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