SOUTH AMERICAN ENERGY MARKETS WEEKLY ROUNDUP (August 24-31): Bolivian government plans to draft the country’s third hydrocarbons law since 1998
South American Energy Markets (SAEM) now publishes a weekly roundup of the top-five stories including analysis affecting energy markets in the region with links. The roundup includes all the major web dailies of South America and other websites that write about the region’s energy markets. SAEM Weekly Roundup appears on Mondays and is published by noon London time.
Monday, August 24, 2009
BOLIVIA/NEW HYDROCARBONS LAW
The executive branch of government is aiming to change the role of YPFB and the energy companies operating in Bolivia with the help of a new hydrocarbons law, reports La Paz daily La Razon. The new hydrocarbons law, which would be the third after passage of new legislation in 1998 and 2005, aims to strengthen YPFB’s role as the sole operator in the upstream-downstream chain as well as the nationalization of the sector in 2006, according to vice minister of industrialization, marketing, transport and storage, William Donaire. He said that the new hydrocarbons law will put an end to “a number of contradictions” with the new constitution approved in a national referendum in January. Donaire said that presently private companies are allowed to take part in upstream projects but the new constitution only permits YPFB to do this in association with these majors.
COMMENT: One of the biggest flaws of the last two hydrocarbons and nationalization law is that the government thinks that everything can be resolved with the passage of a new law. As we have seen, the latest hydrocarbons law (law 3,058) created a lot of confusion and has discouraged vital investment in upstream projects. Another factor that recent legislation has brought to light in Bolivia is YPFB’s inefficiency and incapacity to take the role of sole operator of the hydrocarbons sector. What will the new hydrocarbons law resolve? Nothing. Before it becomes law, it will only fuel greater regulatory uncertainty that will impact negatively long-overdue investments in the country.
BOLIVIA-ARGENTINA/GAS SUPPLIES
In order to have a growing role in Argentina, some analysts and former hydrocarbons sector officials recommend that YPFB should sign agreements directly with private companies since they consider Argentine state-owned energy company Enarsa unreliable, energy analyst Alvaro Rios, was quoted as saying in La Paz daily El Diario. Rios, who was shortly hydrocarbons minister of Bolivia in 2004, said that Enarsa “appears like a company that cannot sign serious agreements to import bigger volumes of Bolivian gas.”
COMMENT: Criticism of Enarsa, which was created in 2004, is nothing new. Earlier this year, Daniel Montamat, former Argentine energy secretary (1990-00) and YPF president (1987-89), told SAEM that Enarsa operates at a loss every month and was only kept afloat in 2008 with $110-$135 million from the state treasury. “It is very difficult to figure out how much money the company makes [or loses] in the international agreements is has signed since such information in not public,” said Montamat. “For example, it purchases gas from Bolivia [at market prices] but sells it at a lower [subsidized] price to the domestic market.”
PERU-BOLIVIA-CHILE/MARITIME DISPUTE
Peruvian President Alan Garcia accuses Chile and Bolivia of agreeing behind his country’s back of reaching an agreement to end a long-standing border dispute that dates back to a nineteenth-century war, writes Bolivian state-owned news agency ABI. “To be frank I do not understand it,” said the Peruvian head of state. “I said [to Bolivian President Evo Morales], listen, this is a bilateral issue which Chile and you have and another [there is another] bilateral issue with Peru…”
COMMENT: The unresolved geopolitical dispute between Peru, Bolivia and Chile continues to entangle relations and any possibilities that the former two countries will export power and gas to the mining-rich region of northern Chile. The situation appears faraway from a solution since Peru and Bolivia are seeking separate concessions from Chile: Peru through international arbitration at The Hague, and Bolivia with the help of direct talks with Santiago. If I were Chile, the best strategy would be to divide and conquer my neighbors. In 1978, Bolivia broke diplomatic relations with Chile after an agreement to grant the landlocked country a maritime corridor to the Pacific Ocean fell through after Peru rejected the agreement because it was its former territory lost in the War of the Pacific (1879-84).
BOLIVIA-BRAZIL/GAS-PURCHASE ACCORD
Owing to the slowing of the Brazilian economy and higher domestic gas output, YPFB President Carlos Villegas said that export volumes to Latin America’s largest economy would be lower this year, writes state-owned news agency ABI. “We believe that [this year] gas exports will reach a maximum of 24 million cu m/day [as stipulated in the take-or-pay agreement],” said Villegas. “Brazil is asking to purchase from October less gas. As a result [export revenues] decreased by $450 million.”
COMMENT: If one has followed news over gas supplies from Bolivia to Brazil during the past two years, it is clear that Brazil has tightened the screws on Bolivia by making it ever-dependent on it. This leverage on the country is being done at the expense of Venezuela and to a lesser extent Argentina, which used to be a fierce rival of Brazil in exerting geopolitical influence in buffer states such as Bolivia, Paraguay and Uruguay. Even though Brazil is becoming less dependent on Bolivian gas, one of the aims of greater Brazilian gas self-sufficiency is gaining greater regional geopolitical clout. Bolivia also has a lot of natural sources that could compliment Brazil’s economic growth.
BRAZIL/DEFENSE OF ENERGY RESERVES
Brazil’s defense minister, Nelson Jobim, was quoted as saying in an exclusive interview with DEF TV, which was published in Infobae.com, that the government will seek to coordinate the armed forces to defend the country’s subsea hydrocarbons reserves as well as the Amazon Jungle. The new defense policy has been approved by President Luiz Inacio Lula da Silva. The new measure establishes a framework to coordinate the three branches of the army in order to protect the country’s gas and oil reserves as well as the Amazon Jungle.
Meanwhile, state-owned energy company Petrobras announced another huge discovery in the Campos Basin, reports Rio de Janeiro daily O Globo. The new discovery at the Aruana field, located 120km offshore the state of Rio de Janeiro, is estimated to house 280 million barrels of oil. Analysts rightly see the latest discovery as another sign that new offshore discoveries will be announced in the future by Petrobras.
COMMENT: Brazil’s new defense strategy takes into account adverse scenarios such as attacks on the country’s energy sector as well as the embattled Amazon Jungle. Jobim’s statement shows that there is concern in the government about defending the country’s enormous offshore oil and gas reserves like those in the Campos and Santos Basins. It also shows a new departure and Brazil’s coming of age as a global energy powerhouse.
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SOUTH AMERICAN ENERGY MARKETS WEEKLY ROUNDUP (August 17-24): Are winds of war amassing between Colombia and Venezuela?
South American Energy Markets (SAEM) now publishes a weekly roundup of the top-five stories including analysis affecting energy markets in the region with links. The roundup includes all the major web dailies of South America and other websites that write about the region’s energy markets. SAEM Weekly Roundup appears on Mondays and is published by noon London time.
Monday, August 17, 2009
COLOMBIA & THE REGION/US MILITARY BASES
Despite all the saber-rattling by Venezuelan President Hugo Chavez, Colombia said that it would like to increase military cooperation with the United States in that country’s fight against guerrilla groups such as the FARC and the illicit drug trade, reports Bogota-daily El Espectador. The announcement was made after President Alvaro Uribe met with Barak Obama in Washington. “I would like this agreement with the United States to project itself to the rest of the continent,” said Uribe. “We would want to have [a similar agreement] with Brazil and the rest of the American continent.” Uribe told his neighbors Venezuela and Ecuador, which have been against Colombia’s plans to increase military cooperation with the United States, that he wants to reestablish good relations with his country’s neighbors. “The first message [goes] to Ecuador and Venezuela that they are our brothers,” he said. “We are fighting a war against terrorism.”
COMMENT: Will Chavez and Ecuadorean President Rafael Correa sit at a same table with Uribe after the announcement? Probably not because Venezuela and Ecuador will try to get the most political mileage from the situation in their home countries. It is pretty incredulous that Chavez in his weekly television address, Alo presidente, said that the matter could lead to a war in South America. While it is highly doubtful that both countries will go to war, it is still a possibility. Taking into account the half-a-century civil war in Colombia, a war with Venezuela would be ruinous for both countries. The last time there was a major arm conflict in Latin America was in 1982 over the Falkland (Malvinas) Islands between Argentina and Great Britain.
ARGENTINA/GAS & POWER TARIFFS
After giving the green light to gas and power tariff hikes, the Argentine government through gas regulator Enargas and the Energy Secretariat suspended such rises after strong protests from various consumer groups, reports Buenos Aires business daily Ambito Financiero. The measure to suspend the hikes has creates a lot of confusion among consumers as well as distribution companies that sent the new bills.
COMMENT: Amid the confusion and protests that the measure to raise tariffs by 300%-400% caused, the government decided to subsidize the rise with 493 million pesos ($130 million). Originally, the money from the hikes was supposed to be earmarked for paying for gas imports from Bolivia and LNG. The government will try again to raise gas and power tariffs in October.
ARGENTINA/GAS TARIFFS
In a statement to the National Securities Commission (CNV), Metrogas, Argentina’s largest gas distributor serving Buenos Aires, blamed directly the government for losses of 39.6 million pesos ($10.5 million) incurred during the first six months of the year, writes Buenos Aires daily La Nacion. Citing the freeze on tariffs by the government and indirectly referring to the intervention of the energy markets since January 2002, the distributor said that the present situation is causing the company’s financial situation to “deteriorate day to day.”
COMMENT: The statement by Metrogas is significant because it is the first-ever that openly criticizes directly the government’s tariff policy. It is also a sign that at least publicly large companies such as Metrogas are becoming increasingly frustrated with President Cristina Fernandez de Kirchner’s energy policy. In an unprecedented move in July 2007, the government intervened Metrogas and forced its head, Robert Brandt, to resign. The government justified the move because it said Metrogas was not supplying industrial customers and in breach of its obligations.
BOLIVIA/UPSTREAM INVESTMENTS
State-owned energy company YPFB invested during the first half of the year a mere $1.9 million of the $107.9 million it had budgeted for the period under review, writes La Paz daily La Razon. Citing a source that spoke under condition of anonymity, the money budgeted was supposed to be earmarked for expansion of the gas-distribution network. A YPFB source, however, denied that so little was being spent by the energy company. Hydrocarbons minister, Oscar Coca, said that YPFB would spend “30%-40%” of its budget in August.
COMMENT: It is odd that YPFB, which has in some cases even threatened companies to invest in upstream projects in the country, could set such a poor example. Even President Evo Morales has joined the chorus and openly criticized YPFB president, Carlos Villegas, for the low investments. However, this may mean that Villegas’ days at the state-owned energy company may be numbered. It also shows that tremendous logistic and inefficiency problems that continue to plague YPFB.
PERU/CAMISEA GAS AND EXPORTS
Lima-based La Republica, which is openly against exporting gas from Camisea (see South American Energy Markets Weekly July 24-31), wrote in a story that nationalization of Peru’s largest gasfields would be mistake. The nationalization proposal was made by Cusco regional president, Hugo Gonzales. Even though such a proposal appears far-fetched at this moment, it reveals how nationalist sentiment is growing in Peru. The nationalization of Camisea, which is located in Cusco department, is not a good idea, according to Jorge Manco Zaconetti of the UNMSM university. “Nationalization in order to supply southern [Peruvian] markets is senseless,” said Manco Zaconetti. “We should explore and prove up reserves and one must take into consideration that Peru is receiving royalties of almost 50% from Blocks 88 [Camisea] and 56 [Pagoreni]…”
COMMENT: It would take a pretty blind person to not understand that apart from poor energy planning, nationalism has been raising its head in Peru for quite a while. There are many examples of this in Peru’s history. One can go back to the last-1960s to the mid-1970s, when left-of-center General Juan Velasco Alvarado nationalized a number of industries after overthrowing an elected civilian government. His nationalization experiment ended in ruin. President Alan Garcia’s first term (1985-90) was probably one of the worst periods ever in Peru. His economic policies forced hyperinflation to rocket to 36,000%, while Maoist Shining Path guerrillas threw the country deeper into turmoil. One analyst, who spoke to SAEM, gave a candid view of the future: “If economic growth stagger it could fuel populism,” said a Scotiabank analyst. “Poverty is always a good breeding ground for populism.”
These briefs can be reprinted as long as the source is cited.
If you have any feedback on today’s articles, or if there are energy industry stories you think should be covered, or need research assistance, please contact etessieri@latamreport.com.
South American Energy Markets (SAEM) now publishes a weekly roundup of the top-five stories including analysis affecting energy markets in the region with links. The roundup includes all the major web dailies of South America and other websites that write about the region’s energy markets. SAEM Weekly Roundup appears on Mondays and is published by noon London time.
Monday, August 10, 2009
BOLIVIA/UPSTREAM INVESTMENTS
Total announced in a statement that it has informed the Bolivian authorities that the Itau gasfield (Block XX) in Tarija department, which is controlled 75% by the French major, is expected to start production in mid-2010 with an expected output of 50 million cu m ft/day (1.4 million cu m/day). Total entered Bolivia in 1996 and also has a 15% interest in the San Alberto, the country’s biggest gasfield with 7.193Tcf proved reserves in 2005, and San Antonio, which mainly supply the gas market in Brazil.
COMMENT: Any announcement of increased gas output is good news for the Bolivian authorities, which have seen their export market in Brazil shrink due to slower economic growth. In a 2005 report by YPFB, Total’s biggest proved gas reserves were located at Itau with 3.274Tcf but had fallen in 2006 to 1.56Tcf, according to YPFB. Of all the majors operating in Bolivia, Total appeared to be the most reticent against investing in upstream projects. Even though former hydrocarbons minister, Carlos Villegas, stated in 2006 that the French company was planning to invest “$1.29 billion in gasfields like Incahuasi and $592 million in Itau,” Total never confirmed such investment sums to SAEM. There was speculation in the end of 2007 that Petrobras was interested in buying Total’s assets in the landlocked country.
BOLIVIA/UPSTREAM INVESTMENT
Development of the Repsol-operated Caipipendi block in Margarita gasfield, which had a total 5.861Tcf of proved reserves in 2005, is going according to plan and will begin to produce 8 million cu m/day by 2011 and 14 million cu m/day by 2014, according to Hidrocarburosbolivia.com, quoting Cochabamba daily Correo del Sur. Caipipendi will play an important role in supplying the Argentine market in the future. At this moment, it produces 1.9 million cu m/day.
COMMENT: It appears sensible for energy companies in Bolivia to invest in upstream projects since gas-strapped Argentina offers a growing market. One of the big question marks, however, one should be asking is which energy company is presently investing aggressively in Bolivia’s upstream sector. We have heard multi-hundred-million-dollar sums announced by the government but they never are made or are postponed. Upstream investments reached in 1998 $604.8 million but fell to $149.5 million in 2007 and are expected to be between $250 and $300 million in 2008, according to analyst Carlos Alberto Lopez. Bolivia’s upstream sector needs in the next five years $7-$8 billion in upstream projects. Uncertainty still persists.
COLOMBIA-VENEZUELA-ECUADOR/DIPLOMATIC CRISIS
A new diplomatic row has erupted between Colombia and its neighbors Venezuela and Ecuador with President Hugo Chavez threatening to halt gas imports from Colombia. Even though it is unlikely that the United States will build a military base in Colombia as President Alvaro Uribe has suggested, the real culprit continues to be Venezuela’s and Ecuador’s alleged relations with the Revolutionary Armed Forces of Colombia (FARC). The most recent row erupted after Uribe demanded an explanation from Venezuela on why FARC rebels were armed with Swedish-made antitank rocket launchers obtained by that country many years ago. Ecuadorean President Rafael Correa, who has not forgotten the Colombian army incursion in March that caused the death of FARC leader Raul Reyes, warned that Colombia would be the first to suffer if it launched preemptive strikes in the region. “With this policy of preemptive strikes I could bomb wherever these [guerrilla] bands may be in Colombian territory…” said Correa in Quito daily El Comercio.
COMMENT: Rocky relations between Colombia and Venezuela are nothing new and date back to 1922 over a maritime border dispute in the Gulf of Venezuela. Since Chavez came to power, suspicions about the Venezuelan president’s relation with the FARC have caused a lot of strife between both countries. A recent row that appeared and blew over between both countries took place in 2005, when the Colombian foreign ministry formally apologized to Venezuela for kidnapping a FARC leader in Venezuelan territory. A clear sign that the recent row will subside came after Chavez said on Saturday that he would be interested in finding a diplomatic solution with Colombia, reports Venezuelan state-owned news agency ABN.
BOLIVIA/ENERGY POLICY
President Evo Morales admitted that the aims of his government’s energy policy have not been met due to the need for a lot of capital and time, reports La Paz daily La Razon. “The opposition worries me now because they are saying that there is not a real nationalization [process going on],” he said. “What is really lacking now is in development [of the energy sector] because it requires a lot of money, planning and it is a difficult task.”
COMMENT: Whenever President Morales makes such an affirmation during a crucial election year, one must dig deeper behind his words. Is he stating that matters are in such a wretched situation at state-owned energy company YPFB that there are more unpleasant surprises awaiting? The biggest blow has not been the corruption scandal that has hit YPFB after its former head, Santos Ramirez, was forced to resign in the end of January (see South American Energy Markets Weekly July 17-24), but the inefficiency of the company to resolve LPG, gasoline and diesel shortages at the pumps. The plunge in gas prices and exports to Brazil will also bite into this year’s national budget.
BOLIVIA-PERU-CHILE/POWER EXPORTS
In the face of ever-worsening gas and power shortages (see South American Energy Markets Weekly July 17-24), Bolivia is ready to export electricity to Peru and Chile from 2015, according to deputy minister for electricity, Miguel Yague, reports state-owned daily El Peruano. The electricity will be supplied by the future Miguillas hydropower project, located west of La Paz. “The output would be to export [power] to Peru,” said Yague. “Probably the domestic market would need 50MW [from the future hydropower plant].”
COMMENT: In the 1990s Bolivia was seen as a power and gas hub that would sell energy to its neighbors. Such plans, however, have failed due mainly to regional regulatory uncertainty. Even though Bolivia fought and lost with Peru a nineteenth-century war against Chile, relations between both countries have been marred by mutual distrust. In the late-1970s, Bolivia and Chile reached an agreement over a maritime corridor which was formerly Peruvian territory. Objections by Lima forced the deal the fall through. A power supply agreement between both countries may, therefore, be easier said than done as is the case with Chile.
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If you have any feedback on today’s articles, or if there are energy industry stories you think should be covered, or need research assistance, please contact etessieri@latamreport.com.
SOUTH AMERICAN ENERGY MARKETS WEEKLY ROUNDUP (July 31-August 7): Repsol YPF sees Brazil as a good market for expansion
South American Energy Markets (SAEM) now publishes a weekly roundup of the top-five stories including analysis affecting energy markets in the region with links. The roundup includes all the major web dailies of South America and other websites that write about the region’s energy markets. SAEM Weekly Roundup appears on Mondays and is published by noon London time.
Friday, July 31, 2009
SPAIN-BRAZIL/EXPANSION
Repsol YPF sees Brazil as a good country to grow in the future, Miguel Martinez, Repsol YPF general director, was quoted as saying in Buenos Aires business daily Cronista Comercial. “If you corner me with the question, I would say that Brazil is where the future of the company lies,” said Martinez, adding that the Spanish major is seeking to reduce its ownership in Gas Natural and its Argentine subsidiary, YPF. The Repsol YPF director blamed lower oil, gas and refining margins for the group’s 58% fall in the first half of the year in net income (€889 million) from a year ago.
COMMENT: After expanding with gusto in Latin America in the 1990s, Repsol YPF has been quietly exiting in recent years markets such as Argentina and Bolivia due to increased government intervention in energy markets. Even though Repsol YPF has played down its long-term plan to reduce risk in some Latin American countries, it has expanded into other markets such as the Middle East and Northern Africa. Brazil also appears to be the new hope of the company taking into account the huge oil and gas potential of the Santos Basin.
ARGENTINA/GAS WELLHEAD PRICES
In the face of massive layoffs in the energy industry and sagging output and reserves, the government of President Cristina Fernandez de Kirchner has agreed with the oil and gas producing provinces to raise long-overdue wellhead prices, which have been frozen for the past eight years, reports Buenos Aires daily Clarin. Under the new agreement, the wellhead price of gas will rise to $1.90 compared with $1.60/MMBtu and in 12 months to $2.60/MMBtu charged to gas generation plants. “It is no longer the case that gas [wellhead] prices are frozen as they were for eight year,” said Jorge Sapag, governor of gas-rich Neuquen. “Gas is an expensive commodity.”
COMMENT: Despite the hike in wellhead prices, they are still well below those charged by countries such as what Bolivia charges Argentina. On July 20, the price of gas quoted by Henry Hub was $3.41/MMBtu. One of the big unanswered questions is if new wellhead prices will pave the way for upstream investments. If the 1990s are anything to go by, when Argentina had clear investment rules and companies were eager to enter the country, energy companies were not too enthused about upstream investments to prove up reserves. If in good times there was little investment, what has changed? Very little, unfortunately.
ARGENTINA/GAS AND POWER SHORTAGES
Low temperatures forced power usage on July 23 to rise by 387MW to a record 19.566GW from 19.179GW a day earlier, according to Argentine spot power market operator Cammesa. High consumption had to be covered by imports from Brazil (622MW) and Paraguay (84MW). Taking into account that Argentina’s industrial output contracted by 10.7% in the first half of the year versus a year ago, according to independent think tank FIEL, the lack of power and gas is an exceptionally worrying sign that shows that Argentina’s energy situation has got far worse.
COMMENT: It is pretty incredible that it was the economic recession and lower industrial production that made it possible for Argentina to plug the power-gas shortfall on both days. Before 2003-04, when Argentina’s started to scale back exports to countries such as Chile and Brazil, the country used to supply its thermal plants with diesel/heavy fuel oil during the winter months so that households could heat their homes with gas. Today, however, it has to supply its thermal plants with liquid fuels during the whole year. A CAMMESA official told SAEM that Argentina has a constant deficit of 4 million cu m/day and during consumption peaks in winter, it may be as high as 12 million cu m/day
VENEZUELA-SPAIN/ENERGY COOPERATION
Venezuela and Spain have signed six agreements that will strengthen energy cooperation between the state-owned PdVSA and Repsol YPF, according to state-owned news agency ABN. Some of the most important agreements signed by both countries was to carry out prospection at Junin 7 Block in the promising Orinico Oil Belt as well as the creation of a joint venture, Petroquirequire. Another part of the agreements involve that sale for $100 million of Repsol YPF’s exploration assets of Barrancas Block to PdVSA.
COMMENT: The agreement between both countries is only an attempt by Spain to make better an already bad situation. Despite the politics and President Hugo Chavez’ ramblings, Venezuela’s prodigious oil and gas wealth are a big lure for energy companies such as Repsol YPF. There is an old saying in Latin America that there is “no evil that can last a hundred years.” It means that since most human cannot live a century, the pain they inflict cannot last that long either.
PARAGUAY-BRAZIL/ITAIPU POWER PURCHASE AGREEMENT
The new Itaipu agreement will oblige Brazil to pay Paraguay $360 million/year versus $120 million previously for power it purchases from the 1.4GW hydropower plant (see South American Energy Markets Weekly Roundup, July 24-31), reports Rio de Janeiro daily O Globo. Paraguay dailies such as ABC Color report that one of the pitfalls of the 1973 treaty was Brazil’s exclusive right to acquire the excess power that its neighbor did not use. “…today, 36 years after the signing the agreement, Paraguay consumes about 8% of the installed capacity of the plant [1,243MW on March 3 at 7.16PM],” ABC Color writes. This clause does not also permit Paraguay to sell power from the hydropower plant, which supplies about 20% of Brazil’s power consumption needs, to countries such as Argentina.
COMMENT: Paraguayan President Fernando Lugo, who had promised on the campaign trail that he would demand that Brazil accept a new power purchase agreement concerning Itaipu, has won an important concession from its neighbor. Taking into account that Paraguay is one of the most corrupt countries in the world, according to Transparency International, one wonders in which pockets the extra$240 million will end up in. Despite the new treaty, Brazil will continue to dictate terms at Itaipu.
These briefs can be reprinted as long as the source is cited.
If you have any feedback on today’s articles, or if there are energy industry stories you think should be covered, or need research assistance, please contact etessieri@latamreport.com.
South American Energy Markets (SAEM) now publishes a weekly roundup of the top-five stories including analysis affecting energy markets in the region with links. The roundup includes all the major web dailies of South America and other websites that write about the region’s energy markets. SAEM Weekly Roundup appears on Mondays and is published by noon London time.
Friday, June 17, 2009
PARAGUAY-BRAZIL/ITAIPU AGREEMENT
Paraguay and Brazil are reported to be close to reaching an agreement over a new power-purchase agreement for the 14GW (20 X 700MW) binational Itaipu hydropower plant, writes Sao Paulo daily Estadao. The new agreement requires the approval of the presidents of both countries, Luiz Inacio Lula da Silva and Fernando Lugo. One of the most contentious points of the new agreement is allowing Paraguay to sell power to other operators rather than Eletrobras. Another important point lobbied by the Paraguayans is raising the cost of the power sold to its giant eastern neighbor. This may cost Brazilian consumers about $1.1 billion (2.1 billion reales).
COMMENT: Even though Paraguay owns in theory 50% of Itaipu and Yacyreta, another large-scale hydropower project being built with Argentina, it is the country’s big neighbors that call the shots. One of the most incredible aspects of the Itaipu power-purchase agreement is that it requires state-owned power group ANDE to sell power only to Eletrobras. Another incredulous fact about these large hydropower projects is that Paraguay still needs more 500kV lines to plug shortages in summer in the capital Asuncion.
BOLIVIA-BRAZIL/GAS SUPPLIES
Brazil has abruptly lowered gas imports from Bolivia from July 14 to 21.05 million cu m/day from a July 1 high of 31.06 million cu m/day, writes GasBrasil quoting Sao Paulo daily Folha. The reason for the fall in gas imports has been attributable to a 135,000 cm shipment of LNG to the Pecem regasification terminal in northeast Brazil.
COMMENT: Bolivia can only blame itself for Brazil seeking to diversify its gas imports by building two regasification terminals at Pecem (7 million cu m/day) and Bahia de Guanabara (14 million cu m/day) that were inaugurated in 2008 and 2009, respectively. The regulatory uncertainty caused by Bolivia’s nationalization scheme has also forced Argentina to ditch construction of the GNA gasline and build regasificaiton capacity. Taking into account that about 50% of Bolivia’s export revenues derive from gas, Brazil can now easily pressure its western neighbor politically. The days when Bolivia was seen in the late-1990s and early 2000s as an important gas-energy hub are long gone.
BOLIVIA-ARGENTINA/GNA GASLINE
If YPFB-Transportadora (formerly Transredes) head, Cyro Camacho’s, said that an agreement has been reached with Argentine gas regulator Enargas to supply 20.3 million cu m/day, according to La Paz daily La Razon. “We have made progress [in the negotiations] on a government level…” said Camacho. ” I understand that such an agreement has been reached with Argentina’s Enargas [to supply] 20.3 million cu m/day.” The YPFB-Transportadora head said that 20km of the GNA line, which will supply Argentina with more gas, will be built by the transporter from the San Alberto gasfield to the Argentine border.
COMMENT: There are many energy sagas and soap operas that maintain our interest. The GNA line is one of these. It was first introduced by Techint and the Argentine government in 2004 and was supposed to be operational by 2006. Enarsa, which is spearheading the construction of the pipeline on the Argentine side, has postponed for a twelfth time a tender to build the line. The only thing that the present state of the GNA gasline offers us are a lot of question marks: What is the actual route of the pipeline? Will it be supplied by Argentina’s Northwest Basin? Does the Argentine government have enough money to build it?
BRAZIL/COARI-MANAUS PIPELINE
The cost of building the 670km Coari-Manual pipeline by Petrobras has not only been delayed by red tape but its price has risen to R$4.58 billion ($2.4 billion) from an original estimate of R$2.4 billion, when construction of the pipeline began in 2006. Petrobras has blamed the higher price tag on contractors. The majority of the gas from the pipeline will be used by state-owned power company Eletronorte’s 550MW plant that is seen consuming 5.5 million cu m/day.
COMMENT: Originally, the Urucu-Coari-Manaus pipeline was supposed to be operational from March 2008. Another challenge of the project has been to convince environmentalists that the project it environmentally sound. While some believe that transporting gas to a thermal plant in Manaus makes sense, its critics have spoken out at soaring cost of the project. Petrobras plans to supply gas to Manaus distributor Cigas within 90 days.
PERU/CAMISEA GAS SUPPLY WOES
Concerned about the real state of proved reserves at Camisea (eee South American Energy Markets Weekly July 17-24), the Peruvian government in talks with Argentine operator Pluspetrol aims to assure that supplies from Peru’s biggest gasfield would be used exclusively by the domestic market, writes HidrocarburosBolivia.com, quoting Americaeonomica. Ministry of Energy and Minies Pedro Sanchez said that Peru will use a clause in the agreement with Pluspetrol that ensures that there will be enough gas to plug soaring domestic demand. Pluspetrol states that proved gas reserves at Camisea and Pagoreni amount to 14.1Tcf while Gaffney, Cline & Associates see it at 8.7Tcf.
COMMENT: Those who remember when Shell and Mobile pulled the plug on the Camisea project in 1998 over differences with the government on whether gas could be exported, there is an eerie sense of deja vu. Taking into account how gas supplies have turned into a hypersensitive issue for the government, President Alan Garcia’s has vowed do everything possible to ensure Peruvian voters that there will be enough gas in the future to fuel growth. This is why the government gives great priority for the construction of new pipeline to southern Peru, a bastion of anti-government support and the home of the populist Ollanta Humala, who lost in 2006 in a close presidential race against Garcia.
These briefs can be reprinted as long as the source is cited.
If you have any feedback on today’s articles, or if there are energy industry stories you think should be covered, or need research assistance, please contact etessieri@latamreport.com.
South American Energy Markets (SAEM) now publishes a weekly roundup of the top-five stories including analysis affecting energy markets in the region with links. The roundup includes all the major web dailies of South America and other websites that write about the region’s energy markets. SAEM Weekly Roundup appears on Mondays and is published by noon London time.
Friday, June 17, 2009
PERU/GAS RESERVES
The latest assessment by Gaffney, Cline & Associates (GCA) shows that Peru’s proved gas reserves at Camisea (Block 88) and Pagoreni (Block 56) stand at 8.79Tcf, lower than the 11.79Tcf published in December by Pluspetrol, the Argentine operator of both blocks. Pluspetrol, however, refutes these findings claiming that new drilling projects underway will prove up reserves by 5.3Tcf to 14.1Tcf. Total investments to Camisea and Pagoreni amount to $30.16 billion during 2001-12, the company said.
COMMENT: The latest revelation on Peru’s gas reserves by GCA came as a rude shock to the government of President Alan Garcia, which has been trying unsuccessfully to quiet critics that the country has enough reserves to supply the domestic market for decades. The government has, as a result, kicked off talks with Pluspetrol over rescinding a contract approved by Alejandro Toledo’s administration (2001-06) that gas from Camisea can be used by Peru LNG. Moreover, the present royalty scheme for Camisea and Pagoreni makes it cheaper to purchase gas from Camisea than from Pagoreni, reports Lima-based daily La Republica. The government is anxious to supply piped gas to southern Peru, a hotspot of opposition to the government in Lima. The problem in Peru lies in cheap ($1-$2/MMBTU) wellhead prices, which in turn fuels rocketing consumption. Raising wellhead prices would, however, be a hard blow to the government’s already low popularity.
Below is a clip in Spanish interviewing former energy regulator Osinergmin head Manuel Dammert, who warned five months ago about Peru’s too liberal energy policy towards foreign majors.
ARGENTINA/LNG SUPPLIES
Morgan Stanley Commodities (MSC) has beaten Repsol YPF in a tender to supply the last three LNG shipments to the regasification terminal at Bahia Blanca, writes Buenos Aires daily Clarin. The LNG terminal, which is leased from Excelerate Energy during the winter months, had received a bid of $6.6/MMBtu from MSC versus $7.9/MMBtu. The regas terminal got its first shipment (135,000cm) of LNG last week. The government is studying a proposal by MSC to pay the LNG with commodities such as soya.
COMMENT: Even though it makes sense to buy a commodity at competitive prices, the surprise entry of MSC shows the ever-weakening role of Repsol and YPF in Argentina. Some analysts claim that the government of President Cristina Fernandez de Kirchner are not too happy with their banker-businessman friend Enrique Eskenazi, which they helped to purchase 14.9% of YPF last year. The latest example that Repsol is ready to relinquish YPF is news that CNOOC and CNPC of China are interested in acquiring Repsol’s Argentine subsidiary (see SAEM July 15, 2009). What do these Chinese companies see that Repsol doesn’t in Argentina?
ARGENTINA/GAS SHORTAGES
Gas supplies to some 140 companies were halted due to colder-than-average weather, writes Buenos Aires daily La Nacion. The halt in gas supplies were confirmed by distribution companies Metrogas, Gas Natural BAN and Camuzzi. Companies with interruptible and uninterruptible gas supply contracts were equally affected. The situation shows that Argentina’s gas-supply woes have got worse this winter since industrial production fell by 11% last month, according to industrial association UIA.
COMMENT: During the winter months, the government gives priority to gas consumption by households. Households consumed in July last year 148.845 million cu m (45.3% of all consumption), down 8.81% compared with 163.230 million cu m (45.3%) from a year ago, according to gas regulator Enargas. The fall in gas reserves and supplies is another example of a failed short-term energy policies of governments. Argentina’s gas supply situation has been, as a result, left to chance and weather factors.
REGIONAL/LNG
LNG consumption in South America will grow this year by 173.3% to 41 million cu m/day from 15 million cu m/day from 2008, reports PetroleoGas, citing a study by Latin American Energy Organization (CEPAL) economist, Mauricio Medinaceli Monrroy. South America’s total sendout regasification capacity will peak during 2012-18 to about 82 million cu m/day. Medinaceli Monrroy believes that while countries such as Chile, Brazil and Argentina will have more regas capacity, the gas markets in Colombia and Uruguay are too small to justify such a project.
COMMENT: The rise in importance of regasification terminals in countries such as Chile, Argentina and Brazil, are an example of the failed energy policies of the 1990s, which paved the way for energy integration among countries such as Argentina, Chile, Bolivia, Brazil and Uruguay. What are the lessons to be learned from the previous decade? Diversifying energy supplies is the only way to ensure energy independence.
BOLIVIA/TRANSREDES NATIONALIZATION
YPFB president Carlos Villegas fired back at former president of Transredes, Guildo Angulo (see SAEM Weekly Roundup July 10-17), by claiming that President Evo Morales was kept informed on the nationalization of the transporter, reports Hydrocarburosbolivia.com. “We are going to explain that the nationalization of the hydrocarbons sector has been carried out in total transparency and we have always placed before the interests of the country first,” said Villegas. “There was a team that made decisions and that rules out the possibility that decisions were made unilaterally.”
COMMENT: It is precisely these types of comments that put in the question the transparency under which Transredes was nationalized. How can Villegas speak of transparency if one cannot even find any statement in YPFB’s official website never mind that of the hydrocarbons ministry about the nationalization? Taking into account the multi-hundred-million-dollar sums that YPFB handles and the cost of nationalizing four energy companies (Transredes, Andina, Chaco and CLHB), it should not come to any surprise that in a country such as Bolivia such a situation would attract conflicts of interest, intrigue and undercurrents. Rest assured, this will not be the last we will hear about the YPFB nationalization saga of Transredes.
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ANALYSIS: Why is there keen interest in acquiring YPF?
Two Chinese energy companies, CNOOC and CNPC, are reported to be interested in acquiring Spanish major Repsol’s Argentine subsidiary, YPF. CNOOC is reportedly seeking 25% and CNPC 75% ownership of YPF for ab about $14.5 billion.
A few facts:
1) It has been known for about 2 years that these Chinese companies have been intersted in acquiring YPF;
2) Taking into account strong state intervention in Argentina’s energy markets after the economic emergency law of January 2002, why would any sane company want to invest in the country today?
3) Any company that acquires YPF will be obliged to invest billions of dollars in long-term upstream projects to halt the fall in oil and gas reserves.
The unfortunate truth about Argentina is that most companies that established themselves in the country in the 1990s would leave if they could. Repsol is one of these but it has not found a suitor for YPF that it willing to pay an adequate price for the subsidiary.
Repsol President Antonio Brufau announced in 2006 that the company is ready to relinquish under 50% ownership of YPF. In February 2008, it sold 14.9% of its Argentine subsidiary to banker-businessman Enrique Eskenazi for $2.235 billion.
SOUTH AMERICAN ENERGY MARKETS WEEKLY ROUNDUP (July 10-17): Bolivia’s Transredes nationalization raises a lot of questions
South American Energy Markets (SAEM) now publishes a weekly roundup of the top-five stories including analysis affecting energy markets in the region with links. The roundup includes all the major web dailies of South America and other websites that write about the region’s energy markets. SAEM Weekly Roundup appears on Mondays and is published by noon London time.
Monday, June 15, 2009
BOLIVIA/TRANSREDES NATIONALIZATION
Transredes president, Gildo Angulo, gave stinging testimony to the senate criticizing the government’s nationalization of the transporter (today YPFB-Transporte), writes hidrocarburosbolivia.com. YPFB President Carlos Villegas, who sacked Angulo for claiming that the state had paid an overprice of $200 million to purchase Shell’s and Ashmore Energy International’s (AEI) stake in TR Holdings, did not bother to appear in the opposition-controlled Senate with Hydrocarbons Minister Oscar Coca to answer Angulo’s charges. In the latest round of accusations, Angulo said that the state had paid about $1 billion for TR Holdings.The official price that YPFB reported to pay Shell and AEI was $241.155 million each.
COMMENT: Many times one has to look behind the news to see which are the real culprits at play. One of these could be power battles between the different players controlling the sector. One of the salvos that Angulo hurled at the Senate hearing was at Villegas, who he claimed was a moral enemy of his predecessor Santos Ramirez, who resigned in disgrace at the end of January due to corruption allegations that involved the murder of an energy executive. Another interesting question that brings to light is why is there such a stir about the Transredes nationalization while very little has been said about the nationalization of Chaco, Andina and CLHB? Probably the secret lies with AEI, the UK investment fund that moves in mysterious ways in the region.
Taking into account that there are discrepancies over how much the state actually paid for the nationalization of a company such as Transredes, it points to a lack of transparency. Whose figures should we believe? For the time being we should take all these accusations and counter-accusations with a grain of salt? Why? Because we have certainly not heard the last of Transredes’ nationalization.
BRAZIL/GAS CONSUMPTION
Brazilian gas consumption during the month of May rose by 26.5% to 41.562 million cu m/day compared with 32.855 million cu m/day in the previous month, according to Brazilian gas association Abegas. While gas usage was boosted by a rise in thermal power consumption, up 160.97% to 10.457 million cu m/day from 4.007 million cu m/day, these figures are still far behind consumption in May 2008, when it stood at 49.771 million cu m/day, a 16.49% reduction.
COMMENT: While consumption is picked up in May compared with the previous month, some analysts believe that it is still too early to talk about an economic recovery and higher consumption. Higher thermal gas output could be attributable to the winter months and the fact that Brazil’s gas-purchase agreement requires a take-or-pay clause of 24 million cu m/day. After purchasing 28-31 million cu m/day from Bolivia during July 1-3, gas exports to Brazil have fallen to 26 million cu m/day between July 4 and July 8.
BOLIVIA-ARGENTINA/LPG
Owing to a shortage of LPG cylinders in winter, Bolivia has agreed with Argentina to supply it with 30-40 tonnes of LPG (3,000-6,000 cylinders/day), reports state-owned news agency ABI. Apart from a shortage of LPG cylinders, Bolivia is also suffering from a lack of diesel and gasoline at the pumps. Prior to the announcement to import LPG from Argentina, state-owned energy company said that it would import gasoline from Chile.
Below is a speech by Vice President Alvaro Garcia Linera, who blames the shortages of LPG on people who contraband it outside of the country.
COMMENT: This is one of the great mysteries of Bolivia: It has the second-biggest gas reserves in South America after Venezuela but is suffering an energy crisis. Projects such as building a gas separation plant with PdVSA of Venezuela and Enarsa of Argentina are far behind schedule aiming to raise LPG output. LPG has been called “the gas of the poor” since it is used by low-income homes at kitchens to heat food. Bolivia uses 113,000 LPG cylinders/day, with up to 50,000 being used in La Paz and 30,000 in Santa Cruz.
BOLIVIA/LNG
Hydrocarbons minister, Oscar Coca, was quoted as saying in La Paz daily La Razon that building a liquefaction plant in Bolivia is still an option for the country. “I want to point out that all the countries are advancing in this process [to build liquefaction/regasification capacity] and the aim is to move ahead in this process,” he said.
COMMENT: Even though Hydrocarbons Minister Coca says that Bolivia is also seeking to enter the liquefaction era, Bolivia’s chances were dashed in 2003 when the Repsol-led Pacific LNG project was indefinitely shelved due to protests against plans to build the liquefaction plant in northern Chile. At the time, riots forced President Gonzalo Sanchez de Lozada to flee the country to Miami. While Bolivia was headed to become the first South American nation to export LNG, it is today one of the last.
VENEZUELA/PdVSA INVESTMENT PLAN
PdVSA head and minister of energy and petroleum, Rafael Ramirez, reiterated that the state-owned energy company’s plans to invest a record $14 billion this year were on track despite an abrupt fall in global crude prices from last year, according to a statement by PdVSA. “The investments have not stopped,” he said. Meanwhile, PdVSA is reported to have told $1.418 billion worth of debt (Petrobono 2011), or about half offered by the company, writes Caracas-based El Universal.
COMMENT: Politicians and markets sometimes do not speak the same language when it comes to countries such as Venezuela. Owing to an abrupt fall in global oil prices, financing PdVSA’s ambitious oil and gas projects have been put into doubt. The government is planning to issue on July 20 new debt to finance PdVSA’s projects. The company had a debt of $7.556 billion in the end of 2008 compared with $3.111 billion in 2007.
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If you have any feedback on today’s articles, or if there are energy industry stories you think should be covered, or need research assistance, please contact etessieri@latamreport.com.
SOUTH AMERICAN ENERGY MARKETS WEEKLY ROUNDUP: How much gas reserves does Peru really have?
South American Energy Markets (SAEM) now publishes a weekly roundup of the top-five stories including analysis affecting energy markets in the region with links. The roundup includes all the major web dailies of South America and other websites that write about the region’s energy markets. SAEM Weekly Roundup appears on Mondays and is published by noon London time.
Monday, June 15, 2009
PERU/PROVED GAS RESERVES
After the ministry of energy and mines announced this month that Camisea’s (Block 88) and adjacent Pagoreni’s (Block 56) proved reserves rose by 23.3% to 17.4Tcf from 14.11Tcf after Gaffney, Cline and Associates (GCA) had certified the reserves on request by Pluspetrol (operator) of Argentina, critics are now claiming that the reserves were “inflated” on purpose, reports Lima daily La Republica. While it is not exactly clear in the article, former Energy Minister Carlos Herrera Descalzi appears to suggest that GCA had lowered reserves from both blocks by 21% to 8.795Tcf.
COMMENT: Anyone who has been following this ongoing debate between those who claim that Peru has enough future gas reserves to supply the domestic market and those that claim the contrary, the La Republica article is a good example of the confusion surrounding the issue. Pluspetrol commissioned the certification from GCA to show that there are enough reserves but that has now apparently been cast into doubt.
The target of the groups that believe Peru does not have enough reserves is the $3.8-billion Peru LNG project, which will have online in 2010 South America’s first-ever liquefaction plant. The situation is distressing from a number of standpoints since large-scale projects are emerging without any assurances if there will be enough gas to supply them. One of these is a recent announcement by Kuntur Transportadora de Gas (see brief below), which plans to build a $1.5-billion pipeline to the south of Peru, announced that it is asking energy regulator Osinergmin to approve transportation tariffs of $2.96/MMBtu. Osinergmin is expected to decide the matter in October.
If one speaks to some of the petrochemical projects planned in Moquegua department by groups such as Petrobras and SK Corp of South Korea, their greatest concern is if there will be enough gas to supply such plants. Another factor that can also throw a monkey wrench to such plans is the political climate. Will Peru, the darling of foreign investment in Latin America, be overtaken by nationalist sentiment as has been the case in Bolivia and Argentina? This is one important variable and risk factor that investors will have to take into account when making multi-billion-dollar investments in the south of the country. But if Peru can prove up reserves soon this will help to take away some of the ammunition that the skeptics are throwing at the government.
PERU/GAS SUPPLY
Kuntur Transportadora de Gas (KTG), the company that has won a concession to build a 1,085km pipeline to the south of the country, announced that 86% of the demand in the south of the country is uncertain. The lion’s share of the future demand from the the$1.5-billion Gasoducto Andino del Sur pipeline will be thermal plants, which are seen consuming 63% in 2015 and 71% by 2020 of gas from the pipeline. The government is drafting plans to promote gas usage by future thermal plants but the crux of the problem still lies in supplies. This was expressed recently by SK Corp, which announced plans to build a $3-billion polyethylene plant that would require 80 million cu ft/day. SK Corp director, K. J. Kim, told SAEM that supplies were the big question mark.“Pluspetrol will hold a [private gas] tender in the end of the year,” he said. “Taking into account the [ongoing] debate in Peru about gas supplies, this is one of the biggest challenges [concerning the construction of the plant].”
COMMENT: One of the matters that is worrying KTG is if soaring demand to Lima will take away gas supplies from the southern pipeline. The only way that Peru can calm all sectors and opinions is by proving up reserves. However, short-sighted energy policy that aims to supply the market with cheap gas ($1-$2/MMBtu wellhead prices) spells disaster.
We saw the same matter happen in Argentina: inexpensive gas led to greater consumption, which in turn did not fuel investments because wellhead prices were so low. If Peru wants to resolve its future gas problems, it must put some backbone in its energy policy and take a longer picture. It must stop trying make everyone happy and fuel gas consumption for short-sighted political gains.
The 1.085km route of the Gasoducto Andino del Sur
BRAZIL/ECONOMY & GAS CONSUMPTION
Brazilian Finance Minister Guido Mantega sees the Brazilian economy growing by 1% in 2009 and by 4% and 5% in 2010 and 2011, respectively, reports Rio de Janeiro daily O Globo. That compares with 5.1% growth in 2008 and 5.7% in the previous year, according to IBGE. Brazil officially entered into recession when it reported for a second-consecutive quarter a contraction of 0.8% in the first quarter versus the previous one. It is the first time that Brazil’s economy is in recession since 2003. Mantega said that the countries that form part of Bric (Brazil, Russia, India and China) will spearhead growth after the global economic crisis ends. “Bric will lead economic growth in the next years,” he said.
COMMENT: What does Brazil’s humble economic growth in 2009 and greater expansion in 2010 and 2011 mean for gas consumption? One matter is for certain – it does not raise a very encouraging picture for Bolivia, which exported on average 30.917 million cu m/day last year. Petrobras gas and energy director, Maria das Gracas Foster, said recently that the economic crisis has forced Brazil to have a surplus of 20 million cu m/day. This was confirmed by a plunge in gas imports from Bolivia (see table below) due to lower gas consumption by industry and thermal power plants. According to gas association Abegas, industry consumed 27.6% less gas in April to 19.255 million cu m/day versus 26.585 million cu m/day a year ago, while thermal plants have seen a reduction of 70% to 4.007 million cu m/day.
If Brazil has such a big gas surplus when the economy shrinks by 0.8% as happened in the first quarter, how much could consumption grow if it expanded by 1%? Taking into account that Brazil has more gas than it needs, imports from Bolivia will probably not exceed this year 24 million cu m/day, the minimum stipulated in the take-or-pay of the 1999-2019 gas purchase agreement . This will spell hard times for Bolivia, which received last year about half of its export earnings from gas.
If the Brazilian economy starts to expand by 4%-5% annual rates, it will mean higher imports from its western neighbor. However, Brazil’s gas output and consumption have grow rapidly as we saw last year. Gas production rose by 28,25% to 34.5 million cu m/day from 26.9 million cu m/d in 2007, while consumption rose by 17.75% to 65 million cu m/day from 55.2 million cu m/day.
While it is clear that Brazil needs Bolivian gas to plug demand, the question is how much will it need from its neighbor.
Gas imports by Brazil from Bolivia during October 2008-April 2009 in millions of cubic meters per day
Month Volume
October……………….31.194
November……………29.496
December…………….25.583
January……………….20.407
February……………..20.083
March…………………19.858
April…………………..20.979
Source: Agencia Nacional do Petroleo
ARGENTINA/ENERGY SHORTAGES
Eight former energy secretaries met with Argentine lawmakers to warn them about the country’s ever-worsening energy situation. Jorge Lapena, who served as energy secretary during 1986-88, told SAEM that Argentina could avert a crisis “in 7-8 years” if it took onboard its recommendations. One of the matters that Lapena would change if he were appointed energy secretary would be to draft a new hydrocarbons law and assure energy companies that Argentina will respect contracts signed with energy companies. “If you look at a map of Brazil and the Malvinas (Falkland Islands) there is a lot of exploration going on,” he said. “If we look at offshore Argentina it is almost negligent.”
Below is a video clip in Spanish with Daniel Montamat, former energy secretary (1999-00) and YPF president (1987-89).
COMMENT: This is the second time this year when the eight energy secretaries have come out in public to raise concern over the energy situation. The first time was in April at the Faculty of Engineering of Buenos Aires, when their appearance was canceled, apparently from government pressure, at the last moment.
The proposals by the energy secretaries is sensible. It asks for greater incentives to energy companies to explore and invest in infrastructure projects. More effective regulation is also mentioned in the proposal. One of the most important of these is changing the hydrocarbons law, which dates to 1967. The law is “confusing and outdated,” according to Lapena.
Argentina has already lost its self-sufficiency in gas and oil will soon follow. When this happens, Argentina’s balance-of-payment problems will start to turn ugly. Statistical agency INDEC announced that the fiscal surplus had tumbled in May by 85% to 914.4 million pesos ($247 million) from 6.026 billion pesos a year ago.
The government of President Cristina Fernandez de Kirchner does not appear to be worried about the situation since she does not believe the country is suffering from an energy crisis in the first place. Such a short-sighted stance shows that matters will not change on the government energy policy front anytime soon.
BOLIVIA/TRANSREDES
It only took a few days for YPFB Transportadora (formerly Transredes) head Guido Angulo to be sacked after he accused the president of the state-owned energy company, Carlos Villegas, of mishandling and alleged corruption in Transredes’ nationalization when he was hydrocarbons minister last year, writes Santa Cruz daily El Mundo. Angulo had accused his former boss of “overlooking” a $200 million debt when YPFB paid $250 million to Shell and Ashmore Energy International to purchase the transporter. Villegas denied Angulo’s accusations and said that YPFB paid $50 million more in order to avoid going to international arbitration.
COMMENT: YPFB is a miniature picture of the political and economic problems Bolivia faces: mismanagement, corruption allegations and a lack of qualified personnel and transparency. Already the disgraceful exit of YPFB’s former head Santos Ramires at the end of January was a big blow to confidence.
The very problems that Bolivia’s energy sector underwent during the 1990s and early 2000s due to “neoliberal” policies are threatening to undermine it again. If one studies closely the opening-up of countries such as Bolivia in the previous decade, it would be naive to claim that privatization and deregulated markets were problem-free. The issue at hand, I believe, was the lack of a long-term comprehensive energy policy, proper regulation and qualified people to overlook the sector. Bolivia faces the same challenges and threats today but under a new government.
So sit back, read the stories from the local media on embattled YPFB with a grain of salt. What you see behind the news is a much scarier picture of the threats facing Bolivia: political bickering, lack of transparency and politicking especially during an election year – the seeds of Bolivia’s energy sector’s present and future turmoil.
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If you have any feedback on today’s articles, or if there are energy industry stories you think should be covered, or need research assistance, please contact etessieri@latamreport.com.
Repsol denies relinquishing ownership off YPF
Repsol denies that there are any plans by the Spanish major to sell its majority interest in YPF as reported on Tuesday by Buenos Aires business daily, Cronista Comercial. Buenos Aires daily La Nacion quoted a Repsol official in Madrid as saying that “there is no news here about our plans to sell the company in Argentina.”
The company said that its CEO, Antonio Brufau, will travel to Argentina next week only to oversee YPF’s operations in Argentina.
COMMENT: Repsol has been seeking to sell up to 25% of the company in the market since 2006. However, poor market conditions have impeded such a sale. Taking into account Argentina’s regulatory nightmare and the government’s capricious energy policy, it is very difficult to grasp what is going on in the country and what Repsol’s final plans are with YPF.
The 14.9% sale of YPF to banker-businessman Enrique Eskenazi last year is a clear indication that Repsol wants to reduce its risks in Argentina.
South American Energy Markets 