SOUTH AMERICAN ENERGY MARKETS DAILY ROUNDUP (April 28, 2009): Engel España announces $350m hydropower investment in Peru
South American Energy Markets (SAEM) publishes 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. SAEM Daily Roundup appears from Monday through Friday and is published by noon London time.
Tuesday, April 28, 2009
Power company Engel España announced that it will invest $350 million in the construction of a hydropower plant in Cusco department, reports Lima daily La Republica. Engel España director, Victor Marsal, who met with President Alan Garcia, was optimistic about investment opportunities in Peru. “Our intention at the moment is to invest in the energy sector and we understand that energy and hydropower are important for Peru,” he said. COMMENT: Together with Chile and Colombia, Peru has been seen as the darling of the foreign investment community. While some countries such as Argentina and Bolivia are trying to get energy companies to invest in long-overdue energy projects, Peru continues to attract investment. From a foreign investment standpoint, clear rules, regulation and a return in investment are vital. From a Peruvian perspective, it is hoped that these investments will benefit the country in the long term and not follow Argentina’s ruinous example, which was the IMF darling of the 1990s.
An auction by Petrobras for short-term gas supplies in May saw a 36% fall in prices to $4.20/million BTU, reports Gasbrasil.com, citing Rio de Janeiro daily O Globo. Gas auctioned for the month of June was sold at $4.25/million BTU, a 35% fall. The amount of gas auctioned in May represents 37% of the gas (3.24 million cu m/day) that was offered. COMMENT: The impact of the new gas law, which was signed into law in March by President Luiz Inacio Lula da Silva, appears to be making a positive impact. Even so, some analysts see gas tariffs pricing in the country lacking clear benchmarks and government policy.
State-owned energy group Petrobras flares $5 million/day and is seen growing by 29% in 2009 due to lower consumption by industry and thermal-power plants, reports gas association Abegas, citing Folha de Sao Paulo. In February alone, Brazil flared 8.1 million cu m/day. Petrobras said that most of the flaring took place where oil is produced. COMMENT: One of the surprising aspects of Brazilian gas production is the high amount of flaring and reinjection. Out of a total output of 58.951 million cu m/day in 2008, 5.971 million cu m/day of the gas was flared and 10.634 million cu m/day reinjected. That compares with 5.331 and 9.574 million cu m/day, respectively, in 2007. Brazil should find a better way to bring gas to markets so that sectors such as industry could benefit from more competitive prices.
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