Skip to content

SOUTH AMERICAN ENERGY MARKETS WEEKLY ROUNDUP (July 10-17): Bolivia’s Transredes nationalization raises a lot of questions

July 10, 2009

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.

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 WEEKLY ROUNDUP: How much gas reserves does Peru really have?

June 21, 2009

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.

plano1

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.

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.

Repsol denies relinquishing ownership off YPF

June 17, 2009

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.

SPOTLIGHT: Will YPF be nationalized?

June 16, 2009

There have been some rumors as of late in Argentina about the government nationalizing YPF due to growing differences between banker-businessman Enrique Eskenazi. An article published today in Buenos Aires business daily El Cronista suggests that over 50% of the company could be purchased Argentina.  Such an announcement could be made this week when Repsol YPF CEO Antonio Brufau visits Argentina.

The transfer of majority control from Repsol could happen before the June 28 presidential elections, the daily said citing sources close to the government.

Grupo Petersen, a company owned by Eskenazi, acquired 14.9% of former state-owned energy company YPF last year for $2.235 billion with an option to purchase a further 10%. Repsol has been trying since 2006 to sell up to 25% of the company to the local market as well. Poor market conditions have impeded such a spin off.

Does it make economic sense to return YPF into Argentine ownership? Even if Eskenazi is an Argentine native he represents a private company in which financial pragmatism must guide it rather than nationalism during an election year. Another question we can ask is what type of a company is Argentina purchasing after YPF was 99.9% privatized in 1999 for a hefty $15 billion?

A recent stock filing in April, shows conclusively that YPF has become an impoverished company under Repsol ownership. Argentina’s biggest oil and gas company’s proved reserves as of end-December continued their downards spiral to 3.099Tcf. That is a 16.4% fall from the previous year and a plunge of 22.8% versus 2006 (4.015Tcf).

In 2000, when Argentina’s proved gas reserves peaked at YPF’s reserves accounted for about a third of Argentina’s total. By 2007, however, Argentina’s and YPF’s reserves had plummeted by 43.16% and 55%, respectively.

SOUTH AMERICAN ENERGY MARKETS WEEKLY ROUNDUP (June 15-21): Bolivia’s troubled YPFB is embroiled again in an alleged corruption scandal

June 15, 2009

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/NATIONALIZATION WOES

After the sacking of YPFB president Santos Ramirez in the end of January due to corruption allegations that involved the murder of an energy executive, the state-owned energy company is facing new accusations of alleged corruption and financial mismanagement. YPFB’s transport division head, Gildo Angulo, denounced the company president Carlos Villegas of overpaying $200 million for transporter Transredes when he was hydrocarbons minister, writes Los Tiempos of Cochabamba. Angulo said that when the state paid $250 million to nationalize the company  last year, it did not take into account the $200 million debt it had.  COMMENT: How can anyone buy a company or nationalize it without taking into account such an important matter? I am certain that Villegas must have known but accepted to assume Transredes’ debt. Usually in Bolivia one has to do a bit of searching behind the news to find out what is really going on. Angulo’s accusations could be part of a wider power struggle to oust Villegas from YPFB, a company which has the onerous task of running and overseeing Bolivia’s energy sector, is suffering from a huge credibility-leadership vacuum after Ramirez was sent to jail.

The undercurrents and power struggles in YPFB must be accentuated by the inefficiency of the company, its lack of financial resources and, most importantly, by its chronic shortage of qualified staff.  As everyone knows, energy in general and gas in particular are huge political issues in Bolivia that can send the country into turmoil.

BRAZIL/LIQUEFACTION PLANT

Petrobras’ energy and gas director, Maria das Gracas Foster, was quoted as saying in Rio de Janeiro daily O Globo that the energy company is studying plans to build a liquefaction plant in the next decade 300km offshore in the promising Santos Basin. Gracas Foster said that the LNG from the plant could be earmarked for the domestic and export market.  COMMENT: It has been known for some time that one of the ways that Petrobras could tap the enormous gas reserves in the Santos Basin is by building an offshore liquefaction terminal. This makes technical sense because, apart from extracting the gas from ultradeep waters, there would be the logistic challenges of transporting it to shore by pipeline and compressor stations.

Energy self-sufficiency is vital to Brazil since many of the top energy executives remember to well how the country fell prey to the oil crises years of the 1970s. The country has made an aggressive push to reduce reliance on oil with the help of ethanol. Therefore, whenever there are political rumblings in Bolivia, which can put into jeopardy its gas supplies from the landlocked country, there is great concern. Brazil, which imports about half of its gas from Bolivia,  is today self-sufficient in oil and it will be only a matter of time when gas will follow.

The only big questions about drilling in the pre-salt crust of the Santos Basin is the price of global energy prices. Tapping the oil and gas wealth in ultradeep waters will be a lucrative undertaking requiring advanced technology.

ARGENTINA-BOLIVIA/GNA GASLINE

Argentine state-owned energy company Enarsa and its Bolivian counterpart, YPFB, announced their commitment to building the GNA gasline, which aims to transport 16 million cu m/d of gas to Argentina next year, reports Buenos Aires daily Clarin. The GNA was originally launched in 2004 by Techint and the Argentine government. Supply and political uncertainty in Bolivia, however, has kept the 1,500km line shelved. COMMENT: There are two matters that make this affirmation in Clarin, quoting Bolivian Hydrocarbons Minister Oscar Coca, odd. Can such a long pipeline be operational next year even if “feasibility studies are [still] being carried out,” according to Coca? The original pipeline was supposed to extend from Salta province in northeast Argentina to Santa Fe and link up with the turnkline grid. Today we do not have the faintest idea what GNA pipeline is the Argentine and Bolivian government are speaking of. Is it the old project or a much watered-down version that will extend from the western province of Salta to Misiones, in the northeast?

Another big question is if the Argentine government has the capital to embark on such a project. The original GNA line was seen costing about $2 billion. Since there are hardly any markets for gas in provinces such as Misiones, Corrientes, Chaco and Formosa, why does the government want to build a pipeline to these provinces in the first place? I think we are going to hear a lot of  announcements by Argentine and Bolivian authorities in the future about when construction of the line will start.  It is highly doubtful, however, that construction will ever begin.

VENEZUELA/PdVSA WOES

President Hugo Chavez denied in Spanish news agency EFE that the state-owned energy company, PdVSA, was on the verge of bankruptcy. He said that the lie was fabricated by the “bourgeoisie”  to show to the people of Venezuela that the “socialist project” in Venezuela was impossible to attain.  Chavez said that PdVSA became last year the fourth-largest oil company in the world from eighth place the previous year. “The real truth,” he said, “is its role in the world but the oligarchic media aims to hide this fact. What is in bankruptcy is capitalism.” COMMENT: The first question one must ask if a state-owned company in Venezuela can become bankrupt. If it has cashflow problems due to its hefty investments inside and outside the country in the face of lower oil prices, it points to a growing insolvency.

Chavez is not the first Venezuelan head of state to ride on high global oil prices. After Venezuela profited handsomely from high oil prices in the 1970s, it went into crisis the following decade as global prices plummeted. So it is not a question of PdVSA going belly up but the political impact that oil prices will have on Chavez’s government. His future, as that of his socialist Bolivarian revolution, hinges on capitalist laws such as supply and demand.

PERU/GAS RESERVES

Gaffney, Cline & Associates (GCA) have certified Camisea’s and Pagoreni’s proved gas reserves at 17.4Tcf, reports state-owned news agency Andina, quoting Peru’s ministry energy and mines. GCA said that Camisea alone has minimum and maximum proved reserves of 13.6Tcf and 18.5Tcf, respectively. Reserves at adjacent Pagoreni have been estimated at about 3Tcf.  “We are doing everything necessary for the domestic market to be supplied [with gas],” Gustavo Navarro, hydrocarbons division head of the ministry of energy, was quoted as saying in the local media. COMMENT: In the face of rocketing demand, the best present that can be made to the government of President Alan Garcia is more proved reserves. Skeptics and political opponents of the government have raised a big debate in Peru over whether there is enough gas to supply the Peruvian market in the future. Some lobby groups such as the engineering association CIP have asked the government to halt future exports through Peru LNG in order to ensure supplies.

One of the biggest problems in the Peruvian gas market are cheap wellhead prices ($1-$2/MMBtu) that fuel consumption and energy inefficiency by thermal plants. During 2004-08, gas consumption has rocked by 40%. Gas transporter TGP is presently expanding throughput capacity of the Camisea-Lima pipeline to 450 from 290 million cu ft/day. At present wellhead prices it will not be long before TGP will be obliged to raise throughput capacity again.

The present situation reveals poor energy planning. Can gas in Peru bring the same political hiccups as in Bolivia? This is a possibility. Looking at Peru’s history in the past fifty years, nationalism and political turmoil are no stranger to the country.

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 Weekly Roundup will be published from Monday

June 15, 2009

South American Energy Markets will begin to publish from today a weekly roundup by noon London time.

The responses to the daily roundup were encouraging. However, since this is a FREE service that requires time and energy, I have decided that writing a weekly roundup is more realistic. It will also give me time to respond to some of your lengthy emails and post other neat stuff that is affecting the region’s energy markets.

Donations would also be a good incentive for me to publish more analysis and news.

If you have any comments or requests, get in touch by email at etessieri@latamreport.com.

Many thanks for your kind support.

SOUTH AMERICAN ENERGY MARKETS DAILY ROUNDUP (May 8, 2009): Oil workers’ strike in Argentina halts all gas exports to central Chile

May 8, 2009

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.

Friday, May 8, 2009

ARGENTINA-CHILE/GAS SUPPLIES

An oil workers strike in Argentina has caused gas supplies to central Chileto be halted altogether from Thursday, writes Santiago daily El Mercrurio. Chilean energy officials are hopeful that gas supplies from Argentina will be resume on Friday or Saturday. Gas supplies to central Chile on April 7 from Argentina were down 89% to -9.3 million cu m/day, according to the latest data supplied by energy regulator CNE. COMMENT: The good news is that Chile will inaugurate in June the Quintero regasification plant. The bad news is that dry gas supplies to the country from Argentina will worsen, especially during the critical winter months. 

PARAGUAY/HYDROCARBONS DISCOVERY

CDS Oil & Gas, which has been prospecting for hydrocarbons in far-flung western Paraguay, announced the discovery of 243 million barrels of oil and 161 billion cu ft of non-associated gas. The London-based investment fund has been exploring for oil and gas in Paraguay since 2005. The gas reserves in the Gabino Mendoza block form part of the gas-rich San Alberto reservoir in Bolivia. COMMENT: Gas will be more difficult for hydrocarbons-poor Paraguay to develop than oil. Sizeable infrastructure investments are needed to bring the gas from Gabino Mendoza to cities such as Asuncion and Vallemi. Oil will help the country reduce its 100% reliance on imports.

ARGENTINA-BOLIVIA/GAS SUPPLIES

(Originally published on May 7, 2009) Just like Brazil announced this week (see South American Energy Markets Daily Roundup, May 5, 2009), Argentina has also raised gas imports from Bolivia to 7 million cu m/day from an average of 4 million cu m/day, reports Salta-based daily El Tribuno. Argentina was purchasing a few months ago an average of 1.8 million cu m/day from its northern neighbor. YPFB president, Carlos Villegas, said that gas exports to Brazil have risen to 24 million cu m/day from 18 million cu m/day. COMMENT:  The announcement by Argentina and Brazil comes as a lifesaver to the Bolivian government. Gas accounts for about half of the countries export earnings.  Even so, the plunge in global energy prices will mean mean that Bolivia will generate about half this year of the $3.2 billion gas-export revenues it received in 2008.

BOLIVIA/REGULATION

(Originally published on May 7, 2009) Due to the new constitution (CPE), which was approved in January by a nationwide referendum, Bolivia will restructure its regulatory agencies such as the one that oversees the hydrocarbons sector. Bolivian industrial association CNI expressed concern recently about the situation, writes La Paz daily La Prensa.  “…until now we do not know if there will exist another regulatory scheme, nor how it will function in the country’s energy sector,” said Daniel Sanchez, CNI president. “Industry is dependent on the availability and continuity of energy [supplies and] for this reason we are worried about the future…” COMMENT:  One of the consequences of the nationalization of the hydrocarbons sector in 2006 has been regulatory uncertainty. As long as steps by the government cause greater confusion on this front, energy companies will be less inclined to invest in the upstream sector. Bolivia drilled in 2008 only three exploratory and production wells. 

BOLIVIA/GAS GRID

(Originally published on May 7, 2009) YPFB president Carlos Villegas said that the at the end of May the long-awaited expansion of the Gasoducto Carrasco-Cochabamba gasline will be finished, reports state-owned news agency ABI. The pipeline will raise gas supplies to 22 million cu ft/day from 18 million cu ft/day for industries in Cochabamba and La Paz. The project has cost YPFB $170 million. The pipeline has a throughput capacity to 95 million cu ft/day. COMMENT: Bolivia’s domestic consumption in March was a mere 5.61 million cu m/day, down from 6.12 million cu m/day in December. Infrastructure projects are needed to increase gas supplies for sectors such as industry. Taking into account YPFB’s problems, the million-dollar question is if the state-owned energy company has the resources to increase burgeoning demand in the country.  

PERU/GAS SUPPLIES

In a brief published yester day on rocketing demand and cheap wellhead prices Peru, SAEM had the opportunity to speak to an analyst in Lima on the gas situation in the country. One of the points that Wiston Peña of Macroconsult made was that — contrary to media reports —  Peru has enough gas to supply the domestic market during the next 20 years. “The problem is not that we do not have [enough] gas [reserves],” he said. “The issue at hand is gas infrastrcture [to supply the market from the Camisea fields].” When Pluspetrol, the operator of the Camisea upstream project, came to Peru in 2000 there did not exist a gas market. “Gas had to be cheaper than coal [in generating electricity],” he said. During 2004-08, gas consumption in Peru has rocketed by 40%. Expanding gas infrastrcture does not only mean raising the throughput capacity of the Camisea-Lima pipeline, but raising the capacity of the gas-fractioning plant at Malvinas (Camisea) and the pipeline that transports gas liquids to the processing plant in Pisco. He agrees that one way to curb consumption  is to raise cheap $1-$2/ million BTU wellhead prices. 


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.