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Why One of My “Seven Wonders of the World” Is Hanging in the Energy Balance

by | published November 19th, 2015

My wife Marina and I travel a great deal, bringing you here at Oil & Energy Investor along for the ride.

Like many others, we have devised a personal list of the most extraordinary places we want to see – our own “Seven Wonders of the World.” These destinations are truly unique and awesome. They stand apart from all the other interesting and beautiful locations we have visited over the years.

We’ve already visited two of the seven destinations – taking a helicopter ride over the Grand Canyon and trekking up the mountains at Delphi in Greece. That leaves five.

On Monday, we will be flying out via Lima to one of the most inspiring spots in the world. It’s located in the jungle on the border between Brazil and Argentina (with Paraguay close by).

There is simply nowhere else like it. And it’s currently a hotbed of energy controversy…

Destination: Paradise in the Jungles of South America

Our destination is Iguazu Falls

The area is surrounded by national parks on both the Brazilian and Argentinian sides. These are home to hundreds of rare species, one of the last remaining protected habitats for jaguars, and thousands of colorful toucans and noisy monkeys.

Normally, visitors are required to leave the parks at sunset. But there is one exception. The five-star Belmond Hotel das Cataratas (depicted in the foreground of the photograph below) is located inside the Brazilian park. That’s where Marina and I will be based for a week.

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At the height of the rainy season, there are more than 200 waterfalls. The stretch shown here is called the Devil’s Throat. Upon seeing it, Eleanor Roosevelt was supposed to have exclaimed, “Poor Niagara!” These falls are a third higher than either the American or Canadian falls at Niagara, creating nearly continuous rainbows as the water cascades down.

It is now beginning to be summer south of the Equator. As a result, the weather is becoming hot and sticky. And you need to plan on getting drenched if venturing anywhere close to the falls.

OK, so this is largely a vacation for the two of us, an opportunity to check off a destination on our list.

But as many of you know, my travels rarely have nothing to do with situations having impact on energy investment. Iguazu, for all its beauty, certainly also has such an element.

A Delicate Ecosystem With the Potential for Oil and Gas Drilling

In fact, it is the beauty and the inordinately sensitive nature of the place that is central to a rising disagreement. This area is one of the most ecologically delicate locations in the world, and its entire ecosystem is hanging in the balance…

Because there is a great deal of unconventional oil and natural gas here.

The current low prices for both, combined with local opposition to drilling, have thus far dissuaded anybody from pursing intentions anywhere close to the falls. But the collapsing local economy and prospects for massive employment are starting to attract some attention.

The three countries in the region – Brazil, Argentina, and Paraguay – are evaluating the prospects. Early indications point toward development further downriver on the Argentinian side. In fact, some drilling plans are already under way within 100 kilometers of Iguazu Falls.

Of course, any decision to move forward will require substantial infrastructure, with the required pipelines, pumping and pressure stations, treatment facilities, and storage terminals altering the region.

Options for Drilling Near Iguazu

That is, if drilling close to Iguazu ever sees the light of day. Preliminary geological studies indicate that the Brazilian side has a prevalence of volcanic rock. That cuts both ways: It means there is the likely presence of excellent capstone formations to hold the hydrocarbons; however, it is more expensive to drill through.

On the other hand, Argentina appears to have far more available low-cost reserves. Major projects further distanced from Iguazu to the southwest are now being touted as some of the most promising worldwide. Argentina already has been identified as having more extractable shale and tight gas than the U.S. Moving forward, drilling will have a more pronounced position in the domestic economy there.

Yet it may be the “smallest sister” in this discussion that has the best moves available. Paraguay may come out of this with the cheapest largess of all three countries. I know some local companies gearing up for a move that, thus far at least, should not have an impact on the ecology upstream.

I’ll be nosing about and investigating this when Marina and I aren’t talking to monkeys and enjoying the natural tranquility.

Drilling Should Not Occur at Iguazu

This brings me to my personal view. Although I spend most of my time evaluating energy investment opportunities, I still appreciate and value nature. While not normally a tree-hugger, there are some places where I do not believe drilling ought to take place. Iguazu is still one of those places. It will require a major effort to change my mind on this one, although other locations further removed geographically may still be in the picture.

By the way, after this trip, there are four places left on our list: the Great Wall of China, Angkor Wat in Cambodia, taking a river cruise up the Nile from Cairo to Memphis (that one may have to wait until the region sees greater stability), and my favorite spot in the world – Machu Picchu in the Peruvian Andes. The gods used to live there.

I will update you from the jungle next week.

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