BP’s fracking secrets Pan-American Energy and Argentina’s shale mega-project November 2017 This report was researched and written by Anna Markova (Platform) with input from Hernán Scandizzo BP does not carry out and Diego Di Risio (OPSur). Thanks also to Ariana Ortega and Martín Alvarez (OPSur), Mika Minio- Paluello and Sarah Shoraka (Platform) and Paul fracking in its home Horsman (Greenpeace). This work is licensed under the Creative Commons country, the UK, Attribution-NonCommercial 3.0 Unported (CC BY-NC 3.0) licence. You are free to share and adapt this work for non-commercial purposes, on the condition because “it would that you attribute the source. License terms: https:// creativecommons.org/licenses/by-nc/3.0/ attract the wrong kind of attention” Platform is a London-based organisation that conducts research, education, and campaigns towards a just future beyond fossil fuels. UK company limited by guarantee no. 2658515, registered charity no. 1044485. [email protected] +44 (0)20 7749 1109 Contents Summary 3 Observatorio Petrolero Sur conducts research, 1 BP and Pan-American Energy 4 communications, and intervenes in public policy for a just transition towards a sustainable society 2 What is Vaca Muerta? 8 and energy system. [email protected] +54 (011) 4373-6304 – Buenos Aires 3 Who is BP? 10 +54 (0299) 15 586-4313 – Neuquén 4 Pan-American Energy’s dossier 12 5 The bet on extreme gas 14 Addendum Pan-American Energy in other countries 18 This publication has been produced with the financial Endnotes 19 assistance of the European Union. The contents of this publication are the sole responsibility of Platform- London and can under no circumstances be regarded as reflecting the position of the European Union. 2 BP’S FRACKING SECRETS: PAN-AMERICAN ENERGY AND ARGENTINA’S SHALE MEGA-PROJECT Summary Pan American Energy is billed as Argentina’s BP does not carry out fracking in its biggest private oil company. It already runs home country, the UK, because “it would Argentina’s largest existing oilfield (Cerro attract the wrong kind of attention”2. But Dragon) and is responsible for a quarter of the in Argentina, BP is pushing forward fracking unconventional gas extraction in Neuquen in a region where: province. Due to be merged with Axion Energy next year, Pan American Energy’s dominance n 50 local municipalities and one province will be even greater. have passed local regulation against In fact, Pan-American (PAE) is a unit fracking. of the multinational oil company BP (ex British Petroleum). Owned 60% by n The right of indigenous Mapuche BP currently (and 50% after next year’s communities to free, prior, informed merger), PAE uses its Argentinian minority consent to drilling on their lands is shareholders – the Bulgheroni family – as routinely violated, with resistance facing its figureheads in Argentina. In reality the evictions and violent repression. Bulgheroni family and the Chinese national oil company CNOOC control the rest of PAE’s n Neighbourhoods located next to waste shareholding in equal measure, through their sites and silica mines used for shale gas company Bridas. While BP, as the largest drilling have expressed concerns about end beneficiary, will derive the largest profit contamination. from PAE’s drilling, BP conveniently rarely mentions owning PAE. BP – via Pan-American – plays a leading Our analysis of BP – PAE’s track record reveals: role in advancing one of the world’s biggest carbon bombs, the Vaca Muerta shale gas and n involvement in an alleged $300 million oil province in Patagonia. bribe to regional government officials in This briefing provides a breakdown of return for an extended oilfield licence; BP – PAE’s role in pushing forward fracking in Patagonia, as well as the company’s history n use of an obscure subsidiary to manage and worrying track record on safety and the potential of worker unrest; environmental impacts. Our research reveals: n large-scale groundwater contamination n By the end of 2017, PAE / BP will have at Koluel Kaike, where PAE was the last drilled and fracked at least 37 wells on oil company of all operating in the area to its Vaca Muerta blocks, in addition to introduce remediation measures. 100 tight gas wells already operating in its flagship block. While there is widespread opposition to fracking n Another 48 wells are planned for the next in the UK, fracking carried out abroad by UK three years in blocks where PAE operates companies rarely hits the spotlight. This briefing or participates in drilling. shines a light on BP’s responsibility. At a time when scientific studies say 80% of already n Many of these wells require 80-stage discovered fossil fuels must stay in the ground to fracking (compared to just 16 to 40 avoid runaway climate change,3 BP is attempting fractures per well on average in US shale to break open one of the most important and operations)1 most dangerous fossil fuel frontiers in the world. BP’S FRACKING SECRETS: PAN-AMERICAN ENERGY AND ARGENTINA’S SHALE MEGA-PROJECT 3 1 BP and Pan-American Energy History In 2003 BP took the state of Argentina to international arbitration court for measures Pan-American was founded in 1997 as a Joint introduced during the 2001 economic crisis, Venture between Bridas (then a company that impeded BP’s ability to transfer PAE completely owned by the Bulgheroni family) dividends abroad and export the oil and gas and the multinational oil company Amoco. Pan- extracted among other things. Argentina agreed American receives the licence to operate Cerro to pay BP off with an undisclosed sum of money Dragón, the largest oilfield in Argentina, which to settle the dispute.6 had been operated by Amoco since 1958. Today, In 2010 BP was selling off its assets in order Cerro Dragón is responsible for 92% of oil and to pay damages due after its Gulf Of Mexico spill, 54% of gas extracted by PAE,4 and PAE itself and agreed to sell its stake in Pan-American extracts 18% of Argentina’s gas output.5 (except PAE Bolivia) to Bridas for 7,060 million In 1998 Amoco became part of British USD. But the deal collapsed, canceled by Bridas Petroleum, in 2000 British Petroleum rebranded according to a BP press release.7 itself as BP, and in 2007 the Chinese national In 2012 BP sued Bridas in the US for the way oil company CNOOC bought 50% of Bridas in which the deal was canceled. According to from the Bulgheroni family. As a result, Pan- a Financial Times analysis of court documents, American’s shareholders today are BP (60%) according to the contract between BP and BP/PAE machinery and Bridas (40%). Bridas, in case of cancellation, BP would pay at Lindero Atravesado block, The relationship between the shareholders Bridas 700 million USD, Bridas would desist Neuquén province, hasn’t always been easy. from any claims of fraudulent activity on BP’s Patagonia Martín Alvarez Mulally Martín Alvarez 4 BP’S FRACKING SECRETS: PAN-AMERICAN ENERGY AND ARGENTINA’S SHALE MEGA-PROJECT Articles in Argentinian press frequently describe Pan-American as belonging to the Bulgheroni family, some even claiming that the Bulgheroni have successfully bought BP out of the company part, and both companies would be able to n Richard Spies, also CEO of PAE, has break the exclusivity clause by which they worked in Amoco and later BP for most could only conduct extractive activities in of his 39-year career in the oil industry. certain Latin American countries through Pan- Spies managed BP’s Russia operations American. Through its court case, BP pushed in 2005-2009, during one of BP’s most for these clauses to be respected. It is unknown difficult periods in that country. whether BP wanted to pay the 700 million USD sum for the right to operate in Latin America n John M Easton has worked in BP since without PAE, or for the assurance that Bridas 1980 in various countries and positions. would not denounce something about BP’s activities.8 n Alberto Galvis Melo has worked for BP for 21 years and is also regional president for What’s BP’s role in Pan-American BP Southern Cone.10 Energy In addition, Bridas co-founder Alejandro Pan-American Energy is incorporated as a Joint Bulgheroni acts as Honorary President. Venture between BP and Bridas. Although BP holds a 60% stake and Bridas 40%, BP has 3 Hiding the owners out of 5 directors on Pan-American’s board, meaning a high degree of control over decisions. Articles in Argentinian press frequently After the merger next year, BP will appoint 50% describe Pan-American as belonging to the of the directors. Bulgheroni family, some even claiming that the PAE does not list its current board members Bulgheroni have successfully bought BP out of publicly, but in its 2015 reporting the board the company.11 includes the following members:9 BP’s website doesn’t have a single page dedicated to its operations in Argentina. For n Marcos Bulgheroni, son of Bridas comparison, in Russia BP only owns 20% of a co-founder Carlos Bulgheroni. state-controlled company (Rosneft), but this partnership is covered by an extensive series n Liu Yonguie, also a board member at of articles.12 Only three press releases about Bridas. No information on Liu Yonguie PAE can be found on BP’s site: one about its is publicly available, but we assume that decision to sell shares to Bridas in 2010, one he is a representative of CNOOC on the about the cancelation of the same deal, and one Board.