Private sector essential in Latin America energy, US official says
The private sector will need to remain an essential participant as countries across Latin America try to develop their oil and gas resources, a US Government official foretold.
“The need to invest in energy infrastructure across the region is substantial,” said Kurt D. Donnelly, a deputy US secretary of State who heads the department’s Bureau of Energy Resources (BER). More publicly traded companies will need to be involved, he said during an Oct. 2 discussion at the Inter-American Dialogue’s 2019 Latin America Energy Conference.
The bureau provides a lot of technical assistance to Latin American governments, Donnelly said. “These countries recognize that US oil and gas investments are essential. Our role is to help their governments get their policies right, so the investment climate is more conducive to attracting those investments,” he said.
Individual countries’ oil and gas outlooks range from badly deteriorating in Venezuela to more promising in Brazil and Colombia, other experts noted.
Venezuela’s oil collapse was well under way before the US announced new sanctions earlier this year, said Risa Grais-Targow, Latin America director for New York-based Eurasia Group. “Its biggest challenge has been the loss of the US market,” she noted.
Rosneft is helping
National oil company Petroleos de Venezuela SA (PDVSA) has been able to find substitutes in Asia, particularly India and China, but its roles there are very limited, and it can’t set terms, Grais-Targow said. “As PDVSA has tried to step in, [Russian oil company] Rosneft has stepped in. It’s substantially off-loading three quarters of Venezuela’s oil and taking it elsewhere,” she said.
Grais-Targow said that the latest figures show Venezuela producing about 650,000 b/d in September, which could drop as low as 500,000 b/d soon. “We’re seeing a level where a lot of this isn’t generating revenue for the government,” she said, adding that many creditors would like to get their hands on Citgo Petroleum Corp., which PDVSA owns. “A new Venezuelan government would need to work out new payment terms with Citgo’s bondholders,” Grais-Targow said.
RoseAnne Franco, who formerly headed oil and gas risk analysis at British firm Verisk Maplecroft, described a different situation in Brazil, where she said a tender scheduled for November could attract strong interest because it involves a discovered resource where there is not much risk. “This tender stands out because of its shear volume and size,” she said. “Companies in the area are expected to try and widen their exposures.”
Two more tenders in the next few months could test companies’ flexibility, Franco said. “The government seems to recognize there’s an energy transition on the horizon and it needs to move quickly,” she said. “There’s a lot of associated gas in these fields. At the moment, about 124 million cu m/day is involved. This could nearly double in the next decade.”
Multiple opportunities
Franco said, “There’s a smorgasbord of opportunities. The Bolsonaro government seems to recognize that all options need to be on the table, and [national oil company Petroleos Brasileiro SA] won’t be able to pursue every opportunity,” Franco said.
In Colombia, national oil company Ecopetrol SA emerged from a period of depressed prices worldwide that began in 2014 with its production down by nearly half but costs apparently improved, suggested its former president, Juan Carlos Echeverry, a founding partner of the Econcept strategic planning group.
“Expanding exploration has been Ecopetrol’s biggest challenge,” he told his Inter-American Dialogue audience. “Its international operations have grown, including a sizeable investment in the Permian basin in the US. Ecopetrol could become more of a Pan-American company with its investments elsewhere. Replacing declining domestic production is still a challenge. Economic questions need to be resolved, as well as whether hydraulic fracturing will be allowed to produce new deposits.”
Echeverry said Colombia continues to face issues surrounding access to resources which could help improve its overall economy. “We have to be more competitive than other countries,” he said. “We also need to recognize that in some case, agriculture has more economic influence than energy. Striking a balance that includes taking care of the environment is essential.”
Contact Nick Snow at [email protected].
Nick Snow
NICK SNOW covered oil and gas in Washington for more than 30 years. He worked in several capacities for The Oil Daily and was founding editor of Petroleum Finance Week before joining OGJ as its Washington correspondent in September 2005 and becoming its full-time Washington editor in October 2007. He retired from OGJ in January 2020.
