Murky waters

An offshore oil spill off the Peruvian coast has wrought environmental damage while creating political opportunities for an unpopular president.

An offshore oil spill in Peruvian waters has wrought significant environmental damage affecting a vast swathe of Peru’s delicate coastal ecology. Some 6,000 barrels of oil were reportedly spilled as a tanker was offloading at the La Pampilla refinery. Spanish oil giant Repsol owns the refinery in question and barbs are being traded as to whether it was operational incompetence or Peru’s navy to blame. Lawsuits will follow. The development has also created unexpected political opportunities for an unpopular president. Pedro Castillo will capitalise on the incident to shore up his political base by blaming big business. 

As accusations are hurled at both sides, a former CEO of PetroPeru explained, “Clearly, protocol was not strictly followed. Both the Navy and Repsol’s own vessels had the technology to see the abnormal waves and react accordingly. It is rare that a failure like this is not detected in time – authorities will have much to review and investigate.”  

“Clearly, protocol was not strictly followed […] it is rare that a failure like this is not detected in time.”

Former CEO, PetroPeru

President Castillo has wasted no time in pointing the finger at Repsol – criticism of large foreign-owned corporations tends to go down well with his voter base. On January 20th, he announced that his administration is considering criminal, civil and administrative action in response to the disaster.  

A former environment minister thought it likely that Repsol will take the rap, “I think it is likely that at this point, Repsol will assume full responsibility for the incident – it is not in the interests of the company to pursue a protracted legal battle with the Peruvian government, the damage financially and reputationally would be very high.”    

“I think it is likely that at this point, Repsol will assume full responsibility for the incident.”

Former environment minister, Peru

The oil spill will exacerbate an anti-extractive sentiment which is advanced enthusiastically by Peru’s influential environmental bloc and by leftist factions who tend to be critical of foreign private interests. To reassure Peruvians that such a disaster will not happen again, President Castillo will force greater scrutiny of oil companies, particularly in areas of risk management and environmental standards.

The former CEO said, “President Castillo faces a 58% disapproval rating. He will seek to show that his administration is tough on irresponsible business conduct. However, he is unlikely to implement radical policies in response to the spill. His relationship with the legislature is already fractious, and he has spent months backtracking on his radical campaign proposals to repair investor confidence.” 

Rather than political posturing and point scoring, President Castillo should focus on working with the extractives sector in order to ensure that policies are in place to mitigate the environmental effects should such a disaster occur again. Repsol should have protocols in place too – it is a wealthy, experienced and technologically sophisticated company – blaming the Peruvian Navy will not wash. Whichever party is found guilty should be dealt with according to the law and rightly so but playing the blame game does neither investor sentiment nor environmental protection any good.   

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