Eighteen-year-old Sarah Osorio, bubbly and beautiful, is enjoying her reign this year as both Miss Palawan and Miss Kalayaan – the name of a contested chain of islands in the South China Sea. Osorio shows me a scene from the video of the beauty contest, where she’s wearing a red bikini.

She said she wasn’t so keen on showing so much skin. She joined the pageant to make a serious point — about the Kalayaan Islands.

“China’s claiming Kalayaan as its own,” she said. “The Philippines don’t have any capability to fight China. China is very big, compared to Philippines.”

Osorio grew up spending a month each summer on Kalayaan’s biggest island. It’s just a tenth of a square mile.

“We’re a small island — no activities, no entertainments,” she said. There’s no electricity so after 6 p.m. there’s nothing to do but sleep.

When I asked her why people choose to live there, she said: “To show that it’s ours, that we have that island for the Philippines.”

Osorio’s parents are among the 60 civilians who claim residence on Kalayaan’s main island, Pag-asu. The idea is just to have a presence – and Osorio’s family is doing its part. Her dad’s a local legislator. Her uncle lives there, too; he’s a fisherman. According to Osorio, he’s had problems with Chinese boats near the island.

“He told me Chinese people were around their area, fishing and fishing and fishing. If you talk to them, they harass you,” Osorio said. It’s mostly shouting matches, she said. But there’s been more physical contact than that, on the broader South China Sea.

Over the past year or so, China has become increasingly aggressive about asserting its claim to almost the entire South China Sea, and the oil and gas reserves its seabed may contain.

When ExxonMobil announced in October that it had found what looked like a sizable natural gas field near the Vietnamese city of Danang, China warned that foreign companies shouldn’t proceed in waters that China claims.

The Philippines has had its own challenges. General Juancho Sabban, who heads the Western Command of the Philippine Armed Force, shows off what he calls a “Chinese donation” to his marine patrol boats – a confiscated Chinese fishing boat.

“They had GPS, they had radios. They had air compressors, for deep sea diving,” which, he pointed out, you normally wouldn’t find on a fishing boat.

Sabban thinks this boat was doing surveillance. It tried to ram a smaller Philippine patrol boat, so, he said, the patrol had to shoot to disable the engine.

The Chinese who were arrested on the boat said they were just fishermen. But Sabban said they were bailed out by the Chinese embassy, and then they disappeared.

He said similar boats have left construction materials near islands the Philippines claims. Sabban has promptly cleared them, because when this happened on Mischief Reef in 1995, the Chinese erected a structure almost overnight, and now have a permanent presence there. It’s about 130 nautical miles from the Philippines and 600 from China.

According to the International Law of the Sea, a country’s Exclusive Economic Zone extends 200 miles from its shores. But China maintains it has a historical claim to islands even farther away, because it found them and named them first.

“In layman’s terms, it’s absurd, unbelievable,” General Sabban scoffs. He points out that the Philippines can also cite historical records of its fishermen who went to China. “So are we also legalized to claim South China Sea?” he asked.

Sabban sees China’s new assertiveness in the South China Sea as being less about protecting questionable historical claims than about the fact that the Philippines and Vietnam are both opening up waters they claim to foreign companies. Shell and Chevron are already active in the Philippines, and the country is soliciting bids for 15 more offshore exploration blocks.

“This year, there will be more drilling in the West Philippine Sea, and we expect that by the end of this year, more rigs will be in place,” Sabban said.

Protecting an oil rig will be one of the military exercises the Philippines does with the US military this spring. A Philippines delegation was just in Washington last week to talk about enhanced US military support in the South China Sea. Admiral Jonathan Greenert, Chief of Naval Operations, spoke about US interests at the Center for a New American Security in Washington last month.

Spratly islands map showing occupied features marked with the flags of countries occupying them. (Graphic: US govt)

“This area is vital to the United States,” Greenert said. “It’s been an area vital to our navy and our focus for decades, because of our economy, our trade routes.”

Greenert said the challenge is to keep those trade routes open – and peaceful – while keeping belligerence to a minimum. “How do you have a conversation with someone who is insistent that you’re in the wrong place? You either stop talking, or you keep talking, and you watch how you ratchet up the rhetoric,” he said.

China’s view is that the United States should mind its own business and stay out of the South China Sea. In November, Chinese Foreign Ministry spokesman Liu Weimin said, “disputes in the South China Sea should be resolved through friendly consultation between directly involved sovereign states.” He added that any interference from outside forces would only “complicate matters.”

China would rather point out, one-on-one, to the Philippines that the $30 billion in trade it has with China could double in a couple of years – or China could punish it, as the Communist Party-owned newspaper The Global Times has suggested, for turning to the US for more military muscle to counter China’s claims. The Global Times has also remarked that these “little countries” in the region should stop challenging China’s interests, or they’ll ‘hear the roar of cannon fire.’

“The Chinese shouldn’t be telling us to get used to that,” responded General Sabban. “We have been hearing the sound of cannons for 40 years.”

General Sabban added, have they forgotten the Vietnam War? A small country can hold out against a superpower, when its core interests are at stake. It can hold out even better – when another superpower stands ready to come to its aid.

The sanctions involve an immediate ban on all new oil contracts with Iran, while existing contracts will be honored until July 1.

Tehran denies that it is trying to develop nuclear weapons and says talks and not sanctions are the only way to resolve the dispute.

The EU currently buys about 20 percent of Iran’s oil exports.

(Graphic: BBC)

Meanwhile, the Pentagon said the US aircraft carrier USS Abraham Lincoln, as well as a British Royal Navy frigate and a French warship, have passed through the Straits of Hormuz at the entrance to the Gulf without incident in the wake of Iranian threats to block the trade route.

Under the new deal, EU governments are expected to stop signing new contracts with Iran when the ban comes into place – which could be as soon as this week, Reuters news agency reports.

All existing contracts will have to be phased out by July 1.

More from the BBC

(Map: BBC)

Congressional republicans say they will keep pushing the Obama administration to approve the Keystone project.

But the administration says a plan for a new, more environmentally-sensitive route has to be submitted first.

Foreign minister John Baird expressed the Canadian government’s disappointment with the White House decision not to approve the project for now.

But even before this matter is sorted out, there is another political battle over another proposed pipeline.

This battle is within Canada over a proposed pipeline that would go west from Alberta through a remote wilderness area to an isolated stretch of coast in British Columbia.

Anchor Marco Werman talks to Canadian journalist Peter Fairley, who is following the story in Victoria, British Columbia.

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Marco Werman: Hi. I’m Marco Werman, and this is The World, a co-production of the BBC World Service, PRI, and WGBH Boston. The U.S. battle over that proposed oil pipeline from Canada to Texas isn’t over. Congressional Republicans say they’ll keep pushing the Obama administration to approve the Keystone project, but the administration says a plan for a new, more environmentally sensitive route has to be submitted first. Foreign Minister John Baird expressed the Canadian government’s disappointment with the White House decision not to approve the project for now.

John Baird: Obviously, this whole episode underlines the importance of diversifying our market. We can’t have only one customer.

Werman: That’s where another proposed pipeline comes in and another political battle, this one within Canada. This pipeline would go west from Alberta, through a remote wilderness area to an isolated stretch of coast in British Columbia. Freelance reporter Peter Fairley is following the story in Victoria, British Columbia. He says the proposed Northern Gateway project is broadly opposed by environmental groups and by the native peoples whose territory the pipeline would cross.

Peter Fairley: Essentially, the opposition is”¦ I would say it’s similar to that which has stalled the Keystone pipeline. We’re talking about impacts on climate from the production of crude oil in the oil sands, but also, and I think probably more so in this case, we’re talking about concerns over oil spills. Kitimat, where this pipeline will end up, is along this storied inside passage, a beautiful site, and it’s also a sensitive salmon habitat, bear habitat, whale habitat. So the thought of mega-tankers coming in and out of there is quite disturbing to many Canadians, I think.

Werman: Well, the Northern Gateway pipeline is big news in Canada, and Canada’s Nature Resources Minister, Joe Oliver issued an open letter last week in which he rails against foreign special interest and, quote, “jet-setting celebrities with some of the largest personal carbon footprints in the world.” These are the people he says have upended their tar sands plan. Who is he talking about, and how have those comments gone down in Canada?

Fairley: [laughs] They’re not going down very well. He’s painting a pretty broad brush. And when he talks about jet-setting celebrities, I think the poster child would be Robert Redford, who was up in Vancouver a couple months ago shooting a film, and while there, published an op-ed in The Globe and Mail, Canada’s biggest newspaper, railing against both the Keystone pipeline and the Northern Gateway. So Oliver went on to say that U.S. funds were flowing to Canadian environmental groups that are on the front lines of opposing the Northern Gateway pipeline, and essentially you know, he’s saying that, you know, Canada’s economic interests are being upended by outside influences.

Werman: Is anyone saying that Joe Oliver has a point?

Fairley: If it sells anywhere, it’s in Alberta, where there’s certainly a lot of economic interest, and jobs are focused on the industry there. But I don’t think it’s selling broadly. People are quite incensed that their concerns are being belittled, and that they’re essentially being called traitors for being concerned about water quality, for example.

Werman: So Canada has this enormously valuable resource in Alberta. They’d like to get it to the U.S. gulf, and ports on the U.S. west coast, and to British Columbia, and they’d also like to sell to China. What is the big picture here? Are the Canadian oil industry and the Canadian government partnered on getting Alberta oil to anywhere in the world?

Fairley: They absolutely are partnered. The Harper Conservative government has made exporting oil sands products a priority for the government. They see this as one of Canada’s big economic opportunities, and they want it to continue. The pipeline to the west coast has a strategic advantage over something like Keystone in that right now, all of Canada’s oil essentially goes to the U.S. via pipelines, and that means that we’re captive to U.S. buyers. By putting a pipeline out to the west coast, Canadian oil producers would be in a position to play Asian buyers off of American buyers.

Werman: Peter, how will the Northern Gateway pipeline actually be decided? Is it headed for a major showdown, as Keystone XL has, here in the U.S.?

Fairley: I think it is. The hearings began this month, and the panel that’s conducting the hearings will make a decision sometime, maybe eighteen months from now, but the government can override that. I think the Harper government would be tempted to do that, and there you have a real political showdown.

Werman: Reporter Peter Fairley in Victoria, British Columbia. Thank you for your time.

Fairley: It’s been a pleasure.

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What impact will new sanctions have on the country and can Iran’s threats about blocking the strait of Hormuz be taken seriously?

Anchor Lisa Mullins talks to Iran expert Dr. Trita Parsi.

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Lisa Mullins: Today, Iran threatened once again to stop ships from moving through the strait of Hormuz at the mouth of the Persian Gulf. That’s an unsettling prospect. At least one sixth of the world’s oil flows through the strait. But today, Iran’s navy chief called closing it very easy for Iranian naval forces. A spokesperson for the US Fifth Fleet responded, the spokesperson said that the United States will not allow any disruption of traffic in the strait of Hormuz. Dr. Trita Parsi is the author of A Single Roll of the Dice: Obama’s Diplomacy with Iran. Can you tell us, Iran says it may close this vital oil trade route that is the strait of Hormuz if the US imposes more sanctions over Iran’s nuclear program. How credible do you think the threat really is?

Dr. Trita Parsi: I have to say I think it is largely bluster, but at some stage if the west continues with sanctions and particularly if some form of an oil embargo is imposed on Iran, then Iranians don’t have as much to lose from actually taking this step. Right now if they were to close the strait of Hormuz they would also shutdown their own oil exports, but if much of their oil exports already have been taken off the market because of an oil embargo, then Iran has less incentives not to play this card.

Mullins: Well, it has less incentive, but does Iran really want a war?

Parsi: Well, the thing is if there is an oil embargo that is imposed on Iran that is in and of itself viewed by Iran and there’s some support in international law, that is already an act of war, so that would be an Iranian response to a declaration of war.

Mullins: How is that considered an act of war in any sense because there certainly have been sanctions against Iran before. Iran has made threats before. Iran even if it is not to sell oil to the US or Europe could sell oil to China or Russia instead of the West.

Parsi: Any type of naval embargoes have to be approved by the UN Security Council to actually have the force of international law behind it. If it is not then it is considered an act of war. The current form of oil embargo that the US is discussing is not gonna get support in the Security Council as you mentioned because of the opposition from Russia and China. What we’re seeing is that we are in a confrontational dynamic. Both sides are trying to maximize the amount of pressure put on each other, and at some point we’re gonna lose sight of what the actual issue was, and we’re just trying to escalate further in order not to lose face. So I think there is unfortunately, a significant risk that this will get out of control and actually lead to an open warfare between the two countries.

Mullins: How do you think it’s gonna spiral out of control when so many parties here have so much at stake, particularly Iran itself.

Parsi: Right now there’s almost no communication between the different governments and as Mike Mullen, the former chairman of the Joint Chiefs of Staff had warned right before he left office, he said that this lack of communication is very dangerous because it gives way for misperceptions. And when you misperceive you miscalculate. And when you miscalculate you escalate and suddenly there you have it, you have a war that you never intended to have.

Mullins: Well, not yet though. What are the aspects of diplomacy that could be exerted right now?

Parsi: Well, diplomacy is not going to be easy, nor is it gonna be quick. The diplomacy that the Obama administration pursued in 2009 essentially only lasted about two and a half months maximum. And there were only two, two and a half meetings directly with the Iranians. That’s not diplomacy and certainly not an exhaustion of diplomacy. But the political space to pursue that option does not exist in Tehran nor does it exist in Washington, and it’s forcing leaders to abide by the already very constrained political landscapes that they’re in and pursue escalation rather than pursuing conflict resolution.

Mullins: Just to be clear, what could once again, what could be done right now in terms of diplomacy that would prevent confrontation?

Parsi: Under best scenario you would start negotiations right away and negotiations would not be limited just to the nuclear issue. The nuclear issue is probably the toughest issue to resolve because the two sides have dug themselves in so deeply in their positions, but there are other areas, whether it is regional security, Afghanistan or other areas in which conversations and diplomacy can begin. Diplomacy is very much about reducing mistrust. And when you reduce mistrust and you increase transparency information about the other side, that in and of itself is a huge favor towards making sure that there are no accidental escalations.

Mullins: That’s Dr. Trita Parsi, author of A Single Roll of the Dice: Obama’s Diplomacy with Iran.

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U.S. Army Cpl. Joseph Rentie,1st Battalion, 279th Infantry Regiment, concludes a search of a truck at a Pakistan border crossing in Paktya province. (Photo by: U.S. Army)

The attack sparked fury in Pakistan and led the country’s leaders to close a critical US supply route to land-locked Afghanistan.

Before 9/11 and the US invasion of Afghanistan, cargo transport across the Pakistan-Afghanistan border was minimal. But now, with over 130,000 NATO troops to sustain in land-locked Afghanistan, supplies had to come from somewhere, and the cheapest and fastest route is through Pakistan.

“The industry has grown from zero to a phenomenal size,” said Mohammed Rajpar, managing director of a major shipping agency based in Karachi. “The way the western countries sustain their troops is even the water they shower in is imported, forget the water they drink,” Rajpar said. “And all their food, drink, transport, surveillance, weapons. It spawned an entire industry.”

At its peak, some 500 trucks carried fuel and goods each day from the port at Karachi to Afghanistan. Today, that number is down to between 200 and 300, as NATO shifted some supply to what is known as the “northern route,” going through the Central Asian republics. Even now though, almost half of NATO’s supply travels through Pakistan.

But after last Saturday’s attacks on a Pakistani border post, the Pakistani government closed off its border crossings with Afghanistan. Private transporter unions issued statements of support for the government reaction.

Nawab Sher Afridi, secretary general of the Oil Transporters Association, said six of his trucks are involved in the transporting fuel to Afghanistan, but that he has always been against NATO’s actions there – a contradiction he readily admitted.

“We are against NATO, I’m telling you plainly,” Afridi said. “Our original home is in Afghanistan. We are ruining it ourselves. What kind of interview do you want from someone who is ruining his own home. But when our livelihood is at stake then the name of necessity is “thank you”. There is no limit. You have to accept the law that they have imposed, and that is the dollar. And in front of the dollar, my faith is nothing.”

But now, the truckers said they’re glad the government is taking a stand against NATO, and, for now at least, they said they’re willing to bear the financial loss.

Babu Jan Shinwari, a driver and owner of a goods supply truck, said the personal gains they have made over the past 10 years have come at a cost for society.

“Its true, we are making more money than we did before,” he said. “But if you look at it another way, we have also suffered a great deal. We have lost human lives, homes have been destroyed, there have been drone attacks and terrorist bomb blasts. It’ a huge loss.”

In fact, in 2005, Babu Jan’s cousin was killed in a bomb attack near the Kandahar Air Base, in Afghanistan, while he was sleeping in the cabin of his oil tanker.

While the truckers claim to be in favor of Pakistan’s action, the closing of the supply lines is having an impact. Many of the trucks that would normally be on the roads to Afghanistan are sitting idle in Karachi. And shippers have had to rent extra space at the port to store cargo that has nowhere to go for the meanwhile.

This isn’t the first time that the supply lines have been suspended. And most observers find it hard to believe that Pakistan will keep the supply lines shut permanently this time, because of both strategic and economic interests.

But shipping company director Mohammed Rajpar said the industry is already starting to think of what comes next, since NATO has already announced plans to leave Afghanistan by 2014.

“These truck drivers and truck owners are probably among the most clever commercial, versatile businessmen on the planet. They have operated in the roughest of environments and the most difficult of circumstances at great personal risk to their life and property,” he said. “They’ll find other avenues of business. And second they will transfer some of this knowledge to elsewhere in the business. How to secure cargo, meeting deadlines. Hopefully they’ll transfer this to the commercial side.”

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Thousands of protesters march outside the White House, urging US President Barack Obama to stop the planned pipeline between Canada and the US.

Prospectors in Israel say hundreds of feet below the ground lies shale rock that can be converted into billions of barrels of oil. But environmentalists say it’s a disaster waiting to happen.

“This is the distinct smell I’m talking about when I talk about oil shale.”

So says Texan oil man, Scott Nguyen, as he sniffs a handful of rock fragments – not back in Houston where he used to work for Shell – but in the lush Valley of Elah in central Israel, about 50km (30 miles) from Jerusalem.

Mr Nguyen wants to prove that oil and gas can be extracted cleanly from Israel’s underground shale, using a technology that heats the earth to more than 300C.

The project could be lucrative. The World Energy Council estimates Israel is sitting on enough shale to produce around four billion barrels of oil, enough at today’s usage to keep the country in oil for more than 40 years.

Mr Nguyen claims there is much more. That’s why he and his colleagues at Israel Energy Initiatives, based in Jerusalem, are lugging rigs around the valley, carrying out prospective drilling.

Shale has been exploited in small quantities in Israel before, but only in a surface-mining operation which generated electricity for local use.

An Historic Quest

The eager search for home-grown energy in Israel is nothing new.

In recent years, big natural gas deposits were discovered off the coast, but the country still imports much of its gas from its neighbour to the south, Egypt. That supply is precarious. This year it was interrupted by a string of attacks on gas pipelines running through the Sinai desert. And concerns remain about future relations with Cairo, after the fall of Hosni Mubarak – an early victim of the Arab Spring.

In terms of oil, Israel imports nearly all it uses – about 100 million barrels a year – mainly from Russia and the former Soviet republics. Those imports were curbed in 2006, during the war with Hezbollah, prompting the Wall Street Journal to say Israel was “perilously close to running out of fuel”.

But despite this hunger for locally produced energy, support for Nguyen and his team is not universal. Some local residents, environmentalists and politicians, are harshly critical.

Back in the US, which has vast shale deposits, drilling was halted in Colorado because the so-called “fracking” method of pumping chemicals into the earth to produce the oil, raised concerns about possible effects on drinking water.

Area Licensed To Israel Energy Initiatives For Drilling

Similar issues are being debated in Israel, where Rachel Jacobson is active in a local committee opposed to Mr Nguyen’s project.* “It’s really one big experiment,” she says, “a foreign company saying we want to make you wealthy. What you are really doing is trying to pull a fast one on us.”

Jacobson’s concern is, in part, because the drilling area is also the site of a vital and politically sensitive water aquifer shared by both Israel and Palestinian areas of the West Bank.

Mr Nguyen and his team try to calm these fears. In town hall meetings, company representatives tell residents that an impermeable layer separates the shale from the aquifer below. The method of extracting the oil, by heating up the shale, won’t have any impact on the aquifer, the company insists.

That doesn’t mollify area resident, Meirav Oren. “The company will come in and give really honorable statements like, well, if anything goes wrong we will stop. No-one is asking how will you stop.”

Experts seem to disagree on the potential dangers to water supplies of the extraction process. “It sounds scary heating this rock up like this” says John Corben, a senior adviser to the International Energy Agency, “but effects on layers close by are usually not large.”

But Mihkel Harm from the World Energy Council says, “the process is hard to control and it might pose a risk for groundwater”.

Mr Nguyen’s company claims Israel may turn out to have oil deposits comparable to Saudi Arabia, which sits on an estimated 260 billion barrels. Corben says it may not be a fair comparison. He says in Saudi Arabia “oil is actually oil” whereas in Israel a lot of money needs to be spent heating the rock and recovering the oil. And there’s a long way to go before the company proves its technology will work, and before it gets all the necessary government permits.

Mr Nguyen’s forecast for commercial oil production is 2018 or later. “Still, ” says Mr Corben “if it is even 4 or 5 billion barrels, that would be an awful lot of oil for a country the size of Israel”.

Additional reporting by Rob Hugh-Jones

*A previous version of this report incorrectly suggested Rachel Jacobson started the Save Adullam group. Instead, Jacobson is active in the group. We regret the error.

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Marco Werman: Those attempting to forge democracy in Libya and rebuild the country know the process won’t be cheap.  And in that context Libya’s vast oil wealth can be seen as a blessing.  But some see the country’s oil as a potential obstacle and a major challenge for the new government. Michael Ross has written extensively on what he calls the curse of oil wealth.  Ross is a professor of political science at the University of California in Los Angeles.  He fears Libya’s oil holdings might be something of a liability.

Michael Ross: No country with as much oil wealth per capita as Libya has ever made a successful transition to democracy.  The countries that have tried, like Iran, and Russia and perhaps Iraq, but none of them have done very well.  And I fear that Libya is gonna face the same kind of problems as the other countries.

Werman: Well, what is it about oil, why isn’t oil wealth and democracy, why aren’t they compatible, especially in the Middle East?

Ross: Oil wealth produces this huge stream of revenue that goes right into the government’s hands.  Normally, governments are responsive to the population partly because they need tax revenues from people.  And as we know from our own national experience, when there’s taxation there’s a demand for representation.  And when a government like Libya’s is able to fund itself through selling oil around the world and not collecting taxes from their people, people don’t tend to demand the same kind of accountability.

Werman: What’s your sense then of how oil wealth might be managed in the new Libya?  Are you seeing early and positive signs that suggest the new government might actually be able to setup a legal framework to manage the revenue?

Ross: The critical thing is going to be how transparent they are.  If the new Libyan government is willing to reveal all of the details of who’s paying it, how much money it’s collecting in each month, what its contracts look like, I think there’s a reasonable chance that people will be starting out from a much stronger position and demanding a lot more accountability.

Werman: And from what we hear, the early days in Libya it’s not seeming that way.  There are already signs of patronage and corruption among the Transitional Council, at least anecdotally from what we’re hearing.  How much time do you think the new government in Libya will have to prove to Libyans and the world that they are in fact fair and just order masters of their country’s oil?

Ross: The probably don’t have much time at all.  One of the problems with countries in Libya’s situation is that as soon as the transitional government comes to power that the force that has brought these different tribes, these different interests together was the overthrow of the Gaddafi regime.  And that’s gone, that unifying purpose is gone.  And the next stage is going to be all of these different groups looking to gain control of the resources of the Libya state and fighting to get what they see as their fair share of the pie.

Werman: Michael Ross, a professor of political science at UCLA.  He has a new book out next year, it’s called The Oil Curse: How Petroleum Wealth Shapes the Development of Nations.  Michael Ross, thank you.

Ross: Thanks for having me.

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• Impact of oil exploitation in Ecuador

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LISA MULLINS: Nine and a half billion dollars is a lot of money, even for America’s third largest corporation Chevron. And so Chevron says it’s going to appeal yesterday’s ruling in an Ecuadorian court that has paying those billions to clean up a wide swath of Ecuador’s remote jungle. The territory was contaminated by oil operations that started decades ago. The court ruled that Chevron was responsible for the contamination. But the oil giant calls that ruling illegitimate and unenforceable. The case has been going on for more than 17 years and it probably has a ways to go. The BBC’s Irene Caselli is in the Ecuadorian capital Quito. There was in fact a press conference today that pretty much guaranteed that there’s a lot more to come in this case. Tell us what happened.

IRENE CASELLI: That’s right Lisa. What happened today is that the plaintiffs and their lawyers held a press conference to announce that they’re going to appeal the ruling as well. Now, their point of view is that the amount of damages established by the ruling is not large enough for them. Obviously 9.5 billion sounds like a lot of money but the plaintiffs and their lawyers are actually saying that it falls short of the 27 billion that were initially recommended by a court appointed expert.

MULLINS: It’s important to know that the suit was originally filed as you said in New York in 1993, and it was filed against Texaco but then Chevron bought Texaco in 2001. The accusations against Texaco itself, what is the nature of them, and what are the claims about the damage done?

CASELLI: The plaintiffs claimed that Texaco knowingly polluted a large portion of rain forest by spilling crude oil and dumping billions of gallons of toxic waste in rivers that they were using for bathing, drinking and fishing. Now, we are talking about an area in Ecuador’s Amazon region which until the 1960s was very pristine. So all of a sudden people that were used to go bathing in the rivers and drink their river water straight without boiling it started seeing oil floating a top this river. And just today I was talking to one of the plaintiffs in the case, and he was remembering when he was six years old when Chevron first came in and he would go running around on the river bank with some friends and would always end up with the soles of his feet black, dark with the oil. And he said that the oil wouldn’t go away for days. It’s a destruction of a culture they call it.

MULLINS: It was an enormous area that’s been contested here. It’s basically the size of Rhode Island this oil patch that was part of virgin rain forest at the time. What’s Chevron’s response?

CASELLI: Chevron’s response is that whatever damage Texaco did at the time was repaired in the 1990s once the company left the country. The company actually came to an agreement with the Ecuadorian government in the early 90s to spend some 40 million dollars in reparations. So Chevron says that Texaco is clear, and that’s why there is no reason to go ahead with this trial.

MULLINS: Chevron is as we said a US company. The case is being tried in Ecuador. Could a final ruling against Chevron be enforced?

CASELLI: There was a sentence just last week by the International Arbitration Tribunal in the Hague saying that no judgment can be enforced until further notice. Obviously also the other issue is that both sizes are appealing at the moment. So it won’t be for months, and maybe years until Chevron is actually asked to pay for its damages, or maybe not.

MULLINS: OK. The BBC’s Irene Caselli, thank you very much, speaking to us from Quito, Ecuador. Thanks again.

CASELLI: Thank you.

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The Suez Canal (Photo: H Nawara)

The Suez Canal sped the pace of shipping by providing a shortcut between Europe and Asia, eliminating the need to for vessels to sail around the southern tip of Africa.

In 1956, nearly a century after the canal’s creation, Egypt’s nationalist President Gamal Abdel Nasser hit western nations where he knew it would hurt, announcing to cheering crowds that Egypt would control the waterway.

That led to the Suez Crisis, a military invasion of Egypt, and an eventual ceasefire, all in the space of a few months.

Michele Dunne, of the Carnegie Endowment for International Peace in Washington, said the canal still plays a pivotal role today.

“It’s a critical choke point for commercial traffic, for oil, and for military vessels,” said Dunne. “So it’s very useful to the United States, or indeed to any outside power that wants to be able to operate freely, militarily or commercially in the Middle East. It’s very very useful.”

Experts estimate that more than 1.7 million barrels of oil pass through the canal, and the pipeline along side it, each day, so any hint of trouble is enough to drive up oil prices.

Fatih Bindol, the chief economist of the International Energy Agency, has tried to play down those fears in the wake of the recent unrest in North Africa.

“Neither Egypt nor Tunisia is a major oil producer, but of course, everybody thinks of the Suez Canal as a major route for oil transportation,” Bindol said. “As far as we know, there is not a major significant threat to the oil supplies in the Suez channel.”

Still, the unrest has prompted two shipping companies to suspend their canal operations.

Ships that are passing through the canal are having difficulty refuelling, getting new supplies or getting funds, because banks are closed. The Egyptian government has reportedly deployed soldiers to guard the canal.

Mahmoud Yousseff, an Egyptian businessman, called that an overreaction.

“The youth that you see in the streets of Egypt have no intention whatsoever of destroying the infrastructure or the economy of the country,” Yousseff said. “The Suez Canal is run by pilots and it can easily be taken over by the Navy. If you ask me can it happen, I say yes. Is it likely to happen? No”

Yousseff worries about something else, though, something that could drive the price of oil much higher.

“What can happen, and would be much more significant, would be the spillover from Egypt to other countries in the Gulf area,” Yousseff said. “Don’t tell me that other countries don’t have the same problems. They do. And that could send the prices of oil up to $200 a barrel.”

Whatever happens to oil, there is something else to consider.

The ongoing problems mean Egyptian businesses cannot export other goods. Even if the ports were operating normally, companies consider it unsafe to use roads or railways, so food and other goods are piling up, along with the damage to Egypt’s economy.

The wells near the town of Rosay en Brie were drilled twenty five years ago, during a mini oil boom in the region. They were shut down after a few years, but now they’re up and running again as test wells for the Canadian firm Vermilion Energy. Vermillion believes the wells may hold the key to a vast new oil resource a mile and a half below the surface.
Vermilion executive Patrick Monget, who runs the company’s operation in what’s known as the Paris Basin, says the industry has long known that the small amount of oil pumped out of the region over the years is part of a much larger deposit. But most of that petroleum is trapped inside fine-grained rock called shale. It’s difficult and expensive to get out, and for years it wasn’t worth the cost.

But these days, oil prices are high and there’s a new technology called hydraulic fracturing that makes it easier to get at the resource.

The technology, which was developed in the U.S, injects huge amounts of water mixed with small amounts of chemicals deep underground, to break apart the shale. Monget says tests using the two wells here show that hydraulic fracturing could unlock as much as 200 billion barrels of oil. That’s potentially enough that ten companies are competing to explore the ground under more than fifty thousand square miles of fields and forests around the Seine and Marne rivers east of Paris.

If their bets pay off, it could represent both a potential windfall for France and a huge problem.

France currently produces only one per cent of the petroleum it uses. Charles Lamiraux, who’s in charge of oil exploration for the French energy ministry, says the Paris Basin shale could increase that five-fold.

“That would be very important,” Lamiraux says. “It would be oil that we don’t have to buy from a developing country, and it would improve our trade balance.

But Lamiraux says development of the oil could have a big impact on the local environment.
“We will have to do the most we can to minimize that,” Lamiraux says.

The French government has three major concerns about the hydraulic fracturing process.
One is water. On average, hydraulic fracturing uses as much water for each well as a hundred thousand French people use in a day.

The second is potential contamination of both the soil and the ground water. And the third is the large number of wells needed to extract the oil—ten to twenty times as many as are used in conventional drilling.

All these concerns have all caused a backlash against hydraulic fracturing in parts of the U.S., and French environmentalists fear the impacts could be devastating to a region that has produced large quantities of vegetables, grain, and Brie cheese for centuries. The Paris Basin shale sits under the most fertile farmland in France, and the region is crucial to both the country’s food supply and its character. Local environmental activist Marie-Paul Duflot points to the gently rolling prairie, the 10th century yellow stone church, and the chance to see deer or wild boar at sunset as she walks through a dormant wheat field at the edge of the village of Sivry.  Duflot, who runs the organization Nature and Environment 77, says these are examples of what she likes most about this part of France.

People here long ago got used to seeing the occasional oil rig in the area, Dufflot says, but she was shocked to learn about the industry’s much more ambitious plans.

“I don’t want to see the countryside transformed into fields of oil derricks,” Duflot says.

She also says there’s already a water shortage in the region, and fears it could become even worse if the oil industry takes off.

The industry responds that it’s working to reduce the amount of water needed for the hydraulic fracturing process. Companies also say that done correctly, the technology presents no risk of water or soil contamination.
For its part, the French government says it will do whatever it takes to protect the environment, even if that means putting strict limits on the number of wells.

And that’s where things get sticky.

Vermilion Energy’s Vice-President of European operations Peter Sider says limits that are too strict could kill the project. He acknowledges that developing the shale oil here could have a significant impact on the surface, but says that as long as people need oil, there will have to be some tradeoffs.

“Unfortunately, the reality of the life on the world today is that we’re dependent on hydrocarbons,” Sider says. He acknowledges that there are a growing number of alternatives, but says they just don’t compete with oil at current prices.
“As long as hydrocarbons are relatively cheap then we’re addicted to it,” Sider says.

France is working to reduce its dependence on fossil fuels, although less aggressively than some of its neighbors. Meanwhile, French environmentalists like Marie-Paul Duflot are just starting to learn about the hydraulic fracturing process and what it might mean for the Paris Basin.
On that point, at least, the greens are in much the same boat as the oil companies. Vermillion Energy says it will take several years of expensive exploration just to figure out the commercial potential of this new oil frontier. Download MP3