Pinon urges a closer look at the rest of the Western Hemisphere

Jorge R. Pinon does not want US politicians to become so concerned about Venezuelan President Hugo Chavez or a possible Chinese presence in Cuba that they overlook the rest of the Western Hemisphere.

Jorge R. Pinon does not want US politicians to become so concerned about Venezuelan President Hugo Chavez or a possible Chinese presence in Cuba that they overlook the rest of the Western Hemisphere.

Excluding Canada, the area supplies 32% of the United States' total oil and gas imports, he said during a recent presentation to the US Energy Association. And he thinks Mexico could face bigger problems than Venezuela.

"It does not have Venezuela's integral and inherent resources. What's more, [national oil company Petroleos Mexicanos] has never learned how to behave in an entrepreneurial way. From a stewardship standpoint, it doesn't know how to take the country forward," Pinon said.

A former executive with Shell Oil Co., Amoco Corp. and BP Plc before his retirement in 2003, Pinon said that major oil companies have four tools in their toolbox when they negotiate with South and Latin American governments and national companies: capital, technology, know-how and stewardship. "Some of these countries have lost their stewardship values," he said.

Continuity matters

"Regime continuity has become very important in the last five years. Majors are willing to play by the rules, but they don't like to see the rules change," said Pinon, who now is an international energy consultant and an energy fellow with the University of Miami's Center for Hemispheric Policy.

When that happens, some majors will walk away. Others will try to stick it out because the country has substantial reserves and its national company could help it rebound when the governmental regime changes, he continued.

Pinon said it's important for US policymakers to recognize that a national oil company can operate in a more entrepreneurial style than the government. That essentially has made Petroleo Brasileiro SA one of the hemisphere's 800-pound gorillas, he maintained.

"It can't seem to do anything wrong. But it face challenges including a 5-8 year development timeframe and lack of equipment. Still, I think Petrobras and [President Luis Inacio Lula da Silva] could be the wedge the US is looking for against [Venezuelan President Hugo Chavez and Petroleos de Venezuela SA]," Pinon said.

Venezuela's potential

If Brazil could be considered an 800-pound gorilla, Venezuela remains the 1,600-pound player because its resources are considerable, he said. Chavez has diverted PDVSA from its core function ("Here's an oil company whose Houston office is ordering powdered milk and medicine.") and production from its conventional oilfields has been neglected, but Pinon said this might not last. "If the Venezuelan people under a democratic process decide to change their government, PDVSA's situation will change very quickly," he indicated.

Pinon said that he also hopes US companies get the opportunity to enter Cuba, which has attracted several firms from other countries. "Its production sharing agreement is awesome. It's more commercial than Venezuela's or Ecuador's," he maintained. The US Geological Survey estimates there could be 4.2 million bbl of oil there, he said.

As for a Chinese presence in Cuba's oil industry which had several US politicians upset a few weeks ago, Pinon said that Sinopec Corp. has a single onshore lease and it has hired some French firms to do some seismic work there.

"I hope Cuba is not used as a political tool. It potentially has 300,000-400,000 bbl a day of production down the road. But its internal demand under a free market government could be 350,000 b/d. It will be a good place to invest," he said.

Contact Nick Snow at nicks@pennwell.com

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