Are oil concessions fueling Nicaragua’s border disputes?

Oil company estimates Nicaragua has 27.6 million barrels in San Rafael del Sur, Managua

After years of exploration, oil company Oklahoma Nicaragua-S.A. estimates that Nicaragua has some 27.6 million barrels of high-quality crude oil waiting to be pumped from the ground in the municipality of San Rafael del Sur, according to a company report presented to the government last week.

The report, which was obtained by La Prensa, claims Nicaragua has the conditions to become Central America’s first oil-producing nation within five years, according to an article published today in the Nicaraguan daily.

The oil company also found the existence of natural gas at its exploration site just south of Managua, according to the report in La Prensa.

The Nicaraguan government first announced “evidence of oil” in 2008—something that has been suspected here since the 1970s. But the quality and quantity of the country’s oil reserves have never been known.

The Sandinista government has been eager to find out. It granted a concession for oil exploration to U.S. company Infinity Energy Resources in 2008, and another one U.S. oil company MKJ Xploration in 2009. La Prensa reports that more concessions for exploration could be awarded next year, including in the Caribbean, where Nicaragua is currently battling with Colombia over competing claims over the continental shelf.

The maritime boundary dispute will be settled by the International Court of Justice next Monday.

Nicaraguan environmentalist Kamilo Lara also suspects that Nicaragua’s border dispute with Costa Rica is motivate in part by competing claims to oil reserves off the Caribbean coast. “Behind this (border) conflict is a battle for petroleum resources,” Lara told The Nicaragua Dispatch in an interview last year.

The disputed five-square-kilometer river island at the mouth of Nicaragua’s San Juan River doesn’t look like much on land, but whoever owns that island also controls an 11,000-square kilometer swath of corresponding Caribbean maritime territory—an area thought to be ripe for oil exploration.

Nicaraguan geologists think the limestone and reef conditions found in the ocean off the coast of the disputed shoreline indicate the possibility of oil reserves, even though the area has never been explored by either country. Marisol Echavery, a geologist with Nicaragua’s National Institute of Territorial Studies, says the area most likely to contain petroleum reserves crosses the border between the two countries, making it difficult for either country conduct exploration.

According to records in the office of the Costa Rican Oil Refinery (RECOPE), the Costa Rican government nearly awarded an oil exploration concession in that area in 1999, but the concession was never granted due to an unspecified problem in the bidding process. To date, Costa Rica has never explored for oil in the contested region, designated “Block 11” on RECOPE’s oil concession maps. Costa Rica put a moratorium on oil exploration in 2002.