Cablegate: Pluspetrol, Achuar and Gop End Amazon Conflict

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UNCLAS LIMA 004321

SIPDIS

STATE FOR EB, WHA/AND, WHA/EPSC, EB/ESC, OES
TREASURY FOR A. JEWELL, J. LEVINE
STATE PASS TO EXIM - A. FOLEY, C. O'CONNOR, R. WILLIAMSON
DEPT OF ENERGY FOR PUMPHREY/LADISLAW;DOBRIANSKY/RICHARDS
ENERGY INFORMATION ADMINISTRATION FOR CHARLES ESSER
DEPT PASS TO INT/USGS/RESTON FOR D. MENZIE/A. GURMENDI
USAID FOR LAC, EGAT

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EPET ENRG EINV SENV PE
SUBJECT: PLUSPETROL, ACHUAR AND GOP END AMAZON CONFLICT

1. (U) SUMMARY. Argentina's oil company Pluspetrol, the GOP and the
regional government of Loreto signed an agreement October 22 with
the Achuar indigenous communities of Peru's Amazon to end a
three-week environmental and social conflict. The Achuars, supported
by local and international NGOs, had occupied five production fields
to pressure the GOP and Pluspetrol. Pluspetrol will cease dumping
contaminated water into the Corrientes River earlier than it had
previously agreed. The GOP and the regional government agreed to
take responsibility for decontaminating the area, developing a
comprehensive health and development program, and providing
temporary food and drinking water to the Achuar. (Note: Pluspetrol
is the operator of the Camisea gas fields. End Note.)

2. (SBU) Pollution in the area dates back over 30 years, long before
Pluspetrol's involvement, and the Achuars' concerns were
acknowledged as genuine. Participants and observers, while
acknowledging serious pollution, noted that the communities'
fundamental concerns were lack of access to tax canon funds and the
failure of the state to provide jobs, education and health care.
The role of a Peruvian NGO in the dispute may have built impetus
behind legislation that would better control NGOs. END SUMMARY.

ACHUAR BESIEGE OIL FIELDS
-------------------------
3. (U) The Achuar indigenous communities living in the Corrientes
River basin in Peru's northern jungle have long protested pollution
by oil spills and salty production water discharged into the rivers
and ponds where they fish, with little response from the GOP. After
demonstrations in July 2006 in Peru's main Amazon jungle city,
Iquitos, they began to lobby the Peruvian government and Congress.
With the help of a Peruvian environmental NGO, Racimos de Ungurahui,
they occupied several of operator Pluspetrol's oil fields,
preventing the company from producing. Pluspetrol estimated that
it was losing $2.4 million per day in sales revenue. Pluspetrol
Norte is a consortium operated by Argentine firm Pluspetrol (55
percent) and with participation by the Chinese state oil company (45
percent.)

4. (SBU) The Achuars complained that their main sources of food,
fish and game had been affected by leaking oil and associated water
discharge (which is hot, oily and briny) dumped into area waters by
the operators of concession Blocks 8 and 1-AB. Peru's state oil
company Petroperu originally developed Block 8 while Occidental
Petroleum developed Block 1-AB, both over 30 years ago. Both dumped
contaminated water into rivers and lagoons from the start of their
productions; in Petroperu's sites there were several oil spills.
Firms familiar with these blocks told us that this area features one
of the highest water to oil extraction ratios in the world, with 10
barrels of water for every barrel of oil extracted. Re-injection
technology is expensive, those firms said, but in other countries
oil companies are required to re-inject the water produced.

5. (U) By mid-August, the press reported that Energy and Mines
Minister (MEM) Juan Valdivia said the ministry met with Pluspetrol
(operator since 1999 for Block 1-AB and 1996 for Block 8) to
encourage it to accelerate plans to re-inject the contaminated
water. Soon after, Pluspetrol reported that it was currently
re-injecting about 210,000 barrels per day (bpd) of contaminated
water, and planned to re-inject 100 percent (approximately one
million bpd) by December 2009, according to MEM sources.

6. (U) After more consultations in early October among the relevant
GOP agencies, the regional government of Loreto and Pluspetrol
officials to discuss the Achuars' demands, the parties signed an
agreement on October 13. Both MEM Minister Valdivia and Health
Minister Carlos Vallejo participated. However, the media reported
that a national NGO, Racimos de Ungurahui -- advisor to the Achuars
-- recommended that they not abide by their agreement and keep the
blockade until Pluspetrol and the GOP agreed to advance the deadline
to cease water dumping in Block 8 to July 31, 2008 (from December
31, 2008, in the October 13 agreement).
7. (SBU) Minister Valdivia and others have told us of their private
frustration with the behavior of Racimos de Ungurahui in this
negotiation. He complained that the president of Racimos, Lily La
Torre, had not acted on the GOP's invitation to participate in the
talks that resulted in the initial settlement and then immediately
tore apart the accord from the sidelines.

DEVELOPMENT DEAL FOR THE ACHUAR
-------------------------------
8. (U) The GOP and the Loreto regional government also agreed to
initiatives including a comprehensive health program and development
plan; responsibility for cleanup of the polluted areas; and
temporary delivery to the Achuar of food and drinking water. The
Health Ministry agreed to evaluate water quality in the area every
three months. Pluspetrol agreed to train and pay indigenous
environmental monitors. In addition, the MEM decreed that not less
than five percent of the Regional government oil canon be used to
directly benefit the communities. The Achuars agreed to leave the
five production fields once Minister Valdivia signed the agreement,
and to channel any further claims through the government's
Ombudsman's Office. Pluspetrol confirmed that the Achuar have
ceased their blockade and oil production has resumed.

POLLUTION IS REAL, BUT THE
CONFLICT MAY BE OVER
DEVELOPMENT
----------------------------
9. (SBU) Representatives of U.S. firm Arcadis have a $21 million
contract to remediate environmental damage in Block 8. They told us
that the pollution is severe, with some lagoons many feet deep in
accumulated oil. They noted that the state did nothing to require
remediation over the many years that Petroperu polluted the area;
similarly, Pluspetrol was not required to reinject the water and
took little action on its own to remediate. Arcadis told us that
while the Achuar are aware of pollution issues, what they most want
are jobs and basic services that they have never received. ArcadiQ
representatives described its extensive corporate social
responsibility program -- employing area residents and providing
health care -- and noted thQ Pluspetrol could act more proactively
in providing the same.

10. (SBU) Carlos Canepa, the chairman of the Congressional Committee
on Amazonia, Indigenous Peoples and the Environment reported to us
on his participation in the talks with the Achuar. He noted also
that while pollution issues are real, the core problem for the
Achuar, as they explained it to him, was lack of development. He
reported that of over one million dollars in gas "canon" taxes that
are reserved for regional and local development, not one dollar had
found its way to development projects for the Achuar. Canepa said
that the national, regional, and local governments had ignored
development needs for years; the core aim of the oil fields takeover
was to get the jobs, health care and education that the Achuar
lacked.

OPPOSITION TO OIL ACTIVITIES
IN OTHER AREAS
-----------------------------
11. (SBU) The Achuars stated in the agreement that they do not want
the GOP to grant new oil exploration and production concessions in
their territories. They have opposed the start up of exploration
and production by Burlington Resources (a subsidiary of
ConocoPhillips) in Block 104 (Septel reports the September 29
exploration and production agreements between Conoco and the GOP),
and of Canada's Petrolifera Petroleum in Block 106, both near Block
8. Although initially GOP officials maintained that it was the
government's sole prerogative to grant oil and gas concessions, a
few days later Minister Valdivia told the local media that oil
operations need a favorable "social license."

12. (SBU) COMMENT: The role of NGO Racimos in the dispute may have
built impetus behind the bill (Septel) that the GOP submitted to the
Peruvian Congress in late October, seeking to restrict the

activities of Peruvian and international NGOs.
STRUBLE

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