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Geopolitics / South America

  • Latin America Energy Advisory – 7th February 2014

    This week we’re stepping back to focus on Latin America again due to the volume of energy developments in the region. This week and last we were debriefed by our partners at Southern Pulse on these latest developments of concern to current and potential investors in the region.PanamaThe Grupo Unidos por el Canal (GUPC) consortium warned on 20 January it would halt expansion work on the Panama Canal unless the government paid the US$1.6 billion in overruns incurred because the canal authority allegedly gave the builders incorrect geological information. Canal administrator Jorge Quijano emphasized that construction would go ahead with…

  • BG Group to Start First Honduras Exploration

    UK-based BG Group is preparing to launch oil and gas exploration on Honduras's Atlantic coast with an initial investment of at least $20 million, marking the first contract for a foreign company to explore in the country.BG will explore for oil and gas for four years in the offshore block covering 35,000 square kilometers off the coast of La Mosquitia, a jungle region bordering Nicaragua, and some say holding 15% of country’s total oil and gas potential. For Honduras, there’s nothing to lose here, as Rigoberto Cuéllar, Minister of Natural Resources has pointed out: "If there is natural gas and…

  • What Mexico’s “Pemex Reform” Really Means

    Bottom Line: Mexico’s Senate on 11 December—after a 19-hour session—approved legislation to modernize the energy sector and open it up to private investment, though some of the bill’s points are still being debated due to ongoing opposition by leftist politicians. Analysis: The Senate approved the legislation with 95 votes in favor (PRI, PAN, Partido Verde) and 28 against (PRD, PT, Movimiento Ciudadan).The legislation will amend the Mexican Constitution and change the status of Pemex and CFE (Federal Electric Commission) from public utilities to state-owned businesses. As companies, these enterprises would have autonomy to issue contracts to meet their principal goal…

  • Amid Declining Latin American Output, Colombian Oil is Booming

    Oil production has been stagnating or declining in many Latin American countries (Brazil, Mexico, Venezuela, and Ecuador), but Colombia is quietly ramping up production. Colombia’s oil production lagged over the last decade after peaking in 1999 at 830,000 barrels per day. But over the last several years, several factors have contributed to a sharp rise in production, enough to position it as the third largest oil producer in Latin America.Source: EIAColombia only sits atop about 2.2 billion barrels of proven oil reserves (more than 100 times less than the 297 billion barrels lying underneath neighboring Venezuela), but the government has…

  • Chile, Bachelet and the Ostensible ‘Lurch to the Left’

    Bottom Line: How far left will Bachelet take Chile? Not as far as it might seem in the face of continual political stalemate. Analysis: Analysts across the political spectrum have been opining for months on what the results of Chile’s 17 November general elections would say about the country’s political future. Michelle Bachelet (New Majority Coalition/Socialist Party), who served as a center-left president from 2006-2010, was up against the conservative Evelyn Matthei (Alliance/Independent Democratic Union), who was consistently polling 10-20 points behind Ms. Bachelet. Two questions, however, remained. First, how big would Bachelet’s win be? She needed 51% of the…

  • China Optimistic on Peru Outlook, but Other Investors Wary

    Bottom Line: China’s optimism as it enters final talks to acquire Petrobras’ assets in Peru is not shared yet with other potential foreign investors as the country fails to make good on promises to streamline the permit process and concessions lay dormant.Analysis: China National Petroleum Corporation (CNPC) is in final negotiations to purchase Petrobras' approximately $2 billion in assets in Peru. The Petrobras offerings include concessions at Bloc X in Piura (where a CNPC subsidiary already operates at Bloc VI and VII), Bloc 58 in the Amazon near the Camisea Project (where there are proven gas reserves at the Urubamba…

  • Elections in Argentina May Quicken Investment Pace

    Bottom line: Opposition to the economic policies of President Cristina Fernández Kirchner will translate into votes for anti-kirchneristas, and may contribute to a quicker pace of investment going into 2014.Analysis: As the economy falters in Argentina, the popularity of current President Cristina Fernández Kirchner is waning. On 27 October, Argentines will head to the polls for legislative elections. Although Kirchner’s party, the Frente de la Victoria, may not lose a significant number of seats, heated campaigning on both sides means they will not gain sufficient numbers to push through controversial bills (such as a constitutional amendment that would permit Kirchner…

  • Push-Back from Investors Improves Libra Prospects

    Bottom line: In its final rules for the Libra auction scheduled for 21 October, the government of Brazil loosened the mandate to permit the winning bidder to retain 50% of oil produced (after recouping costs), up from 30% as contemplated in previous rules.Analysis: Just 11 firms registered to bid on the ultra-deep pre-salt Libra reserves on 21 October, and there was a sense that Brazil may have been asking too much for what remains a complicated and expensive venture. Someone in Brazil’s National Petroleum Agency was listening--an excellent sign that as a governing partner Brazil is flexible and cognizant of…

  • China to Stake Claim off Brazil’s Coast

    Bottom line: China likely to stake a claim off Brazil’s coast through Libra pre-salt auction, but at a potentially high environmental cost for Brazil.Analysis: Given the small field of potential bidders (just 11 companies were approved to participate in Brazil’s 21 October auction of the Libra pre-salt oil field), China will almost certainly be a participant in the winning consortium. In one respect, it may make for a perfect marriage: Chinese companies have cash to spend but little technical experience in ultra-deep pre-salt extraction while Petrobras (the mandatory operator) has the expertise but is wonting for capital. With a $6.8…

  • Risks Abound in Mexico’s New Oil Laws

    Much has been made of the recent announcement that Mexico is seeking to update its oil laws, allowing foreign companies a role in the industry for the first time in decades. How serious investors should take the news depends largely on how the political process plays out in Mexico.The reforms unveiled by President Peña Nieto won’t offer full concessions (which is the preference for oil and gas companies), but will instead offer profit-sharing arrangements, that allow oil companies to receive the cash equivalent of the oil they help produce.The new law will be the most significant upgrade to the Mexican…