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

OGUK updates guidelines for well abandonments

07/23/2015

Oil & Gas UK has released updated guidelines for abandonment of wells, including cost estimates.

MARKET WATCH: Oil futures plunge below $50/bbl

07/23/2015

Light, sweet crude oil futures prices plunged lower to settle below $50/bbl on the New York market on July 22.

Cornyn calls for more US energy exports in wake of Iran deal

07/23/2015 US Senate Majority Whip John Cornyn (R-Tex.) said it would be geopolitically, economically, and strategically absurd for the US to maintain outmode...

Post-sanctions Iran initially won’t shake markets up, executive says

07/22/2015 Iran’s resumption of oil and gas exports, once sanctions are lifted under the recently negotiated nuclear limits agreement, probably won’t flood gl...

UAE easing gasoline, diesel price controls

07/22/2015

The United Arab Emirates is moving prices of gasoline and diesel toward deregulation effective Aug. 1.

MARKET WATCH: NYMEX crude oil prices gain on expected weekly supply decline

07/22/2015 Light, sweet crude oil prices settled modestly above $50/bbl on the New York market on July 21, gaining support from a stronger dollar and from exp...

BLM extends comment period for Colorado oil, gas project’s EA

07/21/2015 The US Bureau of Land Management has extended the comment period for a preliminary environmental assessment (EA) of a proposed oil and gas project ...

Study looks at gas transmission, storage sites’ methane releases

07/21/2015 A comprehensive study of US natural gas transmission and storage operations found total methane emissions from 2,292 on-site measurements, addition...

MARKET WATCH: NYMEX crude oil price for August briefly dips below $50/bbl

07/21/2015 Light, sweet crude oil prices briefly dropped below $50/bbl on the New York market on July 20 for the first time since April but regained some supp...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

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
Available Webcasts


Driving Growth and Efficiency with Deep Insights into Operational Data

When Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST



On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


Emerson Micro Motion Videos

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