Latin America's Business Information Leader
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Oil & Gas Perspectives - a weekly summary
January 9 - January 15 2010
Click to read the online version:
http://www.bnamericas.com/perspectives_home.jsp?idioma=I§or=9&id_email=170278430
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In this issue:
* Weekly Wrap
* Q & A:Devaluation likely to benefit PDVSA in short term
José Luis Villanueva
Director
Fitch Ratings
Venezuela
* Coming Up
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** WEEKLY WRAP **
Bolivia's hydrocarbons industry, viewed as one of the most unattractive in the region despite its massive natural gas reserves, got a much needed boost after state hydrocarbons company YPFB announced a five-year investment program of US$11bn.
YPFB president Carlos Villegas said in August last year that the company would need investment of US$11bn through 2026, which could suggest that Bolivian authorities are planning to accelerate works to finally increase stagnant natural gas production.
"I dream of having our state company becoming as important as Brazil's Petrobras or Venezuela's PDVSA," Bolivian President Evo Morales said at a ceremony to unveil the investment program.
YPFB's investment program will be financed by Bolivia's government, external financing sources and foreign firms that have announced new agreements with the company. YPFB officials said late last year that they had already obtained a US$1bn loan from Bolivia's central bank.
While Bolivia's government has frequently been depicted as hostile to foreign investment, especially after it nationalized most of its hydrocarbons industry, signals have recently started to emerge that the government may again be looking to attract foreign expertise.
Bolivia's government in late November said it was aware that nationalization of the industry in 2006 had not been sufficient to boost production and formed a company to promote and advance new hydrocarbons projects in the county.
Dubbed Empresa Boliviana de Industrialización de Hidrocarburos, the new firm was given a small budget and will seek to form partnerships with foreign companies.
"Bolivia shouldn't have to wait 60 years to get the industry going," the country's hydrocarbons minister Óscar Coca said.
Spanish oil major Repsol said in November it would invest US$1.5bn in Bolivia to increase natural gas production in the country. Russia's Gazprom and French oil major Total in 2008 signed an MOU with YPFB to invest US$4.5bn in a new natural gas project in Bolivia.
Brazil, meanwhile, also said this week that it was interested in investing in Bolivian natural gas infrastructure, according to Brazil's ambassador in La Paz, Frederico Cézar de Araujo.
According to the diplomat, Brazil could be willing to invest US$1.5bn-2bn in the neighboring country.
Average investors will still want to take a wait and see approach to the country, but signs that international majors are still interested in the country and YPFB's announcement could mean authorities are finally starting to increase production.
Also this week in Oil & Gas:
Brazil
- Brazil's attorney general's office is preparing to appeal an injunction that removed sugar and ethanol major Cosan from a government list of companies accused of using slave labor.
Cosan has said it had no knowledge of the situation. The company also said it has cancelled contracts with the sugarcane processor involved in the scandal.
- Mines and energy minister Edison Lobão confirmed the interest of Petrobras in acquiring a stake in Portuguese oil major Galp. According to Brazilian and Portuguese media reports, Petrobras is aiming to buy Italian major Eni's 33.34% stake in Galp.
- Brazil's gasoline will contain 20% ethanol from February 1 as opposed to the current 25% admixture rate. The measure, set to last for 90 days, was taken in order to minimize the impact of rising ethanol prices on the Brazilian fuel market.
Chile
- PetroMagallanes, the Chilean subsidiary of New Zealand's Greymouth Petroleum, announced that oil and gas has flowed from its Río del Oro-1A well on the Caupolicán block in the Tierra del Fuego region of southern Chile.
- Chilean fuel distributer Copec, one of the largest conglomerates in the country, will invest US$700mn in 2010 and aims to consolidate acquisitions made last year.
- Copec also finalized a long awaited contract with Chile's state oil company Enap.
Colombia
- Canadian oil junior Azabache Energy started a 2D seismic program to acquire 50km of data in Colombia. The company earlier in the month received approval to change its name to Azabache Energy from Argenta Oil & Gas.
Ecuador
- Ecuador is set to launch a biofuels pilot program in Guayaquil. The pilot project will create a 5% gasoline admixture with ethanol produced from sugarcane.
Peru
- State oil company Petroperú will list shares on Lima's BVL stock exchange in February in an effort to boost transparency.
- Petroperú and Spain's Técnicas Reunidas will sign the FEED-EPC contract for the modernization of the Talara refinery in Piura this month.
The project is slated to cost between US$1.2bn and US$1.3bn, although the final figure could be adjusted once engineering studies are complete.
- The Andean Development Corporation (CAF) approved a US$65mn loan for Maple Energy's US$246mn, 35Mg/y (133Ml/y) ethanol and biomass project in northern Peru.
Venezuela
- Tulsa-based service firm Helmerich & Payne expects its second fiscal quarter of 2010 to be impacted by US$20mn because of the currency devaluation recently announced by authorities in Venezuela.
RESULTS & FIGURES
Latin America-focused Global Energy Development produced 398,082b of net oil in 2009 compared to 438,007b during the previous year.
Oslo-based Norse Energy reported natural gas production from its Manati field in Brazil averaged 5.85Mm3/d in the fourth quarter of 2009. The volume represents a 7% increase from the third quarter last year.
Brazilian fuel distribution, gas and chemical group Ultrapar plans to invest 314mn reais (US$180mn) in its Ipiranga unit, Brazil's second largest fuel distributor, in 2010.
Ethanol sales by distillers in Brazil's center-south region, where 80% of the country's sugarcane is grown, reached 2.11Bl in December, according to the latest figures from Brazilian sugarcane and ethanol association Unica.
Of this total, 118Ml were exported and 1.9Bl went to the domestic market.
Norway's InterOil Exploration & Production, which operates in Colombia and Peru, produced 7,114b/d last month compared to 6,236b/d in November.
Peruvian consulting firm Maximixe claims there are 3.4Mha of deforested land in the country that could be used to cultivate biofuel crops.
Of the total, 75% are located in the Peruvian jungle in the departments of San Martín (1.4Mha), Loreto (950,000ha) and Ucayali (654,000ha).
Peru's fuel price stabilization fund has seen its debt surpass 400mn soles (US$139mn) as the oil price continues to climb.
Peru's liquid hydrocarbons production totaled 53.3Mb in 2009, up 20.7% from the previous year.
Canada's Talisman announced an international exploration program of US$700mn for 2010. Nearly US$500mn of that will be invested in potential new core areas and include the drilling of new wells in Peru and Colombia.
By Nathan Crooks
Related Companies
* Global Energy Development Plc - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=20§or=0
* The Maple Companies, Ltd. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=29§or=0
* Ente Nazionale Idrocarburi S.p.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=40§or=0
* Talisman Energy Inc. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=46§or=0
* Petróleos de Venezuela S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=1937§or=0
* Petróleo Brasileiro S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=2471§or=0
* Ultrapar Participacões S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=2511§or=0
* Empresa Nacional de Petróleo - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=2524§or=0
* Empresas Copec S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=2528§or=0
* Yacimientos Petrolíferos Fiscales Bolivianos - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=8023§or=0
* Corporación Andina de Fomento - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=13481§or=0
* PetroPerú S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=14541§or=0
* Open Joint Stock Company Gazprom - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=74513§or=0
* Cosan S.A. Indústria e Comércio - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=332604§or=0
* Galp Energia SGPS, S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=702230§or=0
* Norse Energy do Brasil S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=783456§or=0
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** Q & A **
* Devaluation likely to benefit PDVSA in short term
José Luis Villanueva
Director
Fitch Ratings
Venezuela
Venezuela is never a dull place for news, and President Hugo Chávez shocked the country again in early January with the decision to devalue the currency by 50%. While preferential exchange rates will remain for food imports and other essential items, most imported products will become twice as expensive.
The move was largely viewed as positive, even as Venezuelans rushed to stores to buy flat screen TVs before prices increased. The devaluation will obviously force Venezuela's middle class to bear the brunt of price increases, but the move could give state oil company PDVSA increased flexibility to get its house in order.
In a two-part series, BNamericas spoke last week with Thomas O'Donnell, a nuclear physicist with the New School University in New York City and Venezuelan energy analyst, about PDVSA's current troubles and challenges it will face in 2010.
This week, BNamericas spoke about the devaluation and its potential effect on PDVSA with Jose Luis Villanueva, a director at Fitch Ratings in New York and PDVSA analyst.
BNamericas: How is the currency devaluation going to affect PDVSA?
Villanueva: Basically, it increases bolívar revenues overnight. With that in mind, it's going to improve the financial flexibility of the company until inflation catches up. The only thing to bear in mind is that the government could increase spending during this election year. And they may try to transfer more revenues from PDVSA to the government through taxes. So, in all, I would say that it's positive for the company. But at the end of the day, it's going to depend on how much money stays in the company and on how much is transferred to the state.
BNamericas: How will this affect the debt that PDVSA owes service companies? Some have already come out and said that they would take a hit because of the devaluation.
Villanueva: Once you have higher financial flexibility, the company is going to be able to pay back service companies in domestic currencies. So they might not pay what they owe in US dollar terms. Obviously, the debt owed to service companies is going to decrease at the expense of the service companies.
BNamericas: I've also heard that the devaluation could reignite some labor troubles within PDVSA, especially if inflation becomes a problem. Is PDVSA likely to adjust workers' salaries because of the devaluation?
Villanueva: No, not at least in the short term. Some of the problems that PDVSA had in the past occurred because revenues were based on a fixed exchange rate while inflation was close to 30%. That's why margins were decreasing over time. The devaluation gives the company more room to improve salaries for employees and still have better margins. The national guard has said it would shut down businesses that raise prices. If that works out, any demands by PDVSA employees are going to be postponed over time. But eventually inflation will catch up, and that's when there might be some new pressure. But I wouldn't expect it in the short term.
BNamericas: How sustainable is all of this? Obviously the parallel exchange market is going to continue exist. Will the devaluation solve some real problems? Or is it more of a band aid?
Villanueva: The fundamental problems have not been fixed, and that's because of the economy in Venezuela. It might be more than a band aid. They are cleaning the wound out a little bit. It's going to work out for some time. But eventually there will be new pressure on margins because of inflation. The government is trying to increase its standing in an election year and trying to increase the flexibility of PDVSA.
BNamericas: Can PDVSA withstand current prices at US$80/b? Or is it still too low?
Villanueva: For PDVSA, an oil price of US$80/b generates positive cash flow. If prices go below US$50/b, that's when PDVSA starts feeling the pain. With oil above US$50/b, the company should do fine. Our pricing expectation for the long-term is below current prices. We use a more conservative price outlook for our modeling. Based on those more conservative scenarios, we see PDVSA's current rating to be adequate.
BNamericas: Do you think we'll see much interest in the Carabobo tender? Will we see a big agreement with an international oil company, or just more bilateral agreements with other state oil companies?
Villanueva: Companies have shown interest in the round, especially Chinese and Russian companies. But they need more resources and technology to really exploit all the reserves that the country has. I would say you will see agreements with both. The bilateral agreements are easier and faster. But the bidding process will continue to be quite important because of the huge investments needed to increase production and transform the reserves into producing assets. Bilateral agreements might not be enough to do this.
By Nathan Crooks
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** COMING UP **
January:Vancouver-based Ivanhoe Energy will begin permitting for an additional 20 wells on block 20 onshore Ecuador.
Ecuador
January:Colombian oil pipeline operator Oleoducto de los Llanos Orientales (ODL) will increase transport capacity to 160,000b/d in January. Pacific Rubiales has a 35% stake in ODL and Colombia's state oil company Ecopetrol 65%.
Colombia
mid-January:Peru's state hydrocarbons promotion agency Perupetro aims to launch the tender for the first 10 blocks being offered in a new round in mid-January.
Peru
January 17, 2010:Second round of presidential election.
Chile
January 18, 2010:Martin Luther King, Jr. Day, US markets closed.
Regional
January 27, 2010:New president Porfirio Lobo to be sworn in.
Honduras
January 28, 2010:Bids for Venezuela's Carabobo tender for seven Orinoco heavy crude blocks are due on January 28.
Venezuela
January 29, 2010:Offers are due in a tender for marginal areas in Argentina's Neuquén province.
Argentina
January:Canadian junior Petrolifera is planning to start a second exploration phase at its La Pinta-1 well on its Sierra Nevada license in Colombia's Lower Magdalena basin in January.
Colombia
January:Trinidad & Tobago's energy and energy industries ministry this month aims to issue a call for bids for seven shallow water blocks.
Trinidad & Tobago
January:Peru's state hydrocarbons promotion agency Perupetro in January plans to launch a new E&P round. The process to put out to tender 10 blocks in the Amazon will begin once consultations with communities in the areas have concluded.
Peru
February 07, 2010:Presidential and congressional elections.
Costa Rica
February 09, 2010:Argentine oil major YPF is expected to sign an agreement to explore Entre Ríos province for hydrocarbons as part of its recently announced five-year E&P plan.
Argentina
February 15, 2010:Washington's Birthday/Presidents' Day, US markets closed.
Regional
February:Peru's state oil company Petroperú will list shares on Lima's BVL stock exchange in an effort to boost transparency.
Peru
end-February:Construction of the gas pipeline connecting Tierra del Fuego island with mainland Argentina to be completed.
Argentina
March:Jamaica's state-run firm Petroleum Corporation of Jamaica (PCJ) plans to launch a tender for 19 offshore blocks in March.
Jamaica
1Q10:The Camisea consortium developing Peruvian gas blocks 56 and 88 will submit a reconfirmation study of its existing proved gas reserves in the first quarter of 2010.
Peru
1Q10:Calgary-based Gran Tierra Energy aims to begin 2D seismic acquisition onshore Peru in the first quarter of 2010.
Peru
April 02, 2010:Good Friday, most markets closed.
Regional
April:GNL Mejillones is set to begin LNG regasification operations with a floating storage unit (FSU) in Chile's northern port of Mejillones in April, 2010.
Chile
end-April:Peru's state hydrocarbons promotion agency Perupetro to launch a new round for 20 onshore blocks.
Peru
May:The EIS for the Gasoducto Andino del Sur natural gas pipeline project in Peru will to be completed.
Peru
May 31, 2010:Memorial Day, US markets closed.
Regional
June 21, 2010:Offers for Colombia's 2010 open round for nearly 170 E&P blocks are due on June 21.
Colombia
mid-2010:France's Total is set to begin production at its Itau field in Bolivia in mid-2010. Production should eventually reach 1.4Mm3/d of natural gas.
Bolivia
http://www.bnamericas.com/news/oilandgas/Total_sees_1,4Mm3_d_from_Itau_field
July 05, 2010:US holiday marking Independence Day.
Regional
July:Colombia's state oil company Ecopetrol to take over operations at the Cupiagua and Cupiagua Sur fields.
Colombia
September06, 2010:Labor Day, US markets closed.
Regional
3Q10:Mexico's state oil company Pemex aims to complete the reconfiguration of the Minatitlán refinery in Veracruz state by 3Q10.
Mexico
September30, 2010:Trinidad & Tobago's energy and industries ministry plans to offer six shallow water blocks in the first quarter of fiscal year 2010 ending next September.
Trinidad & Tobago
October 03, 2010:Presidential elections.
Brazil
November 01, 2010:All Saints Day, most Latin American markets closed.
Regional
November 25, 2010:Thanksgiving Day, US markets closed.
Regional
December 24, 2010:Christmas holiday (observed), US markets closed.
Regional
end-2010:The potential of the Dorado-Riquelme natural gas block in the far south Magallanes region of Chile will be known by end-2010, according to state oil company Enap.
Chile
Enap
Click here to view the most important conferences and events in your sector of interest. http://www.bnamericas.com/conferences_home.jsp?idioma=I§or=9
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Featured Reports
* Celfin - Monthly Generation Review - November 09: SIC grid demand higher YoY in November; lower in SING - http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=986135§or=0
* CMA Equity: Petrobras Brasil (Noviembre 2009) 3T09 Brief - http://www.bnamericas.com/research_detalle.jsp?idioma=E&documento=990409§or=0
* Gestión de la industria petrolera en período de altos precios del petróleo en países seleccionados de América Latina - http://www.bnamericas.com/research_detalle.jsp?idioma=E&documento=994734§or=0
* Celfin - GEOPARK (BUY, Initial Opinion): Experienced Pioneer - http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=984601§or=0
* Banco Bice: Visión Global: "Aumentos de precios por mejores expectativas, pero sin una contraparte sólida de demanda física" - http://www.bnamericas.com/research_detalle.jsp?idioma=E&documento=986974§or=0
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