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Algarve onshore drilling contracts deemed legal by Attorney General

oilblocsalgarveIn a shock announcement in parliament yesterday, Portugal’s Prime Minister António Costa reported that the oil and gas exploration and extraction contracts signed by the former Minister for the Environment Moreira da Silva with Sousa Cintra of Portfuel have been declared perfectly legal by the Attorney General, hence there was no reason to annul them.

These two contracts are for oil and gas exploration across a large percentage of the region’s land mass, a development that has been objected to by tens of thousands of Algarve home owners and all of the council’s mayors who as one, united under the AMAL banner, already have lodged a legal case to get these contracts annulled.

Portfuel clearly was set up only to take advantage of the contracts on offer, bid against no other companies for the potentially lucrative exploration and drilling rights and was awarded the contracts just days before the government changed last autumn.

The contract criteria were not met by Portfuel, a company that has no track record in the oil and gas industry, had been set up only to handle the unopposed contracts, had no accounts to submit in support of its application, had no employees and whose registered address was an empty office from which the owner’s wife picked up the mail from time to time.

There was an uproar when suspect wells were dug in Rogil near Aljezur, explained by the multimillionaire Sousa Cintra as being wells ‘to find water for agriculture’ despite the borehole’s depth, the location in a forest, the scale of the operation and the employment of a full-time geologist for several months during the extensive drilling process.

Anti-oil protestors and campaign groups were on the case, complained and this drilling activity was halted while the government decided what to do.

The government’s stance remains - it wants to find out what underground resources Portugal has but that it does not envisage oil and gas ever being extracted. The contracts however, both for offshore and onshore activity, cover not only the exploration stage but every stage to extraction and transport of oil and gas.

The ‘antis’ want the government to tear up the contracts in the light of the Paris CO2 agreement and focus on developing the Algarve as a renewable energy region, leading the nation and the world in cutting edge technology and alternative energy production from the sun, wind and waves.

The government refuses to state the cost of withdrawing from the exploration and production contracts for onshore and offshore exploration, signed with often little known third rate companies which already have been trading their licenses within the industry.

The Attorney General’s decision that the Portfuel contracts are quite legal was taken in the face of clear evidence that the contracts could not be legal as the company did not fulfil many of the contract criteria.  

The prime minister’s assurance that the government would continue to oversee the drilling and potential extraction of oil and gas on the Algarve’s land and that it would be making sure it would ‘impede environmental damage,’ offers scant assurance to those property owners businesses and tourists across the Algarve whose peace and quiet inevitably be shattered by unlimited drilling activity.

In fact the prime minster went one step further yesterday in parliament and stated that there would be ‘no environmental damage’ to the region, perhaps unaware that this would be an industry first.

The anti oil campaigners’ social media networks have been humming today with allegations of political influence over the Attorney General’s office and further suspicion that to get out of these contracts would so severely damage the national accounts that the government would prefer to allow the oil companies to continue, despite the political fallout, rather than admit the secret clauses would trigger compensation payments, maybe running into billions of euros.

The Algarve’s mayors are against oil and gas exploration as former minister Moreira da Silva did not see fit to involve them in his suspicious decision to award contracts covering most of their region. The mayors know their local voters are generally against the oil and gas development because, in addition to nimbyism, the royalty rates agreed are so low compared to the industry benchmarks, that the country will get scarce little revenue if oil or gas is found and anyway, the Algarve will get zero as the revenue goes to Lisbon and there is not counterpart arrangement for the Algarve to receive money from the oil companies.

The Algarve’s cry of “zero percent of the revenue and 100% of the risk” has been powerful enough for the mayors to fight as one to keep drilling, and later the distinct probability of fracking, off their turf.

Antonio Costa’s position is invidious but if he came clean and explained the problems to parliament and to the public, he might find a way forward.

As he has not come clean in this dirty business, the Algarve is sharpening its weapons for the fight of its life.