to minimize its harmful effects (Onojake & Abanum, 2012). Other

potential sources of contamination are oil spills from pipeline degradation, spills that occur

52 Now these percentages have evolved to 60% and 5%, keeping in mind that block 1-AB is temporarily not in operation. 53 See Peru’s Oil & gas investment guide 2017/2018. 54 See http://www.reuters.com/article/us-Petroperú-pacific-e-p-idUSKBN181291. 55 Natural gas consumption will increase from 13% in 2014 to 35% in 2025 of total energy consumption: See Ministerio de Energia y Minas (MINEM) Presentation, Plan Energético Nacional 2014-2025. 56 See Peru’s Oil & gas investment guide 2017/2018.

31

during maintenance and drilling, gas flaring and venting and dumping of solid domestic

wastes near the oil production sites. Additional indirect environmental issues include the

building of roads, illegal logging, trafficking in endangered animals and hunting of bushmeat,

which is one of the vital native subsistence resources.57

OXY has drilled two-hundred-fourteen wells from 1972 until 2000 in block 1-AB. After 2000,

thirty-seven more wells were drilled by Pluspetrol. In Block 8, Petroperú drilled the first

hundred-twenty-two wells before 1996, while Pluspetrol was responsible for drilling sixty-four

wells after 1996.58 Since no legal requirements concerning environmental conservation were

present in the mid-1970s, OXY was not obliged to control contamination caused by oil

production or exploration. Already in 1984, the Oficina Nacional de Recursos Naturales

(ONERN) reported that 1-AB area was “the most environmentally damaged region of the

country”.59 It took more than a decade for the General Directorate of Environmental Affairs to

finally make work of a thorough ecological evaluation of the area in 1996. They calculated

that over 10.000 hectares in block 1-AB were directly affected by OXY’s operations and

stated that different rivers were polluted due to oil spills for which OXY was responsible.60 In

OXY’s own Environmental Management Plan, it was determined that the production waters

from the central separator were directed via a drainage system to the main rivers of the

region.61 This is how OXY and Petroperú discharged a daily average of 85.000 barrels of

produced water in the Corrientes River (La Torre Lopez, 1999).

When the concessions were passed onto Pluspetrol in 1996 and 2000, they also inherited

the existing problems and pollution, including the poor disposal practices of produced waters.

In 1996, the Environmental Management and Adjustment Program (Programa de

Adecuación y Manejo Ambiental - PAMA) establishes concrete obligations and

responsibilities for Pluspetrol concerning block 1-AB and 8, including the remediation of the

contaminated areas the latest in 2002.62 Pluspetrol did not comply to these arrangements

and did not remediate the damages, as they argued that they were caused by OXY.

Nevertheless, the modified contract of 2002, reaffirmed these obligations.63 Supervisory

Organ for Investment in Energy and Mining (OSINERGMIN) reported that in between 1998

and 2006, 6619.7 barrels of crude oil have been spilled. Most notably, in October of 2000

Pluspetrol caused a major oil spill and 5.500 barrels of crude oil ended up in the Maranón

River near the community of San José de Saramuro.64 In 2005, Pluspetrol presented a

Complementary Environmental Plan (Plan Ambiental Complementario – PAC) defining

seventy-five affected areas in block 1-AB and twenty-seven areas in block 8.65 Furthermore,

the Environmental Management Plan (Plan Manejo Ambiental – PMA) approved in 2007 set

57 See Orta-Martínez, M. (2010). Oil frontiers in the Peruvian Amazon: Impacts of oil extraction for the Achuar of Río Corrientes (PhD Thesis in Environmental Sciences). 58 See MINEM anuarios. 59 See ONERN: Inventario y evaluación de recursos naturales de la microregión Pastaza-Tigre (departamento de Loreto). Lima: Oficina Nacional de Evaluación de Recursos Naturales (1984). 60 See Talismán (Peru) Ltd., Estudio de impacto ambiental y social de la prospección sísmica 3D y de la perforación exploratoria del Lote 101, (November, 2006) 61 T.H.E. Laboratories, Estudio de impacto ambiental: proyecto de perforación en el Lote 1AB. Occidental Peruana, Inc. Sucursal del Perú: Broomfield, CO. (21 August, 1995) 62 See OXY, Programa de Adecuación y Manejo Ambiental del Lote 1-AB. Lima: Occidental Peruana Inc. (1996) 63 See Decreto Supremo N° 048-2002-EM (20/02/2002): it mentions that Plustpetrol Norte S.A. “assumes all the rights, responsibilities and obligations of Pluspetrol Peru Corporation S.A.” 64 See OSINERG, Derrames reportados: 1998-2006. Lima: Organismo Supervisor de la Inversión en Energía (2007) 65 See R.D. N° 0153-2005-MEM/AAE.

32

out guidelines and obligation for the total re-injection of production waters in the 1-AB site

itself (instead of dumping them in the rivers).66

Pluspetrol has committed to most agreements concerning re-injection of produced waters,

with an investment of 165 million USD to construct the required installations. In 2008

Pluspetrol declared that it had carried out remediations in 100% of the 75 areas located

within 1-AB. However, in reality many of the reparations were inadequately performed. In

2011, OSINERGMIN determined that nine out of seventy-five sites had not been remedied in

accordance with the standards established in the PAC (Baqué & Doyle, 2017). Other

accounts have also reported the use of inadequate techniques to recover oil and cover up

spills, such as the use of tree trunks and leaves as covering, mixing of the water with

uncontaminated earth and improperly fixed recovery buoys.67 In 2013, Pluspetrol was fined

with an amount of nearly 12 million USD for failing to complete remediation in the

contaminated Yanayacu oil field (block 8) in compliance with the PAC.68 Later, another fine of

7 million USD followed for the irreparable environmental disaster in the Shanshococha lake.69

Convoca calculated that Pluspetrol was the most sanctioned company with twenty-four

violations and 21.850.218 USD in fines between 2007 and 2014.70 To this day, Pluspetrol

refuses to pay many of the fines that have been issued by the Agency for Environmental

Assessment and Enforcement (OEFA), challenging many of them before the Peruvian

Judiciary. Furthermore, the company has taken legal measures against a 2014 OEFA report

that underscores Pluspetrol’s responsibility in the remediation of ninety-two sites identified

with environmental damages in block 192 that were not yet mentioned in the PAC. OEFA

requested that these sites would be included in the Abandonment Plan of Pluspetrol for block

1-AB after expiration of the concession.71 In July 2014, Ollanta Humala’s government passed

a new law (Law 30230), which limits OEFA’s capability of taking regulatory measures and

enables companies to have fines remitted in exchange for investments.72 This is how OEFA

reduced Pluspetrol’s final fine for the Shanshococha disaster to 1.83 million USD, a reduction

of 74%.73

OEFA has also demonstrated numerous irregularities in Petroperú’s operations in Loreto.

Between 2011 and 2016, Petroperú has entered into fifty-seven sanctionary procedures and

has received 7.31 million USD in fines, of which a 3.06 million USD fine for Cuninico was the

largest amount.74 Between 2007 and 2016, ninety-nine big or small oil spills have been

reported in the Loreto department, with an average of almost ten spills a year. For a

complete overview of all reported spills between 1996 and 2016 see report N° 487-2016-OS-

GAF. The number of reported events has highly increased after 2006, with the introduction of

Supreme Decree N° 015-2006-EM, which defined new requirements for reporting. Before

2006, the volume of lost oil had to supersede ten barrels before it was considered reportable,

which partly explains the huge increase in reports (Orta-Martínez, et al., 2007). In 2011, two

oil spills close to each other near San José de Saramuro have been reported within a three-

66 See R.D. N° 0612-2007-MEM/AAE. 67 See http://amazonwatch.org/news/2013/1203-pluspetrol-how-not-to-clean-up-the-rainforest-disaster-you-have-caused and Orta-Martínez, M. (2010). Oil frontiers in the Peruvian Amazon: Impacts of oil extraction for the Achuar of Río Corrientes (PhD Thesis in Environmental Sciences). 68 See RTFA-N°-006-2013 (OEFA). 69 See Resolución Directoral No 534 -2013-OEFA/DFSA; the Shanshococha lake has nearly completely disappeared due to improper remediation by Pluspetrol, which consisted of mixing crude oil with the surrounding soil in order to reduce the oil concentrations. 70 See http://convoca.pe/investigaciones/las-huellas-del-petroleo-que-intentaron-esconder. 71 See report N° 411-2014-OEFA/DS-HID; 72 See http://www4.congreso.gob.pe/pvp/leyes/ley30230.pdf. 73 See http://convoca.pe/millions-pardoned-petroleum-companies. 74 See RD N° 878-2016-OEFA/DFSAI.

33

week timespan, with a loss of over a 1000 barrels. Pluspetrol and OEFA attributed these

spills to vandalism.75 On 25 March 2013, the Ministery of Environment declared an

environmental emergency situation in the Pastaza basin.76 In their statement they assert the

execution of “concrete and immediate actions that complement those already initiated, in

order to reverse this situation to the benefit, in particular, of the indigenous peoples who

inhabit the area.”77 Later in 2014, the emergency situation was extended to more

communities in the Corrientes, Tigre and Maranón basins.78

4.1.4 Health impacts In an environmental assessment report of 2006, the Environmental Health Agency (DIGESA)

discussed the results of biological samples taken from fifty monitoring points (twenty-three

surface water, six drinking water, eleven sediments and ten residual water discharge points)

in the Corrientes river. Six out of the twenty-three points for surface water contained chloride

concentration levels surpassing the permissible 250 mg/l reference level. In three out of

twenty-three samples, boron and barium levels were too high. Drinking water concentrations

of heavy metals and chlorides were well below limits. Sediment concentrations did exceed

some TEL (Threshold Effect Level) values but no PEL (Probable Effects Level) for heavy

metals in sediments.79 Although the Corrientes river is not classified as water for human

consumption, the Achuar communities have always used it for drinking and cooking (Orta-

Martínez, et al., 2007). Different measurements in 2013 in sixty points in the surroundings of

the polluted Yanayacu oil field (see supra), of which eleven were included in the PAC of the

oil block, have shown more worrying results. Twenty-two out of fourty-nine non-PAC

sediment samples contained light hydrocarbon (𝐶10 − 𝐶28) concentrations higher (some over

twenty times as high) than the Environmental Quality Standards (EQS) for agricultural land.

Similarly, eight out of eleven PAC samples contained excessive Total Petroleum

Hydrocarbon (TPH) concentrations.80 These results make clear that the impact of

mismanaging concessions is not to be underestimated.

The degradation of soil and waterways has seriously impacted the health of the neighboring indigenous communities. Different testimonies of Achuar people have mentioned health issues such as continued stomach pains, urinating blood and irritations of eye and skin, after coming into contact with contaminated water.81 It is however difficult to assess the true scope of the health impacts as these communities have limited access to medical facilities. Another study by DIGESA in 2006, analyzed blood samples of seventy-four children (0-17 years old) and one-hundred-twenty-five adults. They found that 66.21% of the children had dangerously high blood lead levels that exceeded 10 µg/dl, while 59.64% of them exceeded the cadmium limit of 0.5 µg/dl. Adults were all below the acceptable adult limit of 20 µg Pb/dl, but 68% of them were above the biological limit of tolerance for cadmium.82 The reasons for these serious contaminations are to be found in the extensive use the natives make of the rivers, not only for cleaning, travelling, swimming and cooking, but also for catching fish and provision of food. Contamination of fish in the Amazon due to mining

75 See http://www.oefa.gob.pe/en/noticias-institucionales/nuevo-derrame-de-petroleo-se-produjo-en-trompeteros. 76 See RM N° 094-2013-MINAM. 77 See http://www.minam.gob.pe/cuencas/2013/10/16/declaratoria-de-emergencia-ambiental-reducira-riesgos-ambientales-y-sanitarios-en-la-cuenca-del-pastaza/. 78 See DS N° 006-2014-SA 79 See report N° 2253-2006/DEPA-APRHI/DIGESA. 80 See OEFA Presentation, San Isidro (January 2014), Resultados del Monitoreo Ambiental Participativo en la Cuenca del Río Maranon 81 See Earthrights International, Racimos de Ungurahui, Amazon Watch, WWF Peru, Un legado de Daño - Occidental Petroleum en Territorio Indígena de la Amazonía Peruana 82 See report N° 2006/DEPA-APRHI/DIGESA.

34

activities has already been proven (Akagi, et al., 1995). Recently, researchers found indications contamination from the petroleum industry is a possible explanation for Hg bioaccumulation in fish species in the Pastaza and Corrientes river (Webb, Coomes, Mainville, & Mergler, 2015). Other animals can also come into contact with oil from spills or abandoned installations and risk being contaminated (Mayor, Rosell, Cartró-Sabaté, & Orta-Martínez, 2014). Finally, we have to consider health risks that are not directly related to waste management. There have been reports of sexual abuse and prostitution of Achuar women and children by oil workers. (Isla, 2009) Additionally, the isolated tribes are very vulnerable to foreign diseases that oil workers might introduce.

4.1.5 Conflicts and indigenous organization The indigenous peoples of the Amazon have since long resisted the arrival of oil companies

and their polluting activities. Already in 1978, a delegation of Achuar leaders travelled to

Iquitos to resist encroachment on their lands and to ask for territorial rights (Uriarte, 2007).

The first nationally based indigenous federation, the Interethnic Association for the

Development of the Peruvian Amazon (AIDESEP), was created in 1979. The organization

currently represents sixty-five indigenous federations and 650.000 indigenous people, among

which 300.000 live in the Peruvian Amazon.83 The indigenous peoples neighboring block 1-

AB from the Corrientes, Pastaza and Tigre rivers, only started organizing locally in the early

1990s with the creation of three organizations: the Federación Indígena Quechua del

Pastaza (FEDIQUEP), the Federación de Comunidades Nativas del Tigre (FECONAT) and

the Federación de Comunidades Nativas del Corriente (FECONACO). To this day these

organizations are defending indigenous peoples’ rights in negotiations with the Peruvian

government.

The creation of these and many other organizations can be understood in the context of the

emergence of an institutional framework, which enabled indigenous peoples to create their

own institutions within the existing system (Chirif & García-Hierro, 2007). The enactment of

the Law of Native Communities in 1974, re-established collective land ownership for

indigenous communities.84 However in 1978, the law was altered to implement a new

national forest policy.85 The modification removed indigenous property rights over forestry

land and at the same time facilitated the granting of forest concessions to private investors.

Nevertheless, in the subsequent years the Amazonian indigenous peoples have received

property rights or some other type of government recognition to over 10 million hectares of

forest land (Smith, Benavides, Pariona, & Tuesta, 2003).

The government thus far has made little effort to effectively protect the lands and resources

of these communities. As stated before, the passing of Hydrocarbon Law N° 26221 grants

the government ownership over Peru’s subsoil resources and the permission to exploit them,

even if the lands are titled. That is why in 2010, the active Peruvian oil and gas concessions

overlapped with 55.2% of the titled indigenous territories. (Orta-Martínez & Finer, 2010)

Furthermore, many of the titled lands are too small or densely populated to permit traditional

resource use, such as hunting, foraging and gathering. The semi-nomadism of some native

peoples and their interethnic complexity are difficult to rhyme with strict western

conceptualizations of territory (also see section 4.2.1). These limitations have resulted in

internal division of ethnic groups and confrontations between communities, which also

weakened their social movement (Orta-Martínez & Finer, 2010).

83 See AIDESEP, http://www.aidesep.org.pe/quienes-somos/. 84 See Ley de Comunidades Nativas No. 20653 85 See Ley de Comunidades Nativas No. 21175

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The ILO 169 Indigenous and Tribal Peoples Convention, ratified by Peru in 199386, and later

the UN Declaration of Indigenous Rights, have provided an international framework for

indigenous resistance. Most importantly these international agreements expressed the right

to FPIC for indigenous peoples on legislative and administrative measures that directly affect

them, with the ILO convention being a legally binding instrument. It refers to the responsibility

of the government to inform and get consent from indigenous peoples before any

development projects take place. Both Perupetro and the Ministry of Energy and Mines

(MINEM) have accepted that they are institutionally required to follow and implement these

accords (Stetson, 2010). Although the government has set up initiatives such as informative

workshops and public hearings to present Environmental Impact Studies (EIS), which are

required by law87, the indigenous people claim that these sessions are merely informative

and that they do not constitute genuine democratic participation. Their main argument is that

these sessions need to be aimed at reaching consensus, while the government has

repeatedly signed contracts with oil companies before these meetings took place (Granero &

Barclay, 2010).88 This of course does not contribute to a balanced discussion and it is

therefore argued that these negotiations have not been taking place in “good faith”, in

accordance with the ILO 169 Convention (Stetson, 2010).

After new legislation89 of the Garcia government attempted to weaken indigenous rights and

expand extractive activities, indigenous protest culminated in the Bagua incident in 2009,

which left twenty-four police officers and ten civilians dead. Garcia’s decrees were later

repealed, due to mass protests. In 2011, the Humala government took careful steps towards

serious implementation of the FPIC by passing a new landmark law, making Peru the first

Latin American country to materialize the ILO 169 into national law. The new law gives

Peru’s indigenous communities the right to prior consultation on development policies and

projects that directly affect them, including drilling, mining and construction of roads and

pipelines.90 However, soon after passing the law, the government gave some worrisome

signals as they initiated fourteen new mining projects in the highlands without prior

consultation, with Humala announcing in a speech that highland people do not qualify as

indigenous peoples.91 In this speech on april 28, 2013, he makes a radical turn from his

earlier statements in which he proclaimed respect for and inclusion of indigenous tribes in the

development process. Soon after this speech a series of new reforms were implemented

which were popularly named “paquetazos”, aimed at reactivating the economy by facilitating

public and private investment. These “paquetazos” were not well-received by the public as

they again weakened communal property and environmental regulations.92 In addition,

different companies and associations pressurized the government into tempering the

consultation efforts. The president of CONFIEP93, Alfonso García Miró, declared that the

government should cut loose ”the poor officials who want to misuse social conflicts to give

them an ideological character.”94

86 See Resolución Legislativa N° 26253 87 See Decreto Supremo N° 012-2008-EM 88 An example is the contract for Block 108 granted to Pluspetrol on 13/12/2005 (see D.S. N° 036-2005-EM), while the authorities only started giving informational workshops on 29/08/2006. The Central Ashaninka People of the Río Ene Region (CARE) later opposed further oil activities in their territory. 89 See Decreto Legislativo N° 1015 and Decreto Legislativo N° 1073 90 See Ley del Derecho a la Consulta Previa a los Pueblos Indígenas u Originarios, Reconocido en el Convenio 169 de la Organización Internacional del Trabajo (OIT), N° 29785 91 See Confusiones presidenciales by Javier Torres 92 See Territorios Seguros para las Comunidades del Perú, Paquetazos. 93 CONFIEP is the National Confederation of Private Business Institutions in Peru. 94 See http://gestion.pe/economia/alfonso-garcia-miro-unico-temor-que-podemos-tener-falta-autoridad-tensiones-sociales-2062051.

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The biggest test for the renewed legislation, was the start of the consultation process

concerning further exploitation of block 192. In 2012 a Multi-sectoral Commission was

created consisting of different government institutions (MINCU, MINEM, MINEDU, MINSA …)

and indigenous organizations (FEDIQUEP, FECONACO, FECONAT, ACODECOSPAT and

ORPIO) to evaluate the environmental and social impacts of forty years of oil activity in the

area.95 The commission failed to reach its objectives, which hampered further negotiations,

since the indigenous peoples indicated that they would not participate unless the worst socio-

environmental damages are remedied. Only in March, 2015, the different parties came to an

agreement, which included arrangements on land titling, inter-cultural development and

remediation, with a fund of 16 million USD being created to initiate remediation activities

supplied by fines imposed by OEFA.96 From their side, the indigenous federations agreed to

participate in the prior consultation program.

From the start the consultation process did not run smoothly, with numerous delays,

rescheduling of meetings and the non-participation of FECONAT due to distrust towards the

government. The government then decided to organize separate consultations with the

different organizations. The bidding process had started on 14 May, 2015, and as the

participating companies were hesitant to place their bids, also because the outcome of the

consultations was far from clear, these meetings were further postponed. Furthermore, the

newly-formed federation ORIAP97, an organization with no local legitimacy, wanted to be

included in the process and the government decided to include ORIAP in the negotiating

sessions with FECONAT. Meanwhile, FEDIQUEP and FECONACO drafted a list of twenty-

seven issues that needed to be discussed, of which the installment of an endowment fund of

310 million USD for social development was the most crucial one. When no single company

had placed a bid by August 4, the government unilaterally ended the negotiation process with

FEDIQUEP and FECONACO, holding on to the agreement made with ORIAP and

FECONAT. In this agreement the endowment fund would be financed with 0.75% of the

production value from block 192, whereas FEDIQUEP and FECONACO had asked for 2%.

Some weeks later it was finally decided that Pacific Stratus would be granted a temporary

concession of two years.98

FEDIQUEP and FECONACO have resisted these decisions and vouched for the continuation

of the consultation process. Anyhow, the unilateral approach of the government, the parallel

and contradicting negotiations and their divide and rule strategy, tactics that have been used

frequently in the past99, have seriously discredited the credibility of the consultation laws. The

indigenous tribes supported by the Ombudsman’s Office100, one of the only state actors that

has taken a markedly different position than the executive branch in many of the conflicts,

continue to fight for their cause. In December 2016, after one-hundred-seventeen days of

pacific mass protests near Saramurillo, mainly in response to the series of leaks in the ONP

(see section 4.3), uniting Amazonian peoples of many different ethnicities and language

groups, forty-nine agreements were signed by the new Kuczynski government and

95 See DS N° 200-2012-PCM. 96 See Acta de Lima, 10/03/2015. 97 Organización Interétnica del Alto Pastaza. 98 Most of this information was retrieved from www.amazonwatch.org and has been substantiated by Acta de la Consulta Previa del Lote 192 (ORIAP, 14/08/2015) and Acta de la Consulta Previa del Lote 192 (FECONAT, 18/08/2015). 99 See Witzig, R. and Ascencios, M. (1999), The Road to Indigenous Extinction: Case Study of Resource Exportation, Disease Importation, and Human Rights Violations against the Urarina in the Peruvian Amazon, Health and Human Rights, 4 (1), 60-81 and Anderson, M., Finer, M., Herriges, D., Miller, A., & Soltani, A. (2009). ConocoPhillips in the Peruvian Amazon. Oakland, CA: Amazon Watch-Save America’s Forest for more examples. 100 See Defensoriá Solicita Diálogo Inmediato en Caso del Lote 192, communication of 16/09/2015.

37

indigenous organizations.101 The most important goals of the accords are evaluation and

maintenance of the condition of the ONP and other pipelines in blocks 8 and 192 with the

participation of indigenous representatives, setting up a decentralized debate about

diversifying the energy matrix in Loreto, ensuring safe transport of oil through the Amazonian

rivers and evaluating the feasibility of a total renovation of the ONP. Although the promises of

the government have remained largely unfulfilled in the past, many indigenous peoples hope

and belief that the first steps towards effective cooperation have been made. Furthermore,

the success of the mass protests evidenced that indigenous unity is the best way to ensure

the agreement’s implementation in the future.

4.2 Framing development The previous section has already introduced some of the tactics employed by the

government to direct the negotiations in their advantage. The next sections will now discuss

in more detail how the conflict has been framed by both parties over the years to forward

their respective interests. Benford and Snow first coined the term “framing process” in 1988.

They distinguish three core framing tasks: diagnosis of a problematic event or situation in

need of alteration; articulation of a proposed solution; and a call to arms to ameliorate the

situation. These core tasks comprise the ways in which different movement actors mobilize

adherents and form alliances, while simultaneously demobilizing their adversaries (Snow &

Benford, 1988). Frames can also be conceived of as simplifying devices that condense the

outside world and that organize its complexities (Goodwin & Jasper, 2014). Of specific

interest is how the physical world, the oil, the land, the forest, the rivers, but also the present

infrastructures, such as roads, pipelines and drilling installations, is played out and

transformed to construct particular realities. You will find that the Peruvian conflict forms a

battleground where different frameworks and different conceptions of development

constantly confront each other, constituting to a so-called “framing war”. This “shock of two

visions of development” has led to sometimes violent disruptions in the Peruvian social

fabric, but at the same time forms an opportunity for a possible reconciliation between these

two perspectives and for future collaborative, constructive action towards an inclusive society

(Benavides, 2010).

4.2.1 Indigenous discourse As we have seen indigenous experiences with the Peruvian oil industry are embedded within

a history of (neo-)coloniality. Colonization in this case does not simply refer to the forcible

occupation of indigenous lands but extends to the colonization of their way of living. In fact,

the indigenous peoples have for centuries been denied the right to express different ideas on

nature conservation and cultural and human development. Still, territory plays a crucial role

in the colonization process as it defines the nature-human relationships on which much of

their cultural and social life is built. The recognition of territorial rights is thus fundamental to

protecting broader composite rights such as the right to self-determination and development.

Furthermore, from the understanding of territory as one of the predominant indigenous

values, one can start to identify other values that the indigenous movement use to frame to

recover their rights (Stetson, 2010).

First of all, we have to take into account that indigenous claims of territory are historically

produced, rather than being based on racial distinctions or socio-economic privileges. Their

territorial rights stem from the fact that they were established before the foundation of the

Peruvian state and have been transferred from generation onto generation. In this context,

indigenous rights are not ‘special’ rights, but are applications of universal rights that take into

101 See Acuerdos suscritos en Saramurillo (December 2016).

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account the collective aspects of those rights in order to overcome the historical injustices

and discrimination that these peoples have endured (Feiring, 2013).

This brings us to the second aspect of indigenous conceptualization of territory, namely that

it is a collective right which necessitates the “integrity of territory” (Stetson, 2010). Territory

for the indigenous organizations refers to “the totality of a peoples’ habitat”, including the

subsoil and surface natural resources and the rivers and waterways.102 For the Achuar,

territory provides everything they need: “medicinal plants, roofing palms, blowpipes for

hunting, rivers full of fish, and spiritual sites where they search for a vision.”103 Damaging a

single component of this habitat can thus threaten the whole subsistence system.

Furthermore, it is of importance that the continuity of the territory is preserved so that the

natives can maintain their traditional hunting and foraging practices and semi-nomadic

lifestyle.

This is why land titling also constitutes a possible danger to the communities, because it risks

to divide up their living space into marketable commodities if they are not granted to the

community as a whole. Land as a commodity is something the Achuar and other tribes are

unfamiliar with. They don’t see themselves as owners of the lands but rather as trustees with

certain rights and responsibilities. They defend that "our territory is not a thing, nor a set of

usable, exploitable things, nor a set of resources; Our territory, with its forests, mountains,

rivers and wetlands, with its sacred places where the protective gods live, with their black,

red and sandy lands and their clays is a living entity that gives us life, provides us with water

and air; Takes care of us, gives us food and health; It gives us knowledge and energy; Gives

us generations and a history, a present and a future; It gives us identity and culture; Gives us

autonomy and freedom. Then, along with territory is life and along with life is dignity;

Together with the territory is our self-determination as peoples."104 With this approach and

building on their traditional biodiversity knowledge, ownership and management of natural

resources they increasingly present themselves as ideal partners for the sustainable

development of the forests (Greene, 2006).

Thirdly, we see that indigenous organizations are forced to move and formulate demands

within the institutional framework that has been established over the past decades. The Law

of Indigenous Communities of 1974, which at the time was one of the most advanced legal

documents for indigenous protection, marked the institutionalization of indigenous land rights

(Smith, 1982).105 The law also installed the native community as the official entity of

representation for indigenous people, so that they from a legal point of view were no longer

‘invisible’ to the state. The Peruvian constitution recognizes several other fundamental rights

such as the right to life, physical integrity and well-being (art. 2.1), the right to a suitable

environment for development (art 2.22) and the right to health, family and community (art. 7).

Other helpful laws include the General Water Law of 1969 and the General Health Law of

1997.106

In a report written by EarthRights International, Racimos de Ungurahui, Amazon Watch and

the WWF and another report written by the International Work Group of Indigenous Affairs

(IWGIA) the authors specifically build their case on the violations of these institutional rights

102 See ILO 169 convention Article 13.2. 103 See the Achuar section on Amazon Watch. 104 Retrieved from https://www.servindi.org/actualidad-opinion/06/08/2016/defensa-de-la-vida-y-la-naturaleza-vs-empresas-transnacionales. 105 See Ley de Comunidades Nativas N° 20653. 106 See Ley General de Aguas N° 17752 and Ley General de Salud N°26842.

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and request the Peruvian government to comply to their own laws.107 108 In addition they

make reference to international human rights instruments, such as the International

Covenant on Civil and Political Rights (ICCPR), the International Covenant on Economic,

Social and Cultural Rights (ICESCR), inter-American human rights conventions and the ILO

169 Convention. It can thus be stated that the protection of environment and nature has

become part of the battlefield of human rights and that indigenous people are often the

protagonists in this fight. By engaging with the national and international legal system, they

attempt to break the history of injustice that they have faced. Nevertheless, it is often this

very same system that protects the interests and profits of the transnational companies and

allows them to operate with near total impunity.

4.2.2 Government discourse Peru’s model of development has always been based on the extraction of natural resources.

The Amazonian jungle was to the Spanish conquerors a vast and empty space from which

they could extract wealth and earn prestige. Furthermore, they saw it as their divine duty to

civilize the native ‘wild Indians’, that were in dire need of their help (Gow, 1993).109 This

“myth of the vast Amazonian emptiness” has endured to this day (Smith, 1982). Ex-President

Belaúnde’s book La conquista del Perú por los peruanos110 (1959) implicated the advent of a

neo-colonial development policy. He framed his development plans in a rather perverse way,

by referring to “a conquest”. This time not by a foreign imperialistic power, but by the

Peruvian nationals themselves, thereby excluding or even subjugating the Peruvian

indigenous population.

The Pichis-Palcazu project, in which a large valley in central Peru was colonized for food and

lumber production to supply Lima’s markets and also part of Belaunde’s programs, is such

an example of the exclusive nature of the Peruvian development schemes. These large-

scale ‘modern’ interpretations of development have often not reached their constructive

goals, partly due to interethnic conflicts and the lack of a proper institutional framework, but

also because of their overly ambitious and socially disruptive character.111 Instead of using

the indigenous communities’ unique traditional knowledge of the area, the local alternatives

have not been studied and were largely ignored.112 Whenever the government has tried to

integrate the indigenous it has often done so through “paternalistic inclusive practices” and

from a position perceiving them as “miserable and incapable” (Okamoto Mendoza, 2011).

When president Garcia tried to rekindle foreign investment in the Peruvian oil industry, he

had to come up with a new strategy in the issue on indigenous territorial rights, also because

many foreign companies were hesitant to invest due to the instable socio-political climate.113

This is why Garcia constructed the narrative of El perro del hortelano114 in a series of articles

in El Commercio.115 In his first editorial he wrote: “There are millions of hectares of wood that

107 See Un Legado de Daño: Occidental Petroleum en Territorio Indígena de la Amazonía Peruana. 108 See El Daño no se Olvida, IWGIA. 109 See for example the Spanish Requirements of 1513, a declaration by the Spanish monarchy that legitimized the Spanish invasion and subjugation of the Indian peoples as being a divine order. The Requirements were often read to newly ‘discovered’ indigenous inhabitants to relieve the conquistadores from any moral responsibility for their conquest. 110 The conquest of Peru by Peruvians. 111 Also see sections 3.3.2. 112 See The Pichis-Palcazu Project: an Update, Cultural Survival Quarterly Magazine (1981). 113 See Embassy Lima’s submission of the 2007 Investment Climate Statement for Peru. Source: http://wikileaks.vicepresidencia.gob.bo/PERU-2007-INVESTMENT-CLIMATE,2823. 114 ‘The dog in the manger syndrome’ refers to a fable of a dog in a manger that prevents a horse from eating the barley, while it is not eating himself. 115 See A. García Pérez, El Síndrome Del Perro Del Hortelano, El Comercio, 28 October 2007a; A. García Pérez, Receta Para Acabar Con El Perro Del Hortelano, El Comercio, 25 November 2007b; A.

40

lay idle, millions of hectares the communities and associations have not cultivated and will

never cultivate, in addition of hundreds of mineral deposits that cannot be worked.” He thus

depicts Peru’s rural lands as this immense area that is in need of being exploited, while this

is prevented by the indigenous associations that sit on their lands like the dog in the manger.

Part of the narrative is that the dog does not realize that his master’s other animals are

hungry and that to let them eat is in his master’s best interest. Similarly, the indigenous

communities do not realize that it is in Peru’s and their best interest to open up these vast

territories for exploitation.

In another speech he proclaims: “Enough is enough. These peoples are not monarchy, they

are not first-class citizens. Who are 400,000 natives to tell 28 million Peruvians that you have

no right to come here? This is a grave error, and whoever thinks this way wants to lead us to

irrationality and a retrograde primitivism (Bebbington, 2009).” Whereas the “myth of the vast

Amazonian emptiness” simply ignored indigenous presence in Amazonia, Garcia now refers

to a common enemy of national development in his diagnosis: the indigenous, ‘second-class’

citizens and backward rural communities, that do not have the resources to develop their

lands themselves and therefore jealously prevent others from doing it. Garcia proposes the

formalization of property rights to large swaths of land to attract capital and technological

investment as the solution, as opposed to the “primitivism” of indigenous development

schemes. The decrees that intended to make this happen subsequently led to the

catastrophe in Bagua.

4.2.3 Sabotage discourse In the wake of the Baguazo some observers and journalists have attributed the clash to the

rise of “indigenous radicalism”. In an article titled El radicalismo indígena, journalist for El

Commercio Jaime de Althaus Guarderas professes that even if the decrees were consulted

with AIDESEP, they would have been rejected anyway. He claims that the indigenous

movement in Peru is supported and financed by radical European foundations that attempt to

undermine Peru’s national sovereignty. Politicians such as Yehude Simon and Norman

Lewis, have made allegations to the Ecuadorian, Venezuelan and Bolivian government for

trying to weaken Peruvian competition (Okamoto Mendoza, 2011). This narrative of a

monolithic indigenous radicalism or terrorism which obstructs rational dialogue and holds the

country hostage, has popped up frequently in relation to the recent streak of oil spills as well.

Petroperú is always quick to pronounce that these spills are the result of sabotage, even

before awaiting the official investigations of OEFA and OSINERGMIN. In some of these

cases, for example after the Cuninico spill, the reports later established that the leakages

were due to natural causes or lack of maintenance by Petroperú (also see section 4.3). In

fact, ten out of fourteen oil spills related to the ONP in 2016 were attributed to (indigenous)

sabotage and vandalism, whereas only three of them were due to natural causes according

to the regulatory institutions.116 During a meeting with the Inter-American Commission on

Human Rights (IACHR) that visited contaminated areas near the ONP, with the objective of

gathering information on the human rights situation of communities affected by spills in the

Peruvian Amazon, Petroperú re-affirmed this trend by stating that “62.63% of the incidents

were produced by third parties, up 26% from natural events, 10% from corrosion, 1% from

abrasion and 1% from welding failure.”117

García Pérez, El Perro Del Hortelano Contra El Pobre, El Comercio, 2 March 2008; A. García Pérez, Una apuesta crucial por el siglo XXI, El Comercio, 6 July 2008. 116 See Respuesta del Ministerio de Energía y Minas frente a los derrames acontecidos en el Oleoducto Nor Peruano - Comisión Investigadora Multipartidaria (14 February, 2017). 117 See http://www.oas.org/es/cidh/prensa/comunicados/2017/105.asp.

41

The discourse of sabotage is very convenient for Petroperú as it exonerates them from any

responsibility and avoids a proper analysis of what is really going on with the ONP. Some of

the company’s officials have been quite aggressive in their statements. Lino Cerna Manrique

for example vigorously defends his company, which he calls a “symbol of resistance and

efficiency” and he goes on to condemn the “impunity of third parties in relation to the oil

spills” and the “tremendous [financial] losses” due to inactivity of the pipeline and remediation

payments.118 Furthermore, Gonzalo Tamayo, Minister of Energy and Mines, proclaimed that

the ONP has generated “perverse incentives”, meaning that certain indigenous actors

deliberately cut the pipeline to get access to the remediation payments of Petroperú, for

example by getting paid to clean up the spills. With retroactive effect, Petroperú is also

accused for creating these incentives by tripling the fee for remediation work from 50 to 150

soles per day.119

However, this discourse overlooks the horrific effects that the oil spills have on the adjacent

communities. It does not consider the personal and economic damage resulting from

destruction of the fish stocks and water reserves nor the health risks for children that swim in

the polluted waters or for the indigenous personnel that is hired to clean up the spills. Putting

the blame on indigenous saboteurs warrants the deployment of extra security personnel, the

use of surveillance drones and the implementation of penal laws120 that punish attacks on oil

installations, rather than focusing on proper remediation of the spills, maintenance of the

pipeline and the structural causes of the spills. Furthermore, it is in Petroperú’s best interest

to open up the pipeline as quickly as possible, as it supplies the Talara refinery that is

currently being modernized with a 3.5 billion USD investment. An in-depth evaluation of the

condition of the ONP would obstruct this re-opening and the economic viability of the project.

The indigenous activists on their part, have reacted to the accusations of indigenous

sabotage that have been made by Petroperú and other government institutions. They have

on numerous occasions pointed to Petroperú’s poor management and remediation of the

spills.121 Furthermore, they question whether these spills are the result of “sabotage by third

parties” and whether they are not the result of “negligence by Petroperú”.122 This has indeed

been a central point of discussion in recent communications by both parties. The lack of

objective answers to this question has secured the conflict in a stalemate. The continuous

scapegoating however has dire consequences as it prevents decisive action to resolve the

present environmental threats. Meanwhile, Petroperú has tried to present itself as a

responsible company that adheres to the supervisory environmental and technical protocols

and standards by installing information portals for clients and the public society in

accordance with the best practice of transparency. We will see in the next section why and

how these forms of information production have been constructed.

4.2.4 Transparency and information production As we have seen, the 21st century marked the expansion of policies on transparency and

public information production in the oil industry. Peru is no exception to that rule. Perupetro

for example, has listed “honesty and integrity”, “transparency” and “social responsibility” as

118 See Perú: Impunidad de "terceros” en derrames de petróleo debe cesar (31 May, 2017) 119 See http://elcomercio.pe/economia/dia-1/tamayo-mem-oleoducto-rompiendo-poblacion-255006. 120 See Decreto Legislativo N° 1245 121 See http://observatoriopetrolero.org/Petroperú-actua-con-irresponsabilidad-y-negligencia-frente-a-derrame-de-2014-y-derrame-de-2016-en-territorio-de-la-comunidad-san-pedro-del-maranon/ for one example. 122 See https://www.servindi.org/actualidad/29/10/2016/derrames-de-petroleo-sabotaje-de-terceros-o-negligencia-de-Petroperú-por-falta.

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some of its core values.123 However, as explained in section 3.4.3 promoting transparency is

in itself an act that reveals certain conflicting realities and dynamics. It is a useful tool to help

regimes comply with international standards, to restore trust in the (democratic) government

and to improve the government’s policy effectiveness (Gupta, 2008). On the other hand, it

forms new areas of dispute, especially when it concerns which information is made available,

how this information is evidenced and which possibly essential parts of information are

missing. As such transparency can be part of government discourse with the purpose of

denying social actors information or the ability to put it to effective use.

During the presidency of Toledo, the Law on Responsibility and Fiscal Transparency and the

Law of Transparency and Access to Public Information were passed in 2001 and 2003

respectively.124 These laws are aimed at improving transparency of revenue management,

contract allocation and public administration policies. Sometime later in 2007, Peru applied

for membership to the international Extractives Industries Transparency Initiative (EITI). This

is an international standard of transparency and good governance that was proposed at the

World Summit on Sustainable Development of 2002 in Johannesburg. They have produced

EITI reports for the past ten years and have received the status of ‘Meaningful progress’.125

The National Code for Environment and Natural Resources introduced the concept of

Environmental Impact Assessments (EIA) in 1990.126 Only in 2009 general inter-sectoral EIA

procedures were approved by the Law on the National System of Environmental Impact

Assessment (SEIA).127

The legislative framework for transparent public administration and project evaluation for the

hydrocarbon industry in Peru has thus certainly improved over the years and should in fact

allow for efficient decision-making and public participation. However, we observe that

progress towards an effective implementation of these initiatives is slow. We have seen in

section 4.1.5 that there exists a lack of transparency in how oil and gas concessions are

awarded and that the consultation process up until now has more often served to sideline

and divide the indigenous people rather than being an empowering instrument. Also, the fact

that MINEM has been tasked with overseeing these consultation procedures, while

simultaneously being the organ that is assigned to promote oil and gas development, brings

in doubts about the impartiality of this arrangement (Haselip, 2011).

With regard to information production we see that Petroperú has made a growing amount of

information available to the public through their databank. However, this information mainly

relates to the geological and geographic characterization of the different blocks, including

data such as seismic lines, magnometric surveys and other technical evaluations of explored

reserves. This information is mainly useful to attract foreign investors and is therefore

delivered to them “free of charge”.128 Contrastingly, much less information is available on the

planned activities within these blocks and their social and environmental effects. In 2012, out

of twenty-five active concessions in the exploration phase, five had produced EIA’s for

seismic testing, three for exploratory wells and six for both, leaving eleven concessions

without the required EIA’s (Finer M. , Jenkins, N., & Powers, 2013). Furthermore, the

Peruvian state has been largely absent in most of the remote Amazonian areas, such as

Loreto. Together with the limited capacity for environmental and indigenous organizations to

123 See http://www.perupetro.com.pe/wps/wcm/connect/perupetro/site-en/OurCompany/Cont_PerupetroValues. 124 See Ley N°27245 and Ley Ley N° 27806. 125 See https://eiti.org/peru#overview. 126 See Decreto Legislativo N° 613. 127 See Ley N° 27446. 128 See 1.3 in http://www.perupetro.com.pe/wps/wcm/connect/perupetro/site-

en/Investors/Cont_WhyInvestinPeru.

43

evaluate the situation in the field, this means that impact assessments conducted by oil and

gas companies are not always objectively reviewed. In 2014, then Minister of Energy,

Eleodoro Mayorga Alba declared the following in relation to a proposal to remove the

obligation for EIA for exploration activities altogether:

“The industry has principles, it has well-established practices, and the idea is to move away

from procedures and permissions to action. The companies know what they have to do. This

proposal will serve to accelerate investment in the oil and gas sector”.129

In the end the proposal was rejected, but this again indicates how companies remain exempt

from inquiry as long as they invest.

Overall, the information and consultation provided by government institutions and hydrocarbon companies has been criticized for being paternalistic, incomplete and incomprehensible. Language used in meetings is often overly technical and this leaves indigenous actors with little means to resist as they do not have the required expertise to understand the complexities of the studies (Stetson, 2012). Scholars such as David Pellow have therefore vouched to move beyond the ‘right to know’ to the ‘right to understand’. This would mean that indigenous groups have access to independent technical advisors during the consultation process in order to fully understand the scope and impact of the planned activities (Pellow, 1999). The provided information should also better fit the needs of the indigenous actors and should not be overflown with superfluous technicalities. This is a tactic used by the government to overcomplicate the issues at hand so that their opponents are unable to take coordinated action. The history of the conflict can be summarized as one where many promises have been

made, but almost as many have been broken. The whole framework of transparency and

information production has a lot of characteristics of a ‘passive revolution’ as postulated by

Gramsci.130 A passive revolution is a revolution from above that constitutes gradual change

in the institutional and political structures to meet a certain popular demand, but without

restructuring the underlying social processes of the conflict so that the supremacy of the

dominant class is re-established. As is happening in the Peruvian Amazon, the popular

forces are simply reintegrated in the dominant political system and forego any real social

empowerment.

4.3 Socio-technical analysis of the ONP condition This chapter will investigate some of the statements made in the discourse analysis and this

in relation to the recent series of oil leakages in the ONP. It will give examples of how

Petroperu and the industry have dealt with maintenance regulations and the practice of

transparency. It will again highlight how the right to know has not been ensured and how the

discourse of sabotage works to both misrepresent certain pieces of information and weaken

Petroperu’s accountability. Furthermore, it will reveal the kind of technical information that

needs to be provided to move towards ‘the right to understand’. I will start by giving a short

summary of the standard industrial technologies, requirements and regulations for the

construction and protection of an oil pipeline over its life cycle. Next I will discuss Peruvian

legislation concerning pipeline regulation and some technical reports on recent oil spills that

indicate to what extent the oil industry lives up to the national standards. Due to the very

limited amount of technical information available the discussed reports are rather selective

and are in general not sufficiently backed up by independent scientific evidence. For

example, I was not able to look into the presented technical reports and therefore completely

129 See http://gestion.pe/economia/exploracion-lotes-petroleros-estaran-exonerados-estudios-impacto-ambiental-2090978 130 See Simon, R. (2015). Gramsci's political thought: An introduction. Lawrence & Wishart.

44

relied on the conclusions given in the OEFA reports. They will however provide appropriate

evidence to support the arguments made in the discussion section (4.3.3).

4.3.1 Industry standard and legislation131 The building and operation of a pipeline has a profound impact on the surrounding environment. Thorough planning of design and routing of the pipeline is therefore needed to minimize these effects but also to comply to legal requirements. In order to satisfy these needs, different international and national standards for construction and maintenance may apply. The API (American Petroleum Institute), ANSI (American National Standards Institute) and BS (British Standards) standards are some of the more widely used guidelines. The Peruvian hydrocarbons industry for example works with the ANSI/ASME (American Society for Mechanical Engineers) B31.8 and 31.4 standards for gas and liquid pipelines respectively.132 These standards define a large set of requirements to ensure safety, reliability and operational efficiency in machine design and mechanical production, of which some will be explained in more detail below. The first step in the planning phase is to determine the areas through which the pipeline can or cannot be routed. In theory the most efficient way to construct a pipeline is a straight line from point A to B. However, different demographic and geographic considerations need to be made in order to avoid environmentally sensitive, densely populated or geologically unstable areas. In order to identify sensitive zones the pipeline segments are usually classified into four classes based on the proximity to existing and planned buildings for human occupation in a 200m wide strip on each side of the pipe. Specifications on design will vary according to the different classes. Furthermore, in order to build the pipeline the construction company needs to acquire Right-Of-Ways (ROW), meaning the right to use the subsurface to install the pipeline. This requires negotiating and purchasing this right from the respective landowners. The second phase of planning involves the design properties of the pipeline. The following parameters need to be considered: pipeline length and diameter, wall thickness, material grade, maximum operating pressure (MOP) and flow conditions, operating temperature, pressure drop and corrosion protection. Most of these parameters are interrelated. Pipeline length and diameter and flow velocity define the pressure drop over the pipe and therefore determine the operating pressures and the number of additional pumping stations required to maintain pressure. Maximum operating pressure subsequently defines the operating stress levels in the pipe and therefore determine the required wall thickness and material grade to avoid ruptures. Different material grades have different resistance against stress. For example, the material grade used in the ONP is API 5L x52, with a minimal yield strength (MYS) of 358 N/mm² and minimal tensile strength (SMS) of 455 N/mm².133 The design factor which is equal to the MOP divided by the SMS, an indicator for the resistance against stress with respect to the operating pressure, is one of the critical parameters that varies with the location class that has been explained above. The toughness of the material defines its resistance against crack propagation. Operating temperatures, especially when extremely high or low, also influence material properties and behavior. Furthermore, one needs to take into account a certain offset resulting from defects in the construction that can potentially

131 Most of this information has been retrieved from the following educational books on pipeline engineering, unless referenced otherwise: -Alkazraji, D. (2008). A quick guide to pipeline Engineering. Elsevier. -Miesner, T. O., & Leffler, W. L. (2006). Oil & gas pipelines in nontechnical language. PennWell Corporation. -McAllister, E. W. (2013). Pipeline rules of thumb handbook: a manual of quick, accurate solutions to everyday pipeline engineering problems. Gulf Professional Publishing. 132 See Decreto Supremo N° 081-2007-EM, Regulations on the Transportation of Hydrocarbons by Pipeline. 133 Retrieved from https://www.Petroperú.com.pe/Main.asp?Seccion=550.

45

grow during operation. Pipeline thickness and stability can also be affected by internal or external corrosion or third party damage. Here, the material strength is again of importance, in addition to an adequate corrosion protection system. In order to account for all these different conditions and interdependencies comprehensive pressure testing under extreme conditions is necessary. These (hydro)tests are usually performed with water and according to the B31.4 standard at a pressure of 1.25 MOP. Some defects propagate gradually over time and therefore a test period of at least 24h is usually required. Degradation by corrosion is arguably the most common cause for pipeline failure. Corrosion occurs when a galvanic cell is formed by a negatively charged post (anode) and a positively charged post (cathode) connected through a conducting electrolyte material. If the potential difference is sufficiently high, an electrochemical reaction occurs. In this reaction the anode is consumed forming positively charged ions and transferring electrons to the cathode by means of the electric connection. In case of a pipeline which functions as the anode, this

means that the iron atoms in the steel pipe are being consumed and form 𝐹𝑒2+ ions. The free electrons travel through the conducting subsoil to other positively charged components surrounding the pipe. The positive iron ions will now bind to negatively charged molecules in its vicinity to create non-metallic oxides, which form rust layers. The rust will eventually peel or flake off and the wall thickness of the pipe and thus its resistance against rupture will gradually decrease. For a visualization of the process, see Figure 12. Corrosion mainly occurs in humid environments where an effective conducting bridge is created between the charged components. In order to protect pipelines from corrosion different strategies can be employed. The primary protection against corrosion is an epoxy coating on the pipeline which prevents current flow. The ONP has also been coated with epoxy paint. However, this protection needs to be backed up by a cathodic protection system for when coating defects occur. This is because these coating defects form concentrated spots of accelerated pitting corrosion, also called holidays, when moisture gets trapped inside between the coating and the pipe. There are two well-known methods for cathodic protection. The first method involves sacrificial protection where metal blocks with higher electrochemical potential, such as magnesium, are buried and connected to the pipe in periodic intervals. These now form a different corrosion cell whereby the magnesium is consumed and the pipe functions as cathode and will not be corroded. For larger structures where passive sacrificial protection cannot provide enough current, impressed current cathodic protection is used which delivers an active DC current to the pipe. In order for a steel pipeline to be effectively protected a potential of -850 mV or more negative is required. Again, it is crucial to position impressed current rectifiers (to create the DC current) at frequent intervals and near the critical points such as crossings with other infrastructures.134 After the start of operations the pipeline’s condition needs to be continuously monitored in order to look for possible defects. This is done through a number of different surveys such as aerial surveillance, walking inspections, intelligent inspection tools or pigs, SCADA (supervisory control and data acquisition) systems and cathodic protection surveys. Intelligent inspection pigs are aluminum cylinders with (magnetic) plates attached to them that can move through the pipeline to check for dents or internally corroded areas.135 These are defects that cannot be discovered through visual inspections. The SCADA system can detect leaks or other malfunctions of the pipeline system, including the workings of the valves and operation stations. Cathodic protection surveys are needed to ensure that the required potential of -850 mV is installed over the whole pipeline trajectory. Finally, to prevent pitting corrosion it is recommended to clean the interior of the pipeline with cleaning pigs that

134 See P. E. Francis: Cathodic Protection. Available from: http://www.npl.co.uk/upload/pdf/cathodic_protection_in_practise.pdf. 135 See Figure 13.

46

remove water and debris. CP and intelligent inspection should happen in intervals of maximum ten years. Scheduling of subsequent inspections should always be dependent on the results of previous analyses to account for possible dangers and risks, especially near the end of a pipeline’s lifetime. In 2007, congress passed new laws on the regulation of transport of hydrocarbons by means

of pipeline ducts.136 This law describes the different international standards used in the

industry completed with additional national guidelines and responsibilities for the supervisory

organs such as OSINERGMIN and OEFA. It defines regulations on granting of pipeline

concessions, on tariffs and transport service, conflict resolution and environmental

protection. Annex I stipulates the safety standards for transportation, whereas Annex II deals

with the requirements to implement a Pipeline Integrity System (PIS) which provides an

integrated approach to prevent operation failures, maintaining a safe, reliable service that

guarantees the protection of people, facilities and the environment.

The ONP consists of 3 different sections: Section I running from San José de Saramuro over

306 km to Station 5 in Borja, the Northern Branch running from the Andoas station over 252

km to also arrive in Station 5, and the shared Section II which ends after 548 km in the

Bayovar terminal.137 At the Paso de Porculla the pipe crosses it highest point at a maximum

height of 2390 m above sea level. Surpassing this point requires specific pressure

conditions. Section I and the Northern Branch are protected with standard epoxy paint since

these sections run through humid environments and are prone to corrosion. Section II is

protected with black and white polyethylene tape with an accumulated thickness of 11.43 cm

to safely traverse the mountain and desert areas in western Peru. Diameters and wall

thickness of the different sections are indicated in

Table 1: Distribution of the Canon and Sobrecanon in Loreto in percentage of the total

amount among the different regional institutions. Source:

https://www.mef.gob.pe/es/transferencias-a-gobierno-nacional-regional-y-locales/base-legal-

y-aspectos-metodologicos/canon-y-sobrecanon-petrolero.

Institution Percentage 1. Regional Government 52

2. Local Governments 40

3. National Universities 5

4. Peruvian Amazon Research

Institutions

3

5. State Institutions of Higher

(Technical) Education

/

Table 2. The pipelines are protected with a cathodic protection system according to the ANSI

/ ASME B31.4 standard.138

4.3.2 Oil spills and technical reports Between 2006 and 2016 at least one-hundred-eighty-six hydrocarbon spills have been

reported in Peru. The vast majority of these spills are related to the ONP or installations

(pumping stations, wells, subsidiary ducts) on concessions that make use of the ONP’s

services. Table 3 gives an overview of the spills according to cause determined by

136 See Decreto Supremo N° 081-2007-EM, Regulations on the Transportation of Hydrocarbons by Pipeline. 137 See Figure 5. 138 See Article 54 of Decreto Supremo N° 081-2007-EM.

47

investigation of OEFA and according to responsible company. Ninety-seven of the reported

spills fall under the responsibility of Pluspetrol, which are mostly related to blocks 8 and 192.

The spills that fall under Petroperú’s responsibility are all related to the ONP. This section will

primarily deal with the ONP spills, since we already discussed the impacts in block 8 and 192

in section 4.1.3. Figure 14 gives an evolution of the number of spills from 2006 to 2016 and

also indicates how many were attributable to natural causes and how many to corrosion.

Figure 15 indicates how many were directly related to the ONP and Petroperú. As we can

see the number of spills has highly increased over the years with a peak year in 2014 with

thiry-three spills. Certainly when we compare these numbers with the number of spills

reported between 1997 and 2005, which were only twelve in total. Furthermore, we see that

the number of spills at ONP has been alarmingly high in the past three years with a total of

fourteen spills in 2016. These increases in numbers has several explanations. As indicated

before the Supreme Decree N° 015-2006-EM weakened the requirements of reportable

spills. Also the problem gradually became more known and visible, which resulted in more

careful supervision of the ONP by indigenous communities, whereas many spills went either

undiscovered or unreported before. Other explanations, as will be argued in section 4.3.3,

point in the direction of the degradation of the ONP and its installations, its 40 years of

service and poor maintenance by Petroperú and other companies.

Most publicly available reports give little technical or useful objective information to assess

whether the different stakeholders have complied to their contracted obligations. However,

the Cuninico spill of 2014 has resulted in a big and well-documented lawsuit and a thorough

technical evaluation of the accusations. These evaluations help to highlight some major

shortcomings in Petroperú’s management. In the Cuninico lawsuit Petroperú is accused

among other things of “non-compliance with the Environmental Management and Adaptation

Program (PAMA) for failing to carry out maintenance activities at the spill site” (1), “failure to

comply with the Contingency Plan for not detecting nor controlling the spill in due time” (2)

and for “spilling oil into the environment causing actual damage to flora and fauna and

potential damage to human life or health” (3).139 In directorial resolution N°844-2015-

OEFA/DFSAI by OEFA, the supervisory organ comments on the merits of the case and

several arguments made by Petroperú.

In relation to the first accusation, Petroperú states that it has issued the following technical

maintenance reports to prove that it has complied with its PAMA:

-Final Inspection Survey Report, developed by Rosen Engineering Gmbh by means of intelligent pigs to

inspect corrosion and loss of thickness in March 1999 on Section I of the pipeline

-Preventive and Predictive Maintenance Plans for the ONP for the years 2005 up to 2014

-Technical Report ADS-0028-2006-OEL-PETROPERÚ and CME-007-2012-OLE-PETROPERÚ, which

monitored the cathodic protection system of the ONP

-Two reports on visual inspection of ONP section I conducted in 2012 and 2013

-Technical Report N° OLEO-863-2014, Analysis, Commentaries and Arguments on the Supervisory

Report of OEFA N° 0379-2014-OEFA/DS-HID

These reports have been transferred to OEFA as proof that the necessary inspections and

maintenance works have been conducted and should, according to Petroperú, exempt them

from any responsibility over the development of the spill. Additionally, Petroperú refers to a

report140 on the failure analysis of the spill issued by MCC Technology to point out that the

139 See Resolución de Consejo Directivo N° 044-2015-OEFA/CD and Resolución Directoral N°844-2015-OEFA/DFSAI. 140 See Informe de Análisis de Falla del tramo del Kilómetro 41+833 del Oleoducto.

48

elastomer on the weld joint where the spill occurred had been removed by external force.

This alledgedly caused the aggressive process of corrosion that caused the spill.

OEFA in response, underscored some critical flaws in Petroperú’s defense. According to its

own PAMA, Petroperú had the following obligations:

Maintenance of the ONP

Internal inspections External inspections -Corrosion and thickness loss inspections with

electromagnetic pigs

-Visual inspections on the right of way

-Inspections by cleaning pigs with magnetic metal

brushes every two months

-Periodic monitoring of the external integrity of the

cathodic protection potentials and electrical resistance

-Geometric inspections /

The PAMA indicated that these inspections would effectively contribute to prevent pipeline

processes and facilities being a source of environmental contamination. It should be noted

that the standard in force at the time Petroperú's operations began indicated that inspections

should be carried out at least once every five years, and that from the results, the frequency

of such inspections would be defined. The transferred reports informed on these

requirements but OEFA made several remarks on the results, the date and the scope of the

conducted surveys. The Rossen report in 1999 indicated three critical points of metal loss of

around 30% in the vicinity of the spill.141 Although alarming, Petroperú did not establish a

maintenance frequency nor did it accredit subsequent inspections, based on the results of

these inspections. In Technical Report N° OLEO-863-2014, which was issued after the spill,

Petroperú mentions that two more inspections for Section II were completed in 2004 and

2013 and that a re-inspection of Section I was scheduled for 2015. This means that the last

inspection on Section I happened fifteen (!) years before the incident in Cuninico.

Furthermore, with respect to the cleaning operations with magnetic pigs that Petroperú is

required to perform every two months, Petroperú has not presented any evidentiary

summaries accrediting the execution of said actions.

The last cathodic protection monitoring in the area under discussion had been carried out in

2006, approximately eight years before the incidence of the spill. In the 2006 report, two

measured potentials near the spill site had a value well above the NACE RP0169 standard,

meaning that a periodic follow-up of the cathodic potentials should have been established.142

Petroperú tried to contend that another survey was conducted in 2013, but this survey dealt

with the section from 184 km to 305 km, more than 100 km away from the spill site. This

means that during the eight-year period leading up to the spill the external structural

conditions for effective protection were not properly monitored or maintained. Moreover,

there has not been presented adequate evidence or reporting on visual inspections of the

right-of-way. Petroperú however claimed that visual inspection should be limited to

accessible areas of the duct, i.e. areas that are not submerged or buried, and that other

methods and instruments exist to assess its condition from a distance. OEFA replied that

although the pipeline is submerged for a large part of the year, there are periods during the

year where the water level decreases and the pipeline is exposed so that Petroperú could

still perform these inspections regularly.

Many other remarks point to the invalidity and irrelevance of the supplied information in the

Cuninico case, also regarding the other accusations brought against Petroperú. The OEFA

thus concluded that Petroperú failed to comply to the regulations in its PAMA. Another report

on the Morona spill of February 2016 where the established cause of the spill was also

141 See Article 209 in Resolución Directoral N°844-2015-OEFA/DFSAI. 142 See Article 240 in Resolución Directoral N°844-2015-OEFA/DFSAI.

49

corrosion, followed a similar logic.143 On the other hand as mentioned earlier, eleven out of

fourteen ONP spills in 2016 were attributed to sabotage. However, from these spills only a

few OEFA reports are publicly available and none of them give substantiated evidence of the

cause of the spill. In the next paragraph the examined reports will be further discussed in

relation to the discourse of sabotage.

4.3.3 Discussion Pipeline maintenance has changed over the years. We have evolved from a “fix when

broken” to a more anticipative attitude where failures and associated costs have to be

avoided as much as possible. This requires the execution of directed visual and instrumental

inspections on regular time periods, especially near the end of the pipeline’s lifetime when

the probability of failure increases. In their defense on the Cuninico spill Petroperú stated that

the ONP has an expected lifetime in excess of 100 years. This is however a large

overestimation of the reality, as most industrial players estimate a steel pipeline’s life

expectancy around 50 years.144 The ONP has been in operation for 40 years and it inevitably

starts suffering from old-age diseases. Section I of the pipeline is located in an

environmentally sensitive, valuable and challenging region. These conditions should warrant

a very thoughtful implementation of the Master Maintenance Plan, but as is clear from the

issued inspection reports this is certainly not the case.

The discourse of sabotage tries to divert attention from these deficient management policies.

Consequently, the discussions concerning the recent sequence of spills have reached an

impasse. The government and the oil companies are not committing to remedying the

environmental damages, as they argue that they should not bear the repercussions of

terrorist acts. This is how the existence of the underlying problem, a seriously degraded and

outdated pipeline, is effectively ignored and obscured. The consequences of this problem

primarily fall onto the indigenous communities of which the livelihoods and means of

subsistence are in danger. I argue that this act of negligence by the government is in itself a

form of sabotage and a serious violation of ‘the right to know’. In general terms most

dictionary definitions describe sabotage as a deliberate action to damage a certain

opponent’s facilities for political, economic or military advantage. Sabotage has also been

used in relation to the oil industry. For example, Nigerian law defines a saboteur as any

“person who does; aids another person; or incites, counsels or procures any other person to

do anything with intent to obstruct or prevent the production or distribution of petroleum

products in any part of Nigeria” (Onuoha, 2008). Emile Pouget in his transcript Le Sabotage

reverses the concept of the traditional worker sabotage. He speaks of capitalist sabotage

which to him is “the regular and systematized damage done by capitalists to industry,

commerce, workers, and consumers in the service of profit.”145 In my opinion the actions or

lack thereof of the Peruvian government can be defined as ‘government sabotage’,

combining elements of the previous definitions. I argue that the government deliberately

damages the environment and facilities of indigenous peoples to their own economic

advantage by refusing to acknowledge imminent threat of the pipeline and by refusing to take

purposeful action to either prevent the spills or to repair the damages.

Nonetheless, it is possible that part of the spills have been caused by third party damage.

What I would like to point however is that these are more likely to be cases of isolated

persons or criminal groups inflicting damage for personal gain or perhaps out of boredom.

The federations that protect indigenous rights have nothing to win from these covert acts of

sabotage. In contrast to mobilizing large crowds in peaceful protest to forward certain

143 See Resolución Directoral N° 052-2016-OEFA/DS. 144 See for example http://essentrapipeprotection.com/what-is-the-life-expectancy-of-your-pipes/. 145 See https://www.jacobinmag.com/2016/09/pipelines-explosion-sabotage-disaster-fracking-bp-iww.

50

demands, as happened in Saramurillo, these sabotaging acts are not likely to gain popular

support for the indigenous cause. Furthermore, there are some technical and economic

considerations to be made. A report issued by E-tech international, a nonprofit organization

which gives technical support to communities facing the environmental impacts of large

development programs, demonstrates that in order to sabotage a pipeline sophisticated

equipment is needed.146 Equipment that indigenous organizations or individuals usually do

not dispose of. It also refers to international research on the probabilities of oil spill causes.

According to the paper 25% of the world’s oil spills are caused by corrosion, 36% by defects

in the welding joints and only 3% by sabotage or terrorism. Furthermore, it is argued that

countries with high incidence of oil terrorism and theft such as Nigeria have a high

contribution to this 3%, so that this percentage might actually be much lower in Peru, where

there is no state of active war. In Nigeria, daily theft of oil by terrorist groups is estimated to

amount to 100.000 barrels a day (Ikelegbe A. , 2005). In Peru, oil production is just not on a

level that makes organized oil looting profitable. On the contrary, the financial damages to

the environment and the indigenous subsistence economy are far greater than any

remuneration communities might receive from cleaning operations. In any case, protecting

the pipeline from third party damages by independent individuals or criminal gangs and

prosecuting the perpetrators is not the responsibility of the indigenous federations but of the

central government.

This is not to say that local communities can not be valuable partners in pipeline safety

management. Petroperú stated in their defense argument that it is not feasible to perform

visual inspections in inaccessible areas. In my opinion this is a discriminating idea, as it are

the indigenous peoples who live in these areas and therefore do not enjoy a similar degree of

protection in comparison to more populated areas. By giving indigenous representatives

more control or means of participation in the protection of the industrial facilities or monitoring

of oil spills, they can ensure adequate protection of their communities. Training community

members to look for possible external damages in their territories could significantly enhance

the probability of early detection of vulnerable sections in the pipeline and elicit adequate

response. Furthermore, this type of control could also discourage vandalism and third party

damage.

In order to establish such decentralized monitoring practices it is necessary to make all

relevant technical information on the condition of the pipeline available to indigenous actors

in comprehensible form. For now, as is clear from the previous section, the transparency

policy remains a dead letter. There is still an unwillingness to publish sound technical

evaluations of the spills. Inspections reports are issued to comply to the absolute minimum

standard of regulations, rather than to integrate the acquired information in subsequent

maintenance plans. The discourses of sabotage perfectly fit this approach as they allow to

consistently neglect the warning signals. The indigenous peoples are forced to be helpless

spectators on the sideline. Moreover, they do not only feel their health being compromised

and watch their living environment being degraded, but are also criminalized and

marginalized in the process.

A technical analysis of the condition of the is ONP is thus necessary to establish a factual

basis on which to continue negotiations concerning the oil industry in the Peruvian Amazon.

Technical information should be made available in order to perform independent

assessments on the cause of the spills. This will create incentives to take directed and

meaningful action, whatever the outcome. I argue that trust between indigenous and

government negotiators can only be established by recognizing this need. Combining

government and indigenous forces is the way forward to find workable solutions to protect

146 See E-tech international, El mito del sabotaje de oleoductos en Loreto (2016).

51

the pipeline both against saboteurs and against ruptures by natural causes or lack of

maintenance. Furthermore, it could break the impasse concerning the remediation of the

environmental damages and support and accelerate a search for economically and

ecologically viable alternatives for oil production.

4.4 Alternative strategies for cooperation Framing and counter-framing processes are usually performed in an exclusively oppositional

manner. Likewise, the framing processes in the Peruvian conflict define the participants as

antagonist opponents with radically different interests and values, where each group tries to

maximize its own advantage often to the detriment of the ‘other’. As we have seen in section

4.1.5, this has led to a one-sided and unproductive series of negotiations. However, it is

more often than not the case that the different parties have at least some common ground

and stand to benefit from a cooperative setting. Environmental pollution from oil spills, is a

loss for indigenous citizens, the government and the industry alike and is therefore a problem

that requires holistic action on different levels. In this approach, the decision-making process

in Peru’s hydrocarbons industry should evolve to “a participative model of policy-making that

is designed to function through non-hierarchical, democratic principles” and which

“negotiates towards win-win situations, rather than viewing power as a zero-sum process”

(Pellow, 1999). Participants are stakeholders rather than opponents and power is shared for

the collective good. In the next paragraphs I will propose some specific strategies and

practices that can help to achieve such an environment.

First of all, as I have mentioned before indigenous communities should get more involved

with the monitoring of oil leaks and potential pipeline failures. For example, the pipeline could

be divided into sections of about 50 km, where each section gets assigned a team of

indigenous field supervisors. These supervisors should get basic training in visually detecting

vulnerable points, and if feasible should also be trained to perform tests on the cathodic

protection system. Each team should be able to inspect their section every two or three

months. Reports on their findings, such as missing protective elastomers, deficiencies in the

coating, corroded sections, failing cathodic protection, or third party damages, should be

transferred to the responsible agencies so that they can take directed action if needed. There

should also be a ‘hotline’ installed to report urgent situations.

To support these monitoring activities, I would ask for the creation of an interactive platform

to share technical information on the state of the ONP. This approach combines the technical

expertise of the industry with the terrain knowledge and decentralized supervision of

indigenous actors. The platform should include all inspection reports that Petroperú has

ordered over the years, periodic updates on the visual inspections performed by the

indigenous supervisors and independent assessment reports of oil spills and their

reparations. The platform thus continuously evaluates whether the ONP is in acceptable

condition to transport the produced oil. It can also be used as a diagnostic tool in discussions

on liability and remediation of oil spills, because now the indigenous communities and

business and government institutions have a joint responsibility in assessing the possible

dangers. A responsibility however, that can only be taken if genuine informed participation is

installed.

The creation of such a platform would fall under the framework of Participatory Action

Research (PAR), which has been discussed in great detail by Orta-Martinez in his Phd thesis

on oil frontiers in the Peruvian Amazon.147 In PAR, data collection, reflection and action “are

aimed at removing inequalities and power imbalances by enabling people to enhance and

147 See Orta-Martínez, M. (2010). Oil frontiers in the Peruvian Amazon: Impacts of oil extraction for the Achuar of Río Corrientes (PhD Thesis in Environmental Sciences).

52

share knowledge on their life conditions and take action to improve their own situation.” In his

thesis Orta-Martinez makes use of a Participatory Geographical Information System (PGIS)

to register and document the evolution of the environmental impacts. The most important

effect of this system, as Orta-Martinez argues, has been the effective removal of the

possibility for companies to ignore the evidence of pollution, thereby backing up indigenous

demands and forcing companies to take action. However, he also raises some critical

weaknesses and questions. There is the technical dependency, as the use of advanced

technology often requires the support of external advisors. Next, there is the cost of training,

wages and maintenance. Finally, logistics is an important issue as some of the remote

communities do not have access to computer equipment, electricity or internet.

The usefulness of the PGIS, despite several shortcomings, has been proven and could be

extended with the platform proposed in this thesis. The PGIS system is mainly a tool to

assess impacts, provide evidence of mismanagement, and to plan reactive remediation. The

platform on the other hand could serve as a supporting tool for preventive maintenance and

diagnostics. In the first place, and that is possibly its biggest weakness, this requires the

cooperation of the oil industry. But, the industry also stands to gain a lot since they can now

transfer part of their responsibility to the indigenous communities and the costs for

environmental remediation will be greatly reduced if the program is correctly implemented.

Costs of the operations should however be carefully negotiated. I would propose that the

wages and operation costs of the supervising teams are paid for by the indigenous

federations, in exchange for full cooperation, training and disclosure of information by the

industry. Favorably, the technical demands are lower than for the PGIS since the monitoring

does not require the use of advanced GPS. This is because the monitoring only concerns the

trajectory of the pipeline, which also limits the scope (and costs) of the analysis.

Apart from the short-term direct control over the impacts of oil exploitation, these PAR

methods can also ensure the achievement of long-term political goals and impact decision-

making on the future of the Peruvian oil industry. As the ONP will further degrade and oil

reserves will further dwindle, the platform can be used in cost-benefit analyses on future

investments, as it could provide detailed information on maintenance costs and

environmental risks. It is thus an objective tool for identifying problematic zones, in order to

direct investments to more profitable and less ecologically sensitive oil blocks or alternative

land uses for economic development.

53

5. Conclusions Throughout this dissertation we have examined the socio-economic and cultural drivers of

the expanding oil frontiers in Peru and its increasing impact on environment, health and

human rights issues. Spurred by the illusion of effortless and instant wealth, the oil industry

started as a success story in the 1970s. The ONP here was not just a means to transport oil

from point A to point B, but formed the symbolization of a pipeline to modern society.

However, from 1980 onwards the industry has been in continuous decline. Today, crude oil

exploitation in Peru is only a fraction of what it used to be and the contribution of the

hydrocarbons industry in 2016 to total government revenue fell below 1%. Even the short-

lived surge in oil prices of 2004-2014 has not been able to bring about a turn for the better.

Furthermore, we have compiled evidence on the widespread environmental destruction of

the Peruvian rainforest and the damages to public health, especially among the indigenous

population. Meanwhile, the government has repeatedly tried to reinvent the industry by

diversifying to natural gas exploitation and advertising unconventional heavy oil fields. It

seems the magical discovery has blinded policy-makers to the (long-term) detrimental effects

of their extractive economy and continues to do so to this day.

We have seen how the indigenous communities have organized and resisted the

encroachment of their lands supported by a growing national and international legal

framework. In their discourse they accentuate the historical and collective claims on their

ancestral territories from which they derive their means of subsistence. The integral value of

the rainforest, which they develop sustainably in the form of a trusteeship, is of critical

importance. On the other hand, the central government has framed the Amazon territory as

an unexplored space whose natural resources are at hand to serve national interest. Current

president, Pedro Kuczynski, has followed the ethos of his predecessors to “not exaggerate in

environmental regulations” to be able to attract investment.148 This is how ‘the environment’

has been constantly positioned in confrontation with ‘the economy’. In order to impose their

views on development, the government has partially replaced the environmental regulatory

framework with an appearance of transparency. This has resulted in a growing body of

information on analyses of reserves, oil wells, seismic exploration and so on, accessible by

investors and costumers through databanks. However, this research demonstrated that

reports on the material state of the ONP and the protection measures were not so readily

available. Furthermore, pipeline regulator Petroperú failed to produce and present the

inspection reports in the timeframes established by the (inter)national industry standard.

Thereby exposing the ONP to increased risks of failure by natural degradation.

The discourse of sabotage works to cover up the deficiencies and irregularities in the

maintenance management. This narrative sounds plausible due to the increased

international attention for oil terrorism, which makes it into an effective approach (Onuoha,

2008). By putting the blame on the indigenous communities or some unidentified ‘third party’,

Petroperú avoids scrutiny of the internal workings of the company. The side-effect is that the

integrity of the ONP is also not put in question. Nevertheless, the problem is very real to the

thousands of indigenous people that are directly affected by the oil spills. The situation in the

field has progressively aggravated over the past decades and if the ongoing trend is not

reversed, the damages done to environment might be irreversible. Therefore, I have

juxtaposed ‘government sabotage’ with ‘indigenous sabotage’ since the deliberate strategy to

undermine the indigenous social movement also removes the urgency for action to the

emerging problems and thus brings indigenous lives in danger. Moreover, there are growing

indications that the third party damage might not be instigated by indigenous actors but on

148 See http://larepublica.pe/politica/785489-ppk-buscaria-reducir-estandares-ambientales-para-promover-refinerias.

54

the contrary is inflicted by companies contracted in the clean-up and remediation of the ONP

spills. A preliminary commission has been set up to investigate these accusations. We can

here again observe, as we did in section 3.3.1 with Mitchell, how different forms of ‘sabotage’

are in fact methods to control the means of oil production to make certain economic or

political claims.

The president of the preliminary commission, Cesar Villanueva Arévalo, has stated that they

“are performing their job with concrete data, not with speculations or unconfirmed

information” and they “need to know the background and real causes of this situation that

has greatly affected our country”.149 In the same communication the government has

acknowledged that the situation requires a “technological update” of the maintenance

procedures in dialogue with the native communities. The policy recommendation made in

section 4.4 could be a significant step in this process. The establishment of a digital data

platform on the integrity of the ONP would bring the debate from the scientific to the political

arena since it would remove discussion and speculation on the objective causes of the spills.

The involvement of the native population would allow self-containment of the risks and

enables companies to lay off part of their responsibility. This shared responsibility could form

a feeding ground for more constructive dialogue. Finally, the platform favors a better

assessment of the costs and benefits of the pipeline network.

Already, the MINEM has mentioned the possibility of a complete or partial renewal of the

ONP, a process that the proposed tool could accelerate.150 However, the installation of a new

pipeline would lock the region down in what is perhaps another half century of oil

exploitation. This thesis has collected sufficient evidence on the decreasing economic and

environmental viability of the industry in Loreto. It is therefore my hope that the government

starts thinking about structural development strategies for the Peruvian Amazon, instead of

continuing to take the petty cash from the oil companies. Entering into dialogue with the

indigenous population and investigating sustainable development schemes for the rainforest

could provide Peru with alternative sources of revenue. This time with an eye on the long-

term future of the country, so that this valuable space will not be lost for the coming

generations.

149 See http://www.congreso.gob.pe/index.php?K=263&id=7490. 150 See Saramurillo Accords.

55

Tables

Table 1: Distribution of the Canon and Sobrecanon in Loreto in percentage of the total amount among the different regional institutions. Source: https://www.mef.gob.pe/es/transferencias-a-gobierno-nacional-regional-y-locales/base-legal-y-aspectos-metodologicos/canon-y-sobrecanon-petrolero.

Institution Percentage 6. Regional Government 52

7. Local Governments 40

8. National Universities 5

9. Peruvian Amazon Research

Institutions

3

10. State Institutions of Higher

(Technical) Education

/

Table 2: Pipeline diameter and minimal wall thickness for the different section. Source: https://www.Petroperú.com.pe/Main.asp?Seccion=550.

Section Diameter Wall Thickness (min.) Section I 60,96 cm 6,35 mm

Northern Branch 40,64 cm 6.35 mm

Section II 91,44 cm 7.93 mm

Table 3: Overview of the reported spills between 2006 and 2016 according to responsible company and determined cause. Source: https://es.scribd.com/document/323262637/190-derrames-en-el-oleoducto-norperuano.

Companies Sabot-age

Corros-ion

Failing Connection

Natur-al

Exter-nal

Construc-tion

Operat-ion

Mainten-ance

Investig-ated

Fatig-ue

Deterioria-tion Total

Pluspetrol Norte S.A. 42 28 9 1 2 4 3 1 0 1 0 91

Petroperú S.A. 20 7 0 8 0 0 0 2 0 0 0 37

Maple Gas Corporation 8 4 1 3 4 1 0 0 0 0 0 21 Petrobras Energia Peru S.A. 1 12 0 0 0 0 0 0 0 0 0 13 Sapet Development Peru INC 3 2 0 0 0 0 0 0 0 0 0 5

CNPC Peru 1 0 0 0 0 0 0 0 3 0 0 4 Petrolera Montericco S.A. 0 2 0 0 0 0 0 0 0 0 0 2

Consorcio Terminales 0 1 1 0 0 0 0 0 0 0 0 2

Savia Peru S.A. 1 0 0 0 0 0 0 0 0 0 1 2

Interoil Peru S.A. 1 0 1 0 0 0 0 0 0 0 0 2

Olympic Peru Inc 1 1 0 0 0 0 0 0 0 0 0 2

Southern Peru Corporation 0 0 0 0 1 0 0 0 0 0 0 1

Mercantile Peru Oil & Gas S.A. 0 0 1 0 0 0 0 0 0 0 0 1 Pacific Stratus Energy Peru S.A. 0 0 0 0 1 0 0 0 0 0 0 1

Shougang Hierro Peru 0 0 0 0 0 0 1 0 0 0 0 1

Petro-Tech Peruana S.A. 1 0 0 0 0 0 0 0 0 0 0 1

Total 79 57 13 12 8 5 4 3 3 1 1 186

56

Figures

Figure 1: Map of Peru and its regions. Loreto is situated in the north side of the country.

57

Figure 2: Overview of some of the important blocks in Loreto. Source: Petroperu.

Figure 3: Awarded contracts for exploration and exploitation of oil concessions between 1971 and 2014. Source: www.perupetro.com.pe.

0

10

20

30

40

50

60

70

80

90

100

Contracts

Exploration Exploitation

58

Figure 4: Oil prices between 1971 and 2016 measured in the Illinois Crude standard. Source: U.S. Energy Information Administration.

Figure 5: Map of the Northern Peruvian Pipeline (ONP) with of the most important refineries and stations.

0

10

20

30

40

50

60

70

80

90

100

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

Oil Prices (Illinois Crude)

59

Figure 6: Daily oil production in block 8 and 1-AB and overall daily production in barrels per day in Peru between 1998 and 2016. Source: Estadísticas Petrolera Perupetro.

Figure 7: Evolution of proven, probable and possible oil reserves in millions of barrels in Peru between 1997 and 2015. Source: Estadísticas Petrolera Perupetro.

0

20000

40000

60000

80000

100000

120000

Oil production (barrels/day)

Block 8 Block 1-AB Total

0

2000

4000

6000

8000

10000

12000

Mill

ion

s

Oil reserves

Proven Probable Possible

60

Figure 8: Investments in Block 8 and 1-AB between 2005 and 2016 in USD. Source: Memorias Anuales Perupetro.

Figure 9: Investments in oil exploration and exploitation between 2005 and 2016 in USD. Source: Memorias Anuales Perupetro.

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Mill

ion

s

Investments in Block 8 and 1-AB

Block 8 Block 1-AB

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Mill

ion

s

Investments in exploration and exploitation

Exploration Exploitation

61

Figure 10: Total government revenue through oil tax income in USD and the percentage of the general government revenue this amounts to (the orange line indicates the percentage). Source: Memorias Anuales

Perupetro.

Figure 11: Tax income transferred to Loreto and the whole of oil-producing departments in USD. Source: Memorias Anuales Perupetro.

0,00%

0,50%

1,00%

1,50%

2,00%

2,50%

0

500

1000

1500

2000

2500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Mill

ion

s

Government Revenue

Total revenu % General revenu

0

200

400

600

800

1000

1200

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Mill

ion

s

Canon petrolero

Loreto Total

62

Figure 12: Schematic overview of a corrosion process with the an iron (steel) pipe as anode and a tin exterior component as cathode. Retrieved from: https://saylordotorg.github.io/text_general-chemistry-principles-patterns-

and-applications-v1.0/s23-06-corrosion.h.

Figure 13: Intelligent pipeline inspection pig. Retrieved from: http://smartpigs.net/.

63

Figure 14: The evolution of the number of spills since 2006. The numbers of 2016 are incomplete and mainly include those spills related to the ONP. Source: https://es.scribd.com/document/323262637/190-derrames-en-el-

oleoducto-norperuano.

Figure 15: Evolution of the number of spills that are directly related to the ONP and fall under the responsibility of Petroperú. Source: https://es.scribd.com/document/323262637/190-derrames-en-el-oleoducto-norperuano.

0

5

10

15

20

25

30

35

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Evolution of number of spills

Total Sabotage Natural Causes

0

2

4

6

8

10

12

14

16

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Evolution of spills related to ONP

64

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