ENERGY ADVISOR a WEEKLY PUBLICATION of the DIALOGUE July 3, 2020
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LATIN AMERICA ADVISOR ENERGY ADVISOR A WEEKLY PUBLICATION OF THE DIALOGUE www.thedialogue.org July 3, 2020 BOARD OF ADVISORS FEATURED Q&A TOP NEWS Nigel Blackaby Global Head, POWER SECTOR International Arbitration Group, Freshfields Bruckhaus Deringer Is Covid Speeding Mexico Expects Mary Rose Brusewitz Deal With Spanish Member, Clark Hill Strasburger up Latin America’s Utility: AMLO Jeffrey Davidow Mexican President Andrés Manuel Senior Counselor, López Obrador said he expects The Cohen Group Energy Transition? his country to reach a deal with Jonathan C. Hamilton Spanish utility Iberdrola following Partner, reports that the company had White & Case scrapped plans to build a power Ana Heeren plant in Mexico. Managing Director, Page 2 FTI Consulting Raul Herrera Partner, RENEWABLES Corporate & Securities Practice, Arnold & Porter Atlas Renewable James R. Jones Plans Solar Park Chairman, Monarch Global Strategies in Antofagasta Jorge Kamine Many analysts believe the Covid-19 pandemic will result in an accelerated shift away from The U.S. company filed an envi- Partner, fossil fuels. Oil pump jacks are pictured above. // File Photo: U.S. House of Representatives. ronmental impact statement for Corporate & Financial Services, its planned photovoltaic park in Willkie Farr & Gallagher Chile’s Antofagasta region. Oil majors including Shell and BP recently announced plans Craig A. Kelly Page 2 Senior Director, to write off as much as $22 billion and $17.5 billion worth Americas Int’l Gov’t Relations, of assets, respectively, after slashing their long-term price Exxon Mobil OIL & GAS Tyler Kruzich Q assumptions for oil and gas to reflect the effects of the Trinidad and Director, Int’l Gov’t Affairs for Covid-19 pandemic. Additionally, BP said it expects the health crisis to the Western Hemisphere, Chevron accelerate the shift away from fossil fuels. Will the health crisis indeed Tobago Cuts O&G Jorge León speed up the energy transition—and if so, why and by how much? In what Price Assumptions Energy Economist, The Caribbean nation has cut the BP ways is the pandemic changing oil consumption patterns? Which Latin oil and gas assumptions included American countries will be most affected by such a shift, and what can Jeremy Martin in its national budget, according Vice President, Energy & Sustainability, they do now to prepare for the future? to the finance ministry’s mid-year Institute of the Americas economic review. Minister Colm Larry Pascal Imbert expects the economy to Chairman, Andrés Chambouleyron, managing director of Berkeley decline by 2.4 percent this year. Americas Practice Group, Haynes & Boone Research Group and nonresident fellow at the Institute of Page 2 Charles Shapiro the Americas: “The health crisis has reduced the demand for President, both hydrocarbons and electricity, but the reduction has been World Affairs Council of Atlanta A steeper for the former. This is mainly because confinement has caused R. Kirk Sherr President, a sharper fall in the consumption of fuels due to lower demand for both Clearview Strategy Group public (fear of contagion) and private transportation (more teleworking Mark Thurber Partner, and more online shopping) than in electricity (more teleworking and more Hunton Andrews Kurth online shopping!), a reduction that will probably have a permanent compo- Jose L. Valera nent. This steeper decline in the demand for fuels has led to a reduction Partner, Mayer Brown LLP in oil and natural gas prices that has not been matched by a correspond- Lisa Viscidi ing reduction in electricity prices. This change in relative prices will proba- Program Director, bly hit investment in renewables, favoring thermal generation. Renewable Inter-American Dialogue sources are located away from consumption centers because they need to be where the primary resource is and because they require larger sur- Imbert // File Photo: U.S. Embassy in Trinidad and Tobago. Continued on page 3 COPYRIGHT © 2020, INTER-AMERICAN DIALOGUE PAGE 1 LATIN AMERICA ENERGY ADVISOR July 3, 2020 POWER SECTOR NEWS hosted by Mexican business lobby Concamin. NEWS BRIEFS “But I can’t lie to them, nor can I tell them it’s Mexico Expects Deal an opportune time to invest in Mexico,” he add- Atlas Renewable Plans ed. Landau criticized some of López Obrador’s New Solar Plant in Chile’s energy policies, without going into specifics. With Iberdrola Over Antofagasta Region Power Plant: AMLO U.S. company Atlas Renewable has filed Some actions its environmental impact statement for a Mexican President Andrés Manuel López Ob- taken over the last 577-megawatt solar photovoltaic park in Chile, rador said last week that he expects to reach few months, especial- Renewables Now reported Friday. The park an agreement with Spanish utility Iberdrola ly in the energy is to be constructed in the South American after reports that the firm had canceled a major sector, have created country’s Antofagasta region. According to project in Mexico’s Veracruz state, Reuters the filing, the company estimates it will need uncertainty...” reported June 25. The mayor of Túxpam, $350 million to install the Estepa Solar park, — Christopher Landau where the project was to be located, said the which will consist of 910,728 solar modules. Spanish company had scrapped plans to build The project’s construction phase is expected to an electricity generation plant after failing to last approximately 18 months, according to the reach an agreement to supply power to the “Some actions taken over the last few months, document. state power company, known as CFE, Améri- especially in the energy sector, have created ca Economía reported. Antonio Aguilar, the uncertainty about the government’s promise to mayor, said the company had so far invested respect what was done in the past and not to as much as $40 million in the project, and had change the rules of the game,” he added, Reu- Laid-Off Oil Refinery already selected the property and received the ters reported. [Editor’s note: See related Q&A in Workers in Curaçao necessary permits to begin construction. “They the May 29 issue of the Energy Advisor.] Protest Austere Measures had not begun because they were waiting Protests erupted in the Dutch Caribbean island on this important [deal],” he said. “It’s very of Curaçao last week in response to austerity unfortunate,” he added. López Obrador said OIL AND GAS NEWS measures and layoffs at the country’s oil refin- that “there’s going to be an agreement,” adding ery, Argus Media reported June 26. Financial that Iberdrola had sent a letter to the govern- help from the Netherlands was conditioned on ment stating its openness to continue investing Trinidad & Tobago salary cuts, prompting protests that included in Mexico. “They want to have a dialogue,” Cuts Oil and Gas vandalism, looting and arson last week. Laid- the president added. Another firm involved in off employees from the Isla oil refinery, which Mexico’s electricity sector, Sempra Energy, has Price Assumptions Venezuelan state oil company PDVSA had stopped providing a target for when it expects operated until its lease expired in December, to make a final investment decision regarding Trinidad and Tobago has cut the oil and gas were part of the protests. the addition of liquefied natural gas, or LNG, price assumptions included in its national export capabilities to its Energía Costa Azul re- budget, according to the finance ministry’s mid- gasification terminal in Mexico’s Pacific coast, year economic review, Argus Media reported S&P Global Platts reported. In an email to the June 25. The Caribbean nation’s baseline Pemex Fails to Reach news website, a company spokeswoman said scenario for macroeconomic conditions is now AMLO’s Refining Goal Sempra continues “to have an active dialogue pegged to an assumption of $45 per barrel Mexican state oil company Pemex failed with the Mexican government,” but declined for Brent and $2.90 per one million British to reach the refining goal President Andrés to provide an updated investment timetable. thermal units (BTUs) for the U.S. gas bench- Manuel López Obrador had set out for it in May, In related news, U.S. Ambassador to Mexico mark Henry Hub. It had previously assumed Forbes México reported Tuesday. The firm pro- Christopher Landau last week appeared to prices of $60 per barrel and $3 per one million cessed 640,073 barrels per day (bpd) of crude question whether it was a good time to invest BTUs, respectively. As a result, the govern- in its six refineries, according to data from the in the Latin American country, Reuters report- ment expects the economy to contract by 2.4 Energy Ministry, well below the one million ed. “For me, an essential part of my job as percent in 2020, Finance Minister Colm Imbert barrels bpd that López Obrador wanted. The ambassador is trying to fix problems when they said in the document, Argus Media reported. president had said in April that the increase in arise, and frankly to encourage the investment The Finance Ministry expects an economic refining would help boost prices of Mexican of my compatriots,” Landau said in a webcast rebound next year, with 4.7 percent growth. crude sales abroad. COPYRIGHT © 2020, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ENERGY ADVISOR July 3, 2020 However, the Trinidad and Tobago Chamber of FEATURED Q&A / Continued from page 1 Industry and Commerce, or TTCIC, questioned the government’s economic assessment, the faces of land than conventional thermal gen- tional oil companies will be forced to write Jamaica Observer reported. The 2.4 percent eration. Consequently, they require addition- down asset values, as well. Latin American decline “does not appear to be aligned with the al investment in transmission and in storage policymakers can prepare for the impact realities of the fall in energy prices and reduced (or back up) to reduce intermittency.