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SOUTH AMERICAN ENERGY MARKETS DAILY ROUNDUP (April 15, 2009): Repsol announces commercial viaiblity of the Piracuca field in Brazil’s Santos Basin

April 15, 2009

South America Energy Markets (SAEM) will begin a daily roundup of the top-five stories 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. I aim to publish SAEM Daily Roundup from Monday through Friday by noon London time.

Wednesday, April 15, 2009


Spanish energy major Repsol announced the commercial viability of “another” huge field in the promising offshore Santos Basin. The company said that the operator Petrobras (67%), estimates preliminary in-place volumes totaling 550MMBOE of light crude and natural gas at Piracuca well (BM-S-7), located 218km off the Brazilian state of Sao Paulo at a depth of 3,967 meters. Alongside other huge discoveries such as Mexilhao, Jupiter and Tupi, the big question facing the operators is cost and the development of global crude prices. One skeptical analyst said that many of the discoveries made in the ultradeep waters of the Santos Basin was like discovering gigantic oil and gas reserves on the moon. “How do you bring such oil to markets and what will be the cost?” he said.  Repsol has a 37% stake in the Piracuca.


Economy Ministe Luis Arce states that royalties from gas and oil will decline by 17% this year, according to Tarija daily El Pais. The minister was rebuffing speculation that the fall in royalties could total as much as 49%. “The fall in hydrocarbons revenues to the country represent 17% fall with was approved in the budget,” said Arce. “This is due to the global financial crisis, but will not reach 49% as some analysts have suggested.” Owing to a fall in in global energy prices, Bolivian municipal association SIAM said that revenues from the IDH tax scheme, which was created under the new hydrocarbons law of 2005, would  retreat by 30%-40% (see South American Energy Markets Daily Roundup, April 14, 2009).


Contrary to previous Southern Hemisphere winters, Brazil will not be scrambling for gas supplies since the country, which is suffering from an economic downturn, has surpluses of Bolivian and domestic gas, Joao Milanez, a Rio de Janeiro energy analyst, told SAEM. “Due to the fall in output, gas demand used by thermal plants and industries has retreated,” he said. Industry and thermal plants, which consume the lion’s share of the country’s gas, saw usage plummet in February by 27.7% to 18.377 million cu m/day and 65.1% to 5.312 million cu m/d from a year ago, respectively.


After a tug-of-war in  Congress over the new electoral law, which was passed after Bolivians approved in January by referendum a new constitution, Bolivia will hold presidential elections on December 6, writes state-owned news agency ABI. Morales, who signed the bill into law, said that this was “a day when the Bolivian people continue to make history.” He gave his thanks to about 3,000 labor leaders in Bolivia, Spain and Argentina that had declared hunger strikes to speed up passage of the law. With elections about 8 months away, some analysts see the government taking its eye off its troubled upstream sector to concentrate on campaigning. Moreover, a sharp fall in gas prices that Bolivia exports to Brazil and Argentina will not make life easy for the MAS (Movement Towards Socialism) government (see South American Energy Markets Daily Roundup, April 14 & 8, 2009).


Four reports by private consultancies claim that Argentina is “technically” in recession, writes daily Diario Rio Negro. Orlando Ferreres y Asociados cites a 2.4% contraction of the economy in March compared from a year ago. Since November, the economy continues to shrink between 3% and 5%, according to the consultancy. Industrial output alone retreated by 9%. Consultora M&S claims that the Argentine economy shrunk in the first quarter by 1.8% and in the fourth quarter of 2008 by over 4%. Rubenstein y Asociados and the Universidad de Salvador also said that economic growth had shrunk in the first and previous quarter.  Nestor Kirchner, the husband of President Cristina Fernandez de Kirchner, said with an eye on the June 28 mid-term elections that there were definite signs that industrial output and the economy were starting to recover.

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