ENERGY ADVISOR a WEEKLY PUBLICATION of the DIALOGUE December 7, 2018
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LATIN AMERICA ADVISOR ENERGY ADVISOR A WEEKLY PUBLICATION OF THE DIALOGUE www.thedialogue.org December 7, 2018 BOARD OF ADVISORS FEATURED Q&A TOP NEWS Nigel Blackaby Global Head, OIL & GAS International Arbitration Group, Freshfields Bruckhaus Deringer Can Costa Rica’s ExxonMobil Ups Mary Rose Brusewitz Oil Estimates in Partner, Strasburger & Price ICE Survive Without Guyana by 25% Jeffrey Davidow ExxonMobil said it now expects Senior Counselor, the Stabroek oil block offshore The Cohen Group a Major Reform? Guyana to contain more than five Luis Giusti billion barrels of oil equivalent. It’s Senior Advisor, 25 percent more recoverable oil Center for Strategic & International Studies than previously estimated. Page 2 Jonathan C. Hamilton Partner, White & Case ELECTRICITY Ana Heeren Managing Director, Mexico Suspends FTI Consulting December Power Raul Herrera Partner, Auction Round Corporate & Securities Practice, The country’s electricity regulatory Arnold & Porter The president of Costa Rica’s electricity and telecommunications services provider, Irene body, Cenace, said it had indef- James R. Jones Cañas, in November said the state-owned company is facing high levels of debt. // File Photo: initely suspended the country’s Chairman, Costa Rican Government. fourth long-term power auction, Monarch Global Strategies originally scheduled for Dec. 18. Costa Rica’s electricity and telecommunications services Jorge Kamine Page 2 Counsel, provider, the Costa Rican Institute of Electricity, or ICE, said Skadden Arps in November it projects a loss of 314 billion colones, roughly Craig A. Kelly OIL & GAS Director, Q $525 million, this year, citing low demand for energy and ‘Explicit Nepotism’ Americas Int’l Gov’t Relations, exchange rate volatility as the main causes. Irene Cañas, ICE’s executive Exxon Mobil president, announced plans to end several projects and a new policy of Found in Jamaica’s Jeremy Martin Vice President, Energy & Sustainability, accountability as the state-run company, which maintains a monopoly Petrojam: Report Institute of the Americas in the country’s electricity market, seeks to revitalize its finances. Given Jamaica’s auditor general, Larry Pascal Pamela Monroe Ellis, issued a Costa Rica’s economic troubles, how likely is it that ICE will succeed in Chairman, report that outlined the “explicit Americas Practice Group, boosting its profits and paying its debt? To what extent is ICE’s business acts of nepotism” it discovered Haynes & Boone model failing, and are changes needed to modify it? What should a major in the recruitment processes of Charles Shapiro state-owned oil refinery Petrojam President, reform of ICE look like, and what advantages and disadvantages would and the Petroleum Corporation of World Affairs Council of Atlanta it bring? Jamaica. R. Kirk Sherr Page 2 President, Clearview Strategy Group Juan Manuel Campos Ávila, president and senior consultant Mark Thurber at Ciber Regulación Consultores in San José: “It is very un- Partner, Hunton Andrews Kurth likely that ICE will be able to revert its losses and pay its debt Alexandra Valderrama for various factors that are unlikely to change in the short Manager, A International Government Affairs, and medium terms, particularly the fall in electric demand, the high level Chevron of debt, the high cost of maintaining and operating electric infrastructure Jose L. Valera and its significant loss in the telecommunications market due to the lack Partner, Mayer Brown LLP of new content services to build customer loyalty. Unfortunately, ICE ‘grew Lisa Viscidi old’ along with its personnel, and it has not implemented important and Program Director, structural institutional changes. ICE’s business model has failed. It did Inter-American Dialogue not prepare itself well for changes in the electricity and telecommuni- cations sectors. Political intervention, a lack of internal leadership, the Monroe Ellis // File Photo: Jamai- can Government. Continued on page 3 COPYRIGHT © 2018, INTER-AMERICAN DIALOGUE PAGE 1 LATIN AMERICA ENERGY ADVISOR December 7, 2018 OIL AND GAS NEWS and rigorous evaluation and pursuit of high-po- NEWS BRIEFS tential, high-risk opportunities in this frontier ‘Explicit Nepotism’ area,” said Neil Chapman, senior vice president Brazil’s Petrobras Forms of ExxonMobil, the Houston Chronicle reported. Venture With Murphy Oil Found in Jamaica’s The first oil production of 120,000 barrels a day is expected in early 2020, and Exxon previously for Gulf Exploration Petrojam: Report said there is potential to generate some $20 Brazilian state oil company Petrobras on Mon- billion in oil revenue per year by 2030. The day said it had closed a joint venture deal with Jamaica’s auditor general on Tuesday issued Guyanese government has been preparing to U.S.-based Murphy Oil to explore deep-water oil a report that alleges officials at the Petroleum become an oil producer, opening a department and gas fields in the Gulf of Mexico, accord- Corporation of Jamaica, or PCJ, and state- of energy within the Ministry of the Presidency ing to a securities filing, Reuters reported. owned oil refiner Petrojam were involved in earlier this year. [Editor’s note: See related Q&A Petrobras, which will have a 20 percent stake in “explicit acts of nepotism” in their recruitment on Guyana’s preparations to become an oil the venture, received $795 million for the deal. processes, The Jamaica Gleaner reported. producer by 2020 in the Sept. 21 issue of the Murphy, which will oversee operations, expects Among the cited examples of nepotism , Audi- Energy Advisor.] to increase its total production in the Gulf of tor General Pamela Monroe Ellis said the man- Mexico to approximately 60,000 net barrels of ager of human resources at Petrojam employed oil equivalent per day. her sibling despite his rejection by an interview Brazilian Prosecutors panel for lack of experience. At PCJ, the audi- Accuse Trading Firms tor general’s office found 11 positions out of Argentina and Russia Sign the 27 reviewed had been filled without being in Petrobras Case advertised, and eight of the officials were hired Nuclear Cooperation Deal without evidence of an official recruitment or Brazilian prosecutors on Wednesday accused Russian state nuclear energy company Rosa- assessment process, according to the report, international commodity trading companies tom on Monday said it had reached a deal with the newspaper reported. The auditor general’s Glencore, Trafigura and Vitol of participating Argentina during the recent G-20 Summit to office discovered similar inconsistencies at the in a scheme that paid more than $30 million partner in nuclear energy, Reuters reported. refiner. Accusations of corruption at Petrojam in bribes to employees at state oil company Officials signed a framework agreement, which forced its general manager, Floyd Grindley, to Petrobras in exchange for business, Folha de do not always lead to actual contracts. Argenti- resign in July. [Editor’s note: See related Q&A S.Paulo reported. It is the latest graft allega- na was also expected to sign a deal with China on corruption scandals involving Petrojam in tion involving the South American country’s at the summit for the Asian country to finance the July 13 issue of the Energy Advisor.] massive “Car Wash” corruption investigation. the construction of a nuclear power plant, but The probe has unveiled the largest corruption no agreement has been announced. scheme in Brazil in decades and has result- Exxon Ups Estimates ed in the imprisonment of former high-level of Recoverable Oil government officials and business executives. Prosecutors allege that Petrobras workers of- Vandalism of Petroperú Offshore Guyana fered the trading companies cheaper prices for Pipeline Causes Oil Spill oil and its derivatives in return for bribes from in the Peruvian Amazon A new discovery off the coast of Guyana has employees of Glencore, Trafigura and Vitol Peruvian state oil state company Petroperú led ExxonMobil and partner Hess Corp. to amounting to some $15.3 million, half of the on Nov. 28 said approximately 8,000 barrels increase their estimates of oil reserves at the total graft uncovered in the case, between 2009 of crude oil had spilled in the Amazon after Stabroek block by 25 percent, the companies and 2014, Reuters reported. Prosecutors did vandals damaged the Norperuano pipeline in said Monday, Reuters reported. Exxon said the not name other companies being investigated. the Loreto region of the rainforest, Reuters re- new Pluma-1 well finding and increased projec- The employees allegedly involved worked at ported. The damage was blamed on members tions from other discoveries led the company Petrobras’ trading desk in Houston and in its of the Mayuriaga indigenous community who to increase its estimate of recoverable oil from headquarters in Rio de Janeiro. Investigators have been protesting recent local elections. four billion barrels of oil equivalent to as much say at least two of the employees still work A spokeswoman for Petroperú said local res- as five billion barrels of oil equivalent. “The at the giant oil firm. Petrobras, Glencore and idents prevented the company from securing discovery of a resource base of more than five Vitol did not respond to Reuters’ request for and stopping the spillage at the pipeline, which billion oil-equivalent barrels in less than four comment. An official from Trafigura said the has been a common target of vandals in the years is testament of our technical expertise company does not comment on legal matters. past two years. COPYRIGHT © 2018, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ENERGY ADVISOR December 7, 2018 POWER SECTOR NEWS FEATURED Q&A / Continued from page 1 scarce promotion of new talent and especial- Enrique Egloff, president of the Mexico Suspends ly the lack of accountability gave birth to the Costa Rican Chamber of Indus- Electricity Tender institute’s bountiful losses. In recent history, try: “With regard to ICE’s current the debate on the future of ICE has been A situation, the Costa Rican Scheduled for Dec.