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Portugal's choice between tourism and oil

11426Portugal’s reputation as an oil producer has, so far, been limited to the tasty green stuff you pour over salads and sardines. That could be about to change, writes Paul Ames for politico.eu

The country may be sitting on untapped reserves of petroleum and natural gas, some onshore but most beneath its extensive territorial waters. There’s no commercial production yet but test wells indicate there’s oil down there, perhaps plenty of it.

An aggressive drilling campaign could scare off tourists and damage Portugal’s new reputation as a haven for green power, continues Ames,

The issue is creating problems for the Socialist government of Prime Minister António Costa. It is wavering between the temptations of an oil boom in what is still for the EU a relatively poor country, but it needs the support of anti-oil political parties to stay in power. The powerful fishing and tourist industries are teaming up with environmentalists to block drilling while the oil and gas industry dangles visions of billions in revenues.

Surveys suggest the geology off the Portuguese coast closely resembles that of basins off the coast of Newfoundland in Canada, which currently pump out 170,000 barrels a day.

Reports of a leaked British study sent to the Portuguese government in 2015 had the Lisbon media frothing over estimates of offshore deposits worth €43 billion.

Such speculation may be premature, but the oil industry is definitely interested in finding out if Portugal really does have vast, virgin reserves on Europe’s doorstep.

The potential is there,” said Luis Guerreiro, exploration and new ventures manager at Partex Oil and Gas. “Talk about value and volume at the moment is speculative, but the studies and reports done so far on the geology, the geo-physical and geo-chemicals aspects, indicate with a high degree of probability that there are interesting deposits.”

Lisbon-based Partex is in a consortium with Spain’s Repsol, Dallas-based Kosmos Energy and Portugal’s Galp to explore four blocks off Portugal’s central west coast between Lisbon and Porto.

Another consortium, formed by Galp and Italian supermajor Eni is looking for oil off the southern Alentejo and Algarve regions. Australis Oil & Gas, from Australia, has exclusive rights to two onshore oil and gas exploration concessions around the central towns of Pombal and Batalha.

Almost two in every 10 jobs are supported by tourists, many attracted by Portugal’s pristine beaches and superlative seafood.

In a county that’s dependent on imports for 70 percent of its energy needs, spends around $7 billion a year on oil and gas imports and is only just clambering out of a decade of stagnation and recession, hopes of a hydrocarbon bonanza might be exciting, but the mood is far from celebratory.

The prospect of prospecting off the country’s Atlantic shores has provoked a wave of protests, which the government is finding hard to ignore.

Much of the disquiet is focused on the risks to Portugal’s tourism industry. Direct earnings from tourism brought in a record €11.9 billion last year, according to figures from the World Travel and Tourism Council.

Almost two in every 10 jobs are supported by tourists, many attracted by Portugal’s pristine beaches and superlative seafood.

“Tourism and oil just don’t mix,” says Manuel Vieira, a spokesman for the Algarve Free of Petroleum Platform, a coalition of campaign groups.

“Once this oil industry gets a hold in a place, things get very nasty,” he said in a telephone interview. “There’s no way to provide adequate protection for the coastline.”

Opposition to oil has been particularly intense in the southern Algarve region — Portugal’s premier beach destination which attracted 7 million vacationers to its sun-soaked sandy shoreline in 2016.

Fishermen, local town councils and powerful tourism interests have joined forces with environmentalists to call a halt to oil exploration in the region. And in April, 67 Portuguese scientists published an open letter to the government, calling for a halt to “prevent irreparable damage to the economy, environment and communities.”

In December, the Socialist government rescinded contracts allowing Repsol and Partex to explore off the Algarve’s south coast. Concessions allowing Portuguese company Portfuel to look for oil onshore near the picturesque Algarve towns of Tavira and Aljuzur were also canceled.

At the same time, however, the government has been promoting investment in oil exploration elsewhere.

“Deep offshore hydrocarbon exploration and production is another area where investment from U.S. companies is welcome,” Ana Paula Vitorino, Portugal’s minister of the sea, said last September at a business conference in Washington.

A first well could be drilled this year off the southwest, she explained, adding “geological estimates show that it has the potential to supply one decade of the country’s oil consumption.”

The petroleum issue has put Costa’s government in a sticky situation.

Ministers are tempted by the potential rewards of an oil boom but are concerned about denting the green credentials of a country which gets 57 percent of its electricity from renewables and last year proudly announced it had run the grid entirely from green energy for four days. Costa has said the economy should be carbon neutral by 2050.

Without a majority in parliament, Costa’s government depends on support from the Greens and the anti-oil Left Bloc party, as well as the Portuguese Communist Party, which wants oil exploration controlled by the state rather than private companies.

In parliament this month, Socialist and Communist lawmakers joined forces with the center-right opposition to defeat a Left Bloc proposal “to ban the granting of new concessions for the exploration of hydrocarbons in the national territory.”

Environmentalists and the oil industry accuse the government of fudging the issue. The economy ministry declined to respond to repeated interview requests from POLITICO and no ministers participated in the May 9 parliamentary debate. However, Socialist MPs insist the government is being careful.

The state has concluded contracts which have to be respected … but this Socialist government won’t hesitate in imposing stringent environmental impact studies,” Socialist Party legislator Carlos Perreira told parliament. “New contracts will have to take into account the concerns of local people.”

Meanwhile, local authorities and protest groups have launched legal actions which, combined with prolonged public consultation processes and bureaucratic issues, have delayed drilling. Oil companies are struggling to meet deadlines set in their contracts.

The government will have to decide soon whether to extend a deadline for Galp and ENI to start drilling off the southwest coast.

Another factor could further defer any Portuguese oil boom: the market.

Portugal’s deep offshore is a frontier zone with risks for investors who still don’t know for sure how much crude is down there.

“When the oil price was at $100 a barrel, companies had more appetite to take that risk,” said Guerreiro, the Partex exploration manager. “Nothing has changed in terms of the geology, but companies have less appetite for the risk because the price of oil is lower.”

Paul Ames,  politico.eu

As reported by Natasha Donn in the Portugal Resident, the activist and climate change researcher João Camargo called the Ames article “a very bad piece. It concentrates on oil vs tourism, leaving many other issues without a mention. It makes a ridiculous claim about "potential" which, were there any real grounds or data for that claim, would have already surfaced.It once again bites the hook on the bogus claim of 43 billion euros in reserves but doesn't even understand how ridiculous that is when a few lines down it says Portugal spends 7 billion a year on oil and gas - which means the reserves would be six years worth of Portuguese consumption. And it goes on to propaganda: "this Socialist government won’t hesitate in imposing stringent environmental impact studies."

Laurinda Seabra of ASMAA also talking tio tthe Resident, balked at the omissions in the piece, saying that as far as her association is concerned “the law underpinning the oil contracts is invalid. Had the article looked at issues that had not made mainstream Portuguese media, and raised other factors that are in the public domain, it would have highlighted other areas of concern”, she said.

“In addition when one compares the tourism, fishing and agriculture industries revenues for the country versus the hogwash claim of potential earnings from oil and gas exploration, Ames has conveniently forgotten that the Portuguese subsidiaries of the oil companies registered in Portugal could be seen as nothing more than fronts as their controlling companies as well as the bulk of suppliers are headquartered in offshore havens.”

For the full report in the Portugal Resident, see: 'Portugal’s oil ‘drilling dilemma’ makes it to European stage' (May 26, 2017)

Later on Friday, a report on a keynote speech by the economist, Prof. Ricardo Paes Mamede, was released which showed that the current oil and gas exploration concession so far have yielded "derisory amounts' for the taxpayer and have little chance of producing the sort of wealth the government keeps banging on about.

See: 'Oil and gas concessions yield 'derisory amounts' for the taxpayer' (May 26, 2017)

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