Experts see changes ahead for Mexico, Brazil, Venezuela

Three major Latin American oil-producing nations face different near-term policy prospects, ranging from reforms in Mexico to possible retreat in Brazil to near-total uncertainty in Venezuela, experts said during a conference on Energy in the Americas.

“As we’re looking ahead to what might happen in these countries, what we’re really talking about is where they are headed politically,” said Jeffrey Davidow, a former assistant US Secretary of State for Western Hemisphere Affairs who now is a senior counsel at The Cohen Group as he prepared to introduce speakers during DLA Piper LLC’s 2013 Global Energy Summit on Oct. 22.

Mexico is poised to pass energy reform legislation by yearend 2013, Brazil may be starting to retreat from changes begun when it partially privatized national oil company Petroleo Brasileiro SA (Petrobras), and the government of Venezuela “is counting its days” yet remains attractive to some foreign oil companies, Davidow said.

Changes proposed earlier this year by Mexico President Enrique Pena Nieto “take us back to conditions similar to what was in place immediately after nationalization in 1938,” said Duncan Wood, director of the Mexico Institute at the Woodrow Wilson Center for Scholars. “This is a matter of both energy and financial security.”

He said national oil company Petroleos Mexicanos (Pemex), which previous administrations made a cash cow to fund other programs from its oil revenue, would be allowed to keep more of its profits and enter into a competitive environment. Outside firms would be allowed to invest in exploration and production for the first time since 1960 with either production or profit-sharing agreements returning income to the central government instead of Pemex, Wood said.

Conducive to reform

“Earlier reform attempts failed in part because politicians responded to oil deep connection to the national mentality,” Wood explained. “It wasn’t public opinion which held reform back, but elite opinions and interests. The political landscape we see now is highly conducive to oil reform, largely because changes are taking place across the economy.”

Wood said he also expects Mexico’s legislature to pass energy reforms before yearend and send them to the country’s states for ratification early next year. The next step—development of production or profit-sharing agreements—will be harder and take more time, he predicted.

Private firms have said they await more details before considering any investments, and have asked questions about how big a share the country would receive, what roles regulators would play, how the new tax regime would be structure, and whether the deals would share productions or profits, Wood said. “The auction yesterday on Brazil’s presalt showed Mexicans what could happen in the process doesn’t work,” he added.

Brazil changed auction terms for offshore oil and gas resources because it expects the presalt structures in the offshore Santos basin to be unusually prolific, according to Bruno Chevalier, a managing director of independent power supplier Eneva.

The government tried to portray this first lease sale as a success, but received only a single bid from a consortium that included Petrobras, Royal Dutch Shell PLC, Total SA, China National Petroleum Corp., and China National Offshore Oil Corp. (OGJ Online, Oct. 21, 2013).

Backward step

Brazil’s partial privatization of its national oil company was successful because it brought in outside investments to help it develop its prospects, Davidow said. “Several multinational companies stayed away from the subsalt auction because it looked like a step backward toward protectionism,” he observed. “Brazil may be on the verge of making a mistake.”

Chevalier said Eneva plans to use natural gas to generate power so the gas would not be stranded. “We are finding gas onshore, and shale gas also is a possibility,” he said. “Next month, Brazil’s oil and gas agency plans to hold its first dedicated auction for both in seven basins around the country.”

Venezuela has grown increasingly unsettled following Nicolas Maduro’s close election to succeed the late Hugo Chavez as president, said David Voght, managing director of consulting firm IPD Latin America. “The society is polarized, the electorate is divided, and Maduro must deal with heavy inflation, his legitimacy, a bad leadership team, growing criminal activity, and a divided military,” he said.

Yet some multinational oil companies that left during Chavez’s presidency are considering coming back because Venezuela’s 297 billion bbl of crude, as measured by Ryder Scott Co. LP, makes its resources bigger than Saudi Arabia’s, Voght continued. National oil company Petroleos de Venezuela SA’s production is increasing, but only with foreign companies’ help, he said.

“In the Orinoco belt, there are several large projects with outside companies,” Voght said. “Yet PDVSA is having to import about 100,000 b/d of gasoline and other light products to dilute the heavy crude for export. It’s still very subject to governmental whims. PDVSA probably won’t achieve its goals because there aren’t enough human resources in it. It is moving, however.”

Contact Nick Snow at nicks@pennwell.com.

Related Articles

Shell cuts $15 billion in spending for 2015-17

01/30/2015 Royal Dutch Shell PLC has curtailed more than $15 billion in potential spending over the next 3 years, but is not “not overreacting to current low ...

Victoria extends drilling, fracing ban

01/30/2015 The new Victorian Labor government of premier Daniel Andrews has extended the coal seam gas (CSG) exploration and hydraulic fracturing ban in the s...

Chevron’s $35 billion capital budget down 13% from last year

01/30/2015 Chevron Corp. will allocate $35 billion in its capital and exploratory investment program for 2015, including $4 billion of planned expenditures by...

US Senate passes bill approving Keystone XL pipeline project

01/30/2015 The US Senate has passed a bill approving construction of the proposed Keystone XL crude oil pipeline by a 62-36 vote after 3 weeks of debate. Nine...

Oxy cuts capital budget by a third

01/30/2015 In the midst of falling oil prices, Occidental Petroleum Corp., Houston, expects to reduce its total capital spending for 2015 to $5.8 billion from...

MARKET WATCH: NYMEX natural gas prices drop after storage report

01/30/2015 US natural gas closed at its lowest price in more than 2 years on the New York market Jan. 29 following the government’s weekly gas storage report,...

Pennsylvania governor reinstates state forest drilling moratorium

01/29/2015 Pennsylvania Gov. Tom Wolf (D) signed an executive order fully reinstating a 2010 moratorium on new oil and gas leases in state forests and parks. ...

PwC: Low oil prices might drive surge in restructuring in 2015

01/29/2015 Mergers and acquisitions (M&A) in the oil and gas industry hit 10-year highs in terms of deal value and volume in 2014, according to a report f...

DOE could meet 45-day LNG export decision deadline, Senate panel told

01/29/2015 The US Department of Energy would have no trouble meeting a 45-day deadline to reach a national interest determination for proposed LNG export faci...
White Papers

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected