Guatemalan authorities took samples of the water to analyze if there is oil in it. Photo: Rolanda García, Telesur.

Oil industry in Guatemala: millionaire money losses and threats to the environment

Authorities in Guatemala are investigating an alleged oil spill, while a poor community claims they lost a key water source.
Authorities in Guatemala are investigating an alleged oil spill, while a poor community claims they lost a key water source.

In a community in northern Guatemala, a group of villagers recently reported that an oil spill contaminated the Las Mulas creek, their main source of water. Local residents claim that Latin American Resources, an oil company operating in the area, is responsible for the creek’s pollution.

San Benito is an impoverished community 345 kilometres from Guatemala City. In this region, eight out of every ten people live in poverty. The river is the source of water for consumption, for crops, and where the inhabitants bathe.

The community shares its water source with Latin American Resources, which has operated in Guatemala since 2005. Latin American Resources is one of the six companies with oil exploitation permits in the country. With an average of 163.7 thousand barrels of oil per year, its production is comparatively small.

The San Benito complaint prompted the Guatemalan authorities to start an investigation to find out the origin of the water stain and if the company’s involvement.

While the government awaits the results to find out if the oil company has damaged the creek, data shows that Guatemala is losing money with oil extracting activities.

The context of production

The Extractive Industries Observatory (OIE) is an organization that monitors and analyzes data on extractive industries in Guatemala. According to OIE, Guatemalan oil production is small and low in quality. According to OIE, oil production in the country has decreased in recent years. The last peak in production (9 million barrels), was reported in 2004. In 2019 oil production reached 3.5 million barrels.

Although production is declining, Guatemala is losing millions of dollars in recoverable costs. These are payments from the government to companies to start new projects.

Worth the investment?

In 2009-2018, Guatemala received around USD 732 million and returned USD 883 million to the oil companies from the extraction of hydrocarbons. In other words, Guatemala had to invest USD1.21 for every dollar earned.

And that is the best-case scenario. With other oil projects, Guatemala has invested up to USD55.71 for every dollar earned, according to the OIE.

In the particular case of the Latin American Resources company, Guatemala has received USD 5.5 million in royalties for a USD 31.8 million investment.

“Guatemala is the dumb partner” of extractive companies, says the report of OIE. Why? The business is profitable only for foreign companies as the State assumes all the losses and investment costs.

These calculations do not consider the environmental and social damages generated by the extractive activity in the country.

Back to the community

San Benito organized to report the contamination of a small river. Photo: Rolanda García, Telesur.

“We can no longer drink water, or bathe there,” said Marcelino Pop, a community leader from the San Benito community.

In early February 2021, the community observed something that looked like an oil spill in the stream. Then, they organized and denounced the case to the media. San Benito’s community immediately held the oil company responsible. There was great concern since the stream connects with the Chixoy River, the third-largest in Guatemala.

Pop said pollution from the river was not reported to have increased. Indeed, only a black liquid remained in the stream and it seems to be disappearing according to Pop. Despite this, the community no longer uses that water as they fear it might be polluted.

Laboratory analyses

Days after San Benito put the public spotlight on the oil spill, the Public Ministry of Guatemala, the Commission of Protected Areas, the Ministry of Energy and Mines, and the Ministry of the Environment, travelled to the town to take samples of the water and the liquid in it. There are no results from the analyses yet.

A spokesman from the Environment Ministry told Climate Tracker that the authorities are waiting for the National Health Laboratory to deliver the analysis of the contaminated water. The results will determine whether there are traces of oil and any other chemical substances.

Meanwhile, the community experiences division. While some residents denounce the spill, others work for Latin American Resources and are against those who hold it responsible for the contamination.

San Benito no longer uses the creek and the trees around it are dry, says Marcelino Pop. Now he buys buckets of water from his neighbours who have their own water wells. The company denies that its operations have contaminated the community’s water sources.