Oil Or Trees? Ecuador and Germany in the news.

In June 2009, German newspaper, The Spiegel reported that Ecuador, which derives one third of its national revenue from oil, was prepared to forgo the income from mining the oil if developed nations could come up with a plan to compensate Ecuador for "some of its lost income". In order to mine the oil, mining companies in Ecuador would potentially destroy the rainforest that is home to an amazing range of bio-diversity. Known as the National Yasuni Park, it is a UNESCO biosphere Reserve. (Ref: The Spiegel Online, 23rd June 2009. Oil Or Trees? Germany Takes Lead in Saving Ecuador's Rainforest)

The report by The Spiegel stated that Germany had yet to confirm statements of a $50 million pledge to help sustain the Ecuadoran rainforest. It also noted that the Kyoto Protocols would expire in 2012 and that the Copenhagen Climate summit in December is expected to producea new United Nations mechanism for managing/countering climate change.

In October 2009, Wall Street Journal Online reported that Germany had pledged $50 million per annum to the "Yasuni-ITT project", which will compensate Ecuador for not mining the petroleum reserves under the rainforests. (Ref: WSJ, 27th October 2009. 2nd UPDATE:Ecuador: Germany Pledges $50M/Yr For Yasuni Proj) Among other highlights of the WSJ report:

• Under the Yasuni-ITT project, Ecuador is seeking an "annual $350 million compensation", which would be "equivalent to 10 to 12 years of earnings";
• The project will keep 850 million barrels - or 20% of Ecuador's proven oil reserves - under the ground.
• The project will prevent 407 million metric tons of carbon dioxyde from being released into the atmosphere by avoiding deforestation.
• Ecuador is in negotiations with France and Spain to contribute to the project.

Interestingly enough, when one considers the statement that the project will keep 850 million barrels under the ground, and prevent the release of 407 metric tonnes of carbon dioxide, the question to be asked should be: For how long? How long before Ecuador decides that it needs to chop down the rainforest?

It would appear from a statement of the Ecuadoran Prime Minister, Rafael Correa, that his country expects compensation for as long as the rainforests are maintained. From the WSJ report:

"They shouldn't compensate only forestation but (abstaining from) deforestation."

(Source: WSJ, ibid.)

In September 2009, BusinessGreen, a news portal related to green initiatives, reported that Germany would pay $650 million to Ecuador over the next 13 years. (Ref: BusinessGreen, 2nd September 2009. Weekly CDM and VER market summary - 24-30 August 2009) In the same report, it was also stated that "UK, Italy, Norway and Sweden have pledged to contribute to the fund but have made no firm pledges." (Found via Mongabay, 3rd September 2009. Germany to pay Ecuador $650 million to forgo oil drilling, protect rainforest reserve.)

Interestingly enough, in October 2009, Associated Press reported that a German government official disputed that Germany has made a solid offer of $50 million per annum to Ecuador. (Ref: AP, 26th October 2009. Ecuador to Europe: Pay us not to drill in Amazon)

According to the said official:

The amount of a potential donation and the method and period over which it would be paid have yet to be determined."

Further, the said AP report also stated that Spain had donated $200,000 to help kickstart the fund. Also, the said report stated that Ecuadoran President Rafael Correa would be approaching "Canada, France, Sweden, Belgium and the United States in November." (Source: Ibid.)

Interested readers may read more about the Yasuni-ITT project through the following links:

• Official website for the "Yasuni Depends On You!" campaign. 
• Yasuni National Forest portal LiveYasuni.
• Save America's Forests.
• University of Maryland, College of Chemical and Life Sciences, undated. Ecuador's Yasuni-ITT Proposal.

For purposes of clarification, "ITT" stands for: "Ishpingo-Tambococha-Tiputini (ITT) oilfields" (Source: LiveYasuni, undated. Save Yasuni.)

One important question is whether Malaysia is getting paid for keeping its rainforests? It would be great if our country is getting paid for retaining and maintaining the rainforests. That is unfortunately, a question for another piece.

70 Per Cent Of Petrol Stations Operated By Bumiputera, Says Muhyiddin

According to Bernama, our Deputy Prime Minister, Muhyidding Yassin was reported to have said in a speech last night that almost 70 per cent of petrol stations in Malaysia are being successfully operated by Bumiputeras due to the initiative and efforts taken by the government.". (Ref: Bernama, 6th November 2009. 70 Per Cent Of Petrol Stations Operated By Bumiputera, Says Muhyiddin) As a departure from my usual style, the complete news report is reproduced below.

70 Per Cent Of Petrol Stations Operated By Bumiputera, Says Muhyiddin

KUALA LUMPUR, Nov 6 (Bernama) -- Deputy Prime Minister Tan Sri Muhyiddin Yassin said almost 70 per cent of petrol stations in Malaysia are being successfully operated by Bumiputeras due to the initiative and efforts taken by the government.

The government has been carrying out a more streamlined license distribution system in line with the Petroleum Development Act, he said.

He said the government has been aware of the many challenges faced by the petrol station operators in running their respective businesses especially during the economic crisis.

Muhyiddin also commended them for carrying on their businesses well despite the challenges.

"With this success, I hope this business will continue to expand and be inherited by the coming generation," he said in his speech at a dinner organised by the Petrol Dealers Assocation of Malaysia here Friday.

Muhyiddin also called on the petrol station operators to continue to take the initiative to provide more convenient services environment for their customers.

He said they could also help the local small and medium sized companies by giving them the space to market their products in their petrol stations.

-- BERNAMA

Almost a month ago, on 16th October 2009, our Prime Minister Datuk Seri Najib Tun Razak also mentioned the government contribution to the petrol (and energy) industry during his speech at the UMNO general assembly. Here is an excerpt from our Prime Minister's speech:

The fact is that, whether you realise it or not, the Government has done so much for the people. For example, in the transportation and energy sectors, the Government has provided RM9bil for petrol, LPG and diesel; RM2bil for a cash rebate programme; more than RM600mil for toll compensation; RM150 for electricity; and another RM45mil for flights to rural areas and trains to the East Coast.

(Source: The Star Online, 16th October 2009. Upholding Tradition, Realising Changes.)

The speech can also be seen in our Prime Minister's 1Malaysia blog (click the link). (Ref: 1Malaysia.com.my, undated. Speech: Upholding Tradition, Realising Changes.)

It may be noted that our beloved Deputy PM was making that statement at a function organised by the Petrol Dealers Association of Malaysia (PDAM). From a 2005 article by Bernama, we find the following statement:

PDAM is an affiliation of all the petroleum brand association of petrol dealers in Malaysia. It consists of ESSO, Mobil, Shell, Petronas, BP and Caltex.

(Source: Bernama, 3rd October 2005. Action Will Be Taken If Losses Continue, Say Petroleum Dealers

Interestingly, the same 2005 Bernama article was about the dissatisfaction of petrol dealers in Malaysia, and how much they were getting for each litre of petrol sold. The relevant bits from the report:

Alang said dealers will get eight sen sales margin per litre petrol sold and 0.035 sen per litre in diesel.

Tan Sri Muhyiddin Yasin's speech had touched on this topic, when it was reported on the late news at TV3 (at 12 o'clock this morning). He mentioned that the sales margin for petrol dealers had increased since 2008. This is in fact true. A write up on the Automatic Pricing Mechanism can be found on local blog The Malaysian Life. The relevant bits show that:

iv. Oil companies' margin

Margin or profit of oil companies is fixed at five sen per litre for petrol and 2.25 sen for diesel.

v. Station dealers' margin

Margin or profit of dealers is fixed at 12.19 sen per litre for petrol and seven sen per litre for diesel.

(Source: The Malaysian Life, 16th February 2009. How The Government Determines The Price Of Petrol)

The post on the APM mechanism by The Malaysian Life above is good reading.

The sales margin for petrol and diesel had been raised in June 2008. Singapore-based Asiaone in its motoring segment, reported on the matter:

The government has announced an increase in the commission for some 3,500 petrol and diesel dealers. This immediately led to the Petrol Dealers' Association calling off its "no credit card" advisory to its members.

Effective yesterday, the new commission rate for petrol is 12.19 sen per litre and seven sen per litre for diesel, Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad said.

Previously, the commission for petrol was 9.5 sen per litre and diesel 4.5 sen per litre.

Petroleum Dealers Association president Abdul Wahid Bidin described the new commission rates as acceptable.

"We accept it with gratitude. With the new rates, we can at least survive," he said when contacted by the New Straits Times.

(Source: Asiaone Motoring, 26th June 2008. Commission raised for petrol, diesel dealers.)

I have been unable to locate the website for the Petrol Dealers Association of Malaysia (if there is one). Can anyone drop me the link to the website? Interestingly enough, Shell petrol dealers in Malaysia also have a blog, but it has not been updated recently.

Update (9th November 2009):

In a report on NST, dated 7th November 2009, it was indeed reported that the Deputy Prime Minister, Tan Sri Muhyiddin Yassin, had mentioned the sales margin of petrol dealers had increased, "from 9.5 sen to 12.19 sen per litre of petrol and 4.5 sen to seven sen for a litre of diesel from June last year." (Ref: NST Online, 7th November 2009. Licence cheer for petrol station owners)

In the same NST report, the Deputy PM was also quoted saying that:

1. Petrol stations could be turned into a kind of marketing grounds for local products, manufactured by Malaysian SMI;
2. Petrol station operators have to ensure that facilities (including toilets and surau/prayer rooms) at their premises are well maintained;
3. Some 3,200 petrol dealers can now convert their business licences from sole proprietor businesses to private limited companies;
4. Petrol dealers had been asking for years for their business licences to be converted, so allow their children to inherit the business.