En­ergy an­a­lysts see op­por­tu­ni­ties for U.S. in Latin Amer­ica

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - ROB NIKOLEWSKI

SAN DIEGO — From the north­ern­most point in Mex­ico to the tip of Tierra del Fuego in Chile, Latin Amer­i­can coun­tries are ex­pe­ri­enc­ing an en­ergy trans­for­ma­tion.

Some coun­tries are mov­ing faster than oth­ers. Some are strug­gling with long-run­ning po­lit­i­cal bat­tles that threaten de­vel­op­ment.

The is­sues may seem re­mote to en­ergy con­sumers in the United States, a coun­try that, in the space of less than a decade, has ex­pe­ri­enced what’s been called an “en­ergy re­nais­sance” in oil and nat­u­ral gas pro­duc­tion while also see­ing re­new­able en­ergy sources — es­pe­cially in Cal­i­for­nia — make up an in­creas­ing amount of the power mix.

So what does en­ergy in Latin Amer­ica have to do with the United States?

Plenty, es­pe­cially when it comes to ex­ports, said Erin Blan­ton, di­rec­tor of nat­u­ral gas for Med­ley Global Ad­vi­sors, a re­search and anal­y­sis com­pany with of­fices on four con­ti­nents.

“It is a huge ben­e­fit for U.S. jobs and U.S. in­dus­try to have those ex­port mar­kets,” Blan­ton said dur­ing a re­cent in­ter­na­tional en­ergy con­fer­ence spon­sored by the In­sti­tute of the Amer­i­cas at the Univer­sity of Cal­i­for­nia at San Diego.

“This is a huge cen­ter of de­mand for us, for our en­ergy prod­ucts,” she said.

Four years ago, Mex­ico ini­ti­ated a sweep­ing over­haul of its en­ergy sec­tor, aimed at end­ing the mo­nop­oly sta­tus of its state-run oil and gas com­pany, known as Pemex, and its elec­tric com­pany, known as CFE.

With an eye to­ward meet­ing the coun­try’s grow­ing en­ergy de­mands, Mex­ico has opened the sec­tor to pri­vate in­vest­ment.

“This is a big deal,” Blan­ton said. “Gas use is grow­ing phe-

● nom­e­nally with the in­ter­con­nec­tions of pipe­lines. And one of the big­gest ben­e­fi­cia­ries is U.S. gas.”

Mex­ico im­ports huge amounts of piped nat­u­ral gas, most of it from Texas. Nearly 20 gas pipe­lines en­ter Mex­ico from the United States.

In re­cent months, San Diego-based Sem­pra En­ergy, through its IEnova sub­sidiary, closed on a $1.1 bil­lion pur­chase of a 50 per­cent stake in an in­fra­struc­ture com­pany that in­cludes nat­u­ral gas pipe­lines.

The Sem­pra sub­sidiary al­ready has a liq­ue­fied nat­u­ral gas im­port fa­cil­ity on the Baja Penin­sula and is look­ing to ex­pand the site to in­clude an ex­port fa­cil­ity, in the hope of cap­tur­ing part of the boom­ing global liq­ue­fied nat­u­ral gas mar­ket.

This year, oil gi­ant BP opened its first re­tail site in Mex­ico, and it plans to open about 1,500 more lo­ca­tions in

the next five years.

Raul Gal­le­gos, a se­nior an­a­lyst based in Colom­bia for the con­sult­ing group Con­trol Risks, said op­por­tu­ni­ties and risks vary from one coun­try to an­other.

“In Venezuela, there are num­ber of op­por­tu­ni­ties that are pop­ping up in the oil sec­tor, even though if you were watch­ing the news you wouldn’t think there are,” Gal­le­gos said. “In Colom­bia, on the other

hand, which is mov­ing to­ward peace, it’s a mess as far as the op­por­tu­ni­ties.”

In Brazil, home to South Amer­ica’s largest econ­omy, the pres­i­dent is bat­tling cor­rup­tion al­le­ga­tions that may oust him from power and that threaten to dis­rupt the coun­try’s eco­nomic agenda.

But that doesn’t mean for­eign en­ergy in­vest­ment is run­ning away.

“The fu­ture of Brazil looks healthy from an oil and gas stand­point for the long term,” said Jay Thorseth, vice pres­i­dent of Amer­i­cas Ex­plo­ration at BP.

In Venezuela, the coun­try’s econ­omy un­der so­cial­ist Pres­i­dent Ni­co­las Maduro is bat­tling hy­per-in­fla­tion and short­ages of food and medicine.

Oil is es­ti­mated to ac­count for 96 per­cent of Venezuela’s hard cur­rency rev­enue, and 2½ years of low crude prices have dec­i­mated its econ­omy. Gal­le­gos said the Maduro gov­ern­ment is des­per­ate to in­crease pro­duc­tion, which cre­ates op­por­tu­ni­ties

for multi­na­tion­als such as Chevron, Shell and Rep­sol.

“The oil sec­tor is a busi­ness where they op­er­ate in Iraq with peo­ple blow­ing them­selves up all over the place,” Gal­le­gos said. “Venezuela is a cake­walk for some of th­ese guys.”

Peru’s pop­u­la­tion is about the same as Venezuela’s, and the coun­try has elected a num­ber of pres­i­dents pro­mot­ing busi­ness-friendly poli­cies.

Sem­pra has its own South Amer­i­can util­i­ties divi­sion and is con­sid­er­ing a bid on a gi­ant pipe­line project in Peru.

Still, Gal­le­gos said do­ing busi­ness in Peru can be tricky. Con­cerns over things such as wa­ter is­sues have roiled some com­mu­ni­ties, prompt­ing re­sis­tance to in­dus­try. Gal­le­gos said some peo­ple ac­tu­ally throw rocks to scare away com­pany ex­ec­u­tives.

“Latin Amer­ica is a place you can in­vest, it’s a place where you can come in, but you have to do your home­work,” Gal­le­gos said.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.