Colin D Gordon

The global recession, the volatility of oil prices and general geo-political uncertainties provided the backdrop to the Latin American energy meeting at London’s Bolivar Hall on Wednesday 17^th July. The event was organised by the Windsor Energy Group (WEG) and chaired by Lord Howell of Guildford, who was Secretary of State for Energy in Margaret Thatcher’s Government until she transferred him to the Ministry Of Transport. Around 70 people attended, among them diplomats, energy analysts, shipping  experts, a Department of Energy & Climate Change official  and a representative from Japan’s Oil, Gas & Metals National Corporation (JOGMEC).  Four Ambassadors ( Venezuela, Bolivia, Colombia, Cuba) and two Minister Counsellors (Brazil & Mexico) provided an outline of their countries’ energy consumption, production statistics, refining capacity and long-term objectives. They then participated in an open discussion and answered questions from the audience.

The main themes which emerged were the requirement for investment planning,utilizing up-to-date technology, attracting international finance , the prospects for regional co-operation and the impact of recent legislation on their national oil & gas industries and  world energy markets. WEG Director Paul Tempest emphasized in his summary that the burgeoning  South East Asia fuel demands have “fundamentallystrengthened” the bargaining position of Latin American producers and exporters when dealing  with the USA, Western Europe and Japan.

The first speaker, Dr Samuel Moncada, displayed graphics indicating that Venezuela will soon have the largest proven oil reserves in the world (316 billion barrels),surpassing Saudi Arabia (261 billion), Canada (181),Iraq (113) and Russia (94). These calculations are based on certified figures for the huge Orinoco Oil Belt, where the extra-heavy crude, tar-like substance has until now been too expensive to extract. It is, however, liquid enough to be pumped out of the ground – unlike most of Canada’s own reserves of tar sands. Venezuela will continue to expand PDVSA’s global refinery network and commit substantial financial resources to the upstream development of both oil and gas. He detailed the revenues the country derives from its principal export. Royalties are 30% of the price of oil. There is also a National Tax of  3.33%, a  contribution to Social Development of 1% before tax, an Export Tax of 0.1% and a Science & Technology Tax of 2% on gross income. Of the remaining net profit, 50% has to be paid in Income Tax.

Next to the podium was Bolivia’s Ambasador, Dr Beatriz Souviron. Though her country has the second biggest gas reserves in the region ( after Venezuela), the multi-nationals are far more interested in what lies below the Salar de Uyuni Salt Desert – namely 60% of the world’s Lithium supply. As mentioned in the ‘Guardian’ newspaper on 18^th June, tiny amounts of this very light metal have for years been used in laptops, Blackberrys and other devices, but now its principal application is expected to be in batteries for electric cars which will replace petrol and diesel vehicles. The price of Lithium has risen by 8 times since 2002. Bolivia possesses an estimated 5.4 million tonnes, Chile 3m, Tibet 1.1m and the USA 0.4m. President Evo Morales has declared that his government “Will never give away control of this natural resource” but acknowledges that a foreign partner is needed. The aim is to start by extracting 1,200 tonnes in 2010. Meanwhile, Bolivia’s hydrocarbon earnings have jumped from just $US 447.8m in 2000 to $US 2,544.3 m last year.

Colombian Ambassador Dr Noemi Sanin gave an assessment of her nation’s future energy outlook. Between 2009-2025, $US 43,280m will be invested in exploration,oil & gas pipelines, refineries, hydro -electric power generation  ( mainly for domestic consumption), the mining of carbon, nickel, copper and gold in addition to developimg palm oil plantations for biofuel exports.  Cuba’s priority – in the opinion of its UKAmbassador, Dr Rene Mujica – is to lower domestic demand for oil and explore alternative energy sources such as solar power. This is despite a US Geological Survey concluding that there could be 4.6 million barrels of crude oil and 9.8 trillion cubic feet of natural gas beneath Cuba’s northern ocean floor. There have also been media reports that Raul Castro would like to re-invigorate his country’s sugar industry by producing ethanol in a deal with Brazil’s Petrobas – which in turn could lead to Venezuelan President Hugo Chavez cancelling the discounted oil supply arrangement.

In Mexico (according to Minister Counsellor Abel Abarca Ayala) oil is a sensitive and contentious political topic, especially as  production declined from 3.50 million barrels a day in 2007 to 3.19 million bpd last year and Mexico has fallen from being the second to the third largest source of US oil imports. The government is attempting  to improve the efficiency of Pemex and to encourage more international production partnerships.

Finally, Minister Counsellor Flavio Marega: In March 2009, Brazil produced 2.024 millions of oil per day ( mostly for domestic use) compared to 1.935 bpd in 2007. Using only 3.7 million hectares, less than 1% of its arable land, the country (he said) now produces enough ethanol to meet 50% of the fuel needs of its passenger vehicles – but there has been a simultaneous increase in the cultivation of food crops. The construction of a gas pipeline with Bolivia and the electricity grid exchanges with Argentina, Uruguay, Paraguay and Venezuela demonstrate that regional energy integration is becoming a reality. He did not consider China’s growing presence in Latin America (for example, in the Brazilian telecommunications sector) to be a threat or a matter for concern but as a commercial opportunity.

Comments are closed.