ENERGY ADVISOR a WEEKLY PUBLICATION of the DIALOGUE September 4, 2020

LATIN AMERICA ADVISOR ENERGY ADVISOR A WEEKLY PUBLICATION OF THE DIALOGUE www.thedialogue.org September 4, 2020

BOARD OF ADVISORS FEATURED Q&A TOP NEWS Nigel Blackaby Global Head, OIL & GAS International Arbitration Group, Freshfields Bruckhaus Deringer Will Rowley Keep Guyana Producing Mary Rose Brusewitz Below Exxon’s Member, Clark Hill Strasburger His Energy Policy in Target for August Jeffrey Davidow The South American country is Senior Counselor, producing approximately 85,000 The Cohen Group Trinidad & Tobago? barrels per day of crude, below the Jonathan C. Hamilton 120,000 target the company had Partner, set for August. White & Case Page 2 Ana Heeren Managing Director, FTI Consulting RENEWABLES Raul Herrera Partner, Chile Generates Corporate & Securities Practice, 19% of Power From Arnold & Porter James R. Jones Renewables in July Chairman, Chile’s renewable sources gener- Monarch Global Strategies ated 19.3 percent of the country’s Jorge Kamine Incumbent Prime Minister Keith Rowley was re-elected in Trinidad and Tobago last month. total electricity in July, up 3.2 Partner, Rowley’s main rival in the race has blasted his government’s energy policy. // File Photo: percent year-on-year. Corporate & Financial Services, Government of Trinidad and Tobago. Page 2 Willkie Farr & Gallagher Craig A. Kelly Incumbent Prime Minister Keith Rowley won Trinidad and Senior Director, Tobago’s August elections. His main rival, former Prime POWER SECTOR Americas Int’l Gov’t Relations, Exxon Mobil Minister Kamla Persad-Bissessar, had previously criticized New DR Gov’t Jorge León Q Rowley’s energy policy, saying the Caribbean country’s Betting on Private Energy Economist, energy sector was “on life support” and facing “a very uncertain future” BP Sector Investment as a result, local newspaper the Guardian reported. What is the current Jeremy Martin The government of the Dominican Vice President, Energy & Sustainability, state of Trinidad and Tobago’s energy sector? What are the problems Republic’s new president, Luis Institute of the Americas Persad-Bissessar was referring to? How well has Rowley’s government Abinader, will not invest in the Mayya Novakovskiy construction of new power plants, managed the energy sector during his first term, and what can the prime Manager, Western Hemisphere, said Energy Minister Antonio Chevron minister and his energy team do to improve it over the next five years? Almonte. Instead, it will bet on Larry Pascal private-sector investment by do- Chairman, mestic and international players Americas Practice Group, Winston Dookeran, professor of practice at the University of to boost the sector, he added. Haynes & Boone the West Indies and former minister of finance of Trinidad Page 3 Charles Shapiro President, and Tobago: “In the aftermath of the Covid-19 pandemic, Trin- World Affairs Council of Atlanta idad and Tobago’s economy is experiencing a ‘loop type’ cycle R. Kirk Sherr A of shocks—on the supply side, there are falling wages and production, President, Clearview Strategy Group which feeds into the demand side with a reduction in purchasing power. Mark Thurber The forces that this ‘loop type’ cycle unleashes add new pressures on the Partner, Hunton Andrews Kurth energy sector, already facing structural adjustments from the govern- Jose L. Valera ment’s far-reaching decisions to reorganize the country’s major oil compa- Partner, ny, Petrotrin. Could the energy sector be relied upon to put the economy Mayer Brown LLP back on its feet? In spite of some positive developments in upstream Lisa Viscidi Program Director, activities, the downstream enterprises faced global headwinds that affect Inter-American Dialogue their profitability. In this spiral, suppliers in the energy sector face revenue shortfalls. Yet, the thriving energy sector remains the cornerstone of foreign exchange earnings and value added in the economy. It is crucial Abinader // File Photo: Government of the Dominican Republic. Continued on page 3

OIL AND GAS NEWS South American country received $46 per NEWS BRIEFS barrel for the third lift of one million barrels Guyana Producing from its share of Liza crude from the Stabroek Owner of Curaçao’s block. The share, loaded in early August, was Isla Refinery Filing Suit Below ExxonMobil’s $11 more per barrel than what Guyana received for its second entitlement lift in May, Natural Against PDVSA Target for August Resources Minister Vickram Bharrat said. “It’s Refineria di Korsou, or RdK, which owns a good price given the hit the global oil market Curaçao’s 335,000-barrel-per-day Isla refinery, Guyana is producing approximately 85,000 has taken from the effects of the coronavirus is filing a lawsuit against former operator barrels per day (bpd) of crude, below a target pandemic,” the minister added. Guyana had and Venezuelan state oil company PDVSA for it had set for August, due to a prolonged gas received $55 per barrel for its first share, lifted $51 million in New York State court, Reuters compression issue on the ExxonMobil-oper- in February, before coronavirus largely broke reported Aug. 27, citing a recent filing. RdK ated Stabroek block, Argus Media reported out in Latin America and the Caribbean. has accused PDVSA of failing to make monthly Aug. 27. The company is aiming to fix the payments from early 2018 to December 2019 technical problem this month, hoping to reach Lower Oil Sales Drive as required under two of the companies’ the 120,000 bpd capacity of the floating contracts. RdK is currently looking for a new production, storage and offloading unit that is Colombia’s Plunge operator, after PDVSA’s deal to operate the working the Liza-1 well offshore Guyana, said refinery expired at the end of last year. the president of ExxonMobil Guyana, Alistair in Exports in July Routledge. The South American country’s production reached 100,000 bpd in July, up The value of Colombia’s exports plunged 21.7 Chile’s Renewables 25 percent from the previous month’s output, percent year-on-year in July, to $2.5 billion, Mark Bynoe, Guyana’s energy department driven by lower sales in oil, coal and ferronick- Generated 19.3 Percent director, told Argus Media in July. Hess, one of el, the national statistics department, DANE, of Electricity in July ExxonMobil’s partners in the Stabroek block, said Monday, Reuters reported. The fall was Chile’s renewables generated 1,248 giga- had said output would reach 120,000 bpd in less steep than a month earlier, when export watt-hours of power in July, equivalent to August. ExxonMobil now says it will reach the value dropped 26.4 percent from the previous 19.3 percent of the country’s total electricity target “if we resolve everything that we have year. Colombia’s international oil sales were production that month, Renewables Now re- and all the plans that we have in the September down 50.9 percent year-on-year in July to $632 ported Aug. 28. The figure is 3.2 percent higher timeframe,” Routledge said. In related news, million, and in volume they were down 17.4 as compared to the same month last year and Exxon wants Guyana’s newly sworn-in govern- percent from the same year a month earlier, up 6.9 percent as compared to June, when ment to approve its third offshore oil project, DANE said. In the first seven months of the the renewables share reached 18.2 percent, which has been under review for months as year, the value of Colombia’s oil exports fell according to the report. [Editor’s note: See the country resolved problems with the vote 48.2 percent. related Q&A in the Aug. 14 issue of the Energy recount process following its March 2 election, Advisor.] Reuters reported. The company has previously said it planned to make a final investment deci- Venezuela’s Cardón sion on the Payara project around September. Refinery Halts New President Irfaan Ali, who has criticized Cuba Expands Power Cuts the country’s contract with Exxon as too Production Again as U.S. Sanctions Hit generous, has appointed a team of Canadian Venezuelan Fuel Supply consultants, including former Alberta Premier Venezuelan state oil firm PDVSA’s Cardón Alison Redford, to review Exxon’s proposal refinery has again stopped producing gasoline Cuba is deepening power cuts as U.S. sanc- to develop the field. “The timely approval of because its reformate unit is down, Reuters tions on Venezuela, the island’s main fuel additional proposed projects, including Payara, reported Sunday, citing a union leader and supplier, have made it harder for the Caribbean will ensure that the local work force and the two others with knowledge of the matter. The nation to keep its lights on, Argus Media report- utilization of local suppliers will continue to news comes days after reports that the refining ed last week. As Venezuelan state oil company grow,” said Routledge, Reuters reported. In facility, the second largest in the country, had PDVSA’s production has fallen sharply, so has related news, Guyana secured a higher price for resumed operations after having fixed the unit. the country’s fuel supply to Cuba. The Cuban its third crude lift of crude from the Stabroek The Andean nation has been facing severe fuel government chastised citizens for using too block, Argus Media reported Monday. The shortages for months. Venezuela’s refining much power during the Covid-19 lockdown and an unusually hot summer.

capacity, of 1.3 million barrels per day (bpd) of FEATURED Q&A / Continued from page 1 crude, has been paralyzed for years due to lack of investment and maintenance, in addition to to the economic health of the country, but it main exports from the Point Lisas industrial recent U.S. sanctions that have crippled PDV- may not have sufficient resources to sustain estate. The country is also facing declining SA. The 45,000 bpd reformer is typically used a recovery effort in this volatile period. In production of natural gas, which will end to convert naphtha into blending components terms of governance issues, the energy 2020 at 15 percent less than what it was in used to raise the octane of gasoline. However, sector is ‘drifting,’ without a stable regulatory 2015, and declining production of oil, which Venezuela has been using the facility to pro- framework, outdated legislation and missing duce approximately 25,000 bpd of gasoline for areas of accountability. Some commentators the domestic market, Reuters reported. Union have pointed to failings in direction and The country is also leader Iván Freites told the wire service that strategy to inspire confidence. A looming facing declining the refinery’s fluid catalytic cracking unit, which area of uncertainty is the changing global production of natural is key for large-scale gasoline production, is energy supply chain, necessitating foresight gas ... and declining halted. He added that the plant could restart analysis to select strategic options. The production of oil.” operations in the coming days. Roadmap to Recovery Committee set up by — Kevin Ramnarine the prime minister envisages a positive role for the energy sector ‘by enabling scheduled POWER SECTOR NEWS maintenance, construction and drilling proj- will end 2020 at around 27 percent less ects; recalibrating the gas value chain and than what it was in 2015. Reversing these restructuring the oil/gas industry to improve worrying trends will occupy policymakers’ New DR Gov’t Bets on competitiveness.’ Exploration activities are attention in the coming years.” Private Investment on the upside, and the geostrategic issues posed by Venezuela and Guyana are ‘watch Daniel Erikson, managing in Electricity Sector items’ on the radar screen that could pos- director of Blue Star Strate- itively affect the energy sector in Trinidad gies: “During Trinidad’s general The government of the new president of the and Tobago.” A election, opposition leader and Dominican Republic, Luis Abinader, will not former Prime Minister Kamla Persad-Bisses- invest in the construction of power plants, Kevin Ramnarine, former min- sar frequently criticized Prime Minister Row- instead betting on private-sector investment by ister of energy of Trinidad and ley’s efforts to attract and maintain foreign domestic and international players, said Energy Tobago: “During the election, the investment. Persad-Bissessar has repeatedly and Mines Minister Antonio Almonte, Renew- A opposition UNC raised concerns argued that Rowley’s administration failed to ables Now reported Aug. 28. Abinader was about the state of the energy sector as it create the proper incentives to attract new sworn in last month. His government will not relates to the closure of eight petrochemical investment and squandered the status and invest in another facility like Punta Catalina, plants at the Point Lisas Industrial Estate reputation established during her adminis- Almonte said, in reference to a 752-megawatt and the closure of the oil refinery in the town tration from 2010-2015. In 2019, Rowley’s coal-fired plant whose building contract has of Pointe-a-Pierre. These closures have had government negotiated an investment deal been tied to corruption allegations related an impact on economic activity in fence with Shell and BP that Persad-Bissessar to Brazilian construction giant Odebrecht, line communities. Other criticisms leveled described as simply recovering lost ground. according to the report. Instead, he said the at the incumbent PNM included its inability Like other major energy producing countries, government will focus on updating a 2007 law to award acreage for exploration. In his Trinidad and Tobago’s economic stability that regulates incentives for investments in second term, Rowley will have to address was threatened by the global collapse in oil renewable energy. The law offers tax incentives these issues. The reopening of the refinery prices earlier this year. Trinidad and Tobago and exemptions to developers of projects as under the operatorship of a company formed is the largest oil and natural gas producer big as 120-megawatt concentrated solar power by the trade union for the refinery is bound in the Caribbean, and its energy sector ac- plants and of schemes such as micro- and to be a major issue in the coming months. counts for 45 percent of the country’s GDP. mini-hydropower stations of as much as 5 The other issue is getting the closed or In recent years, lower energy prices have led megawatts, as long as the power is delivered idled petrochemical plants at Point Lisas to frequent contractions in the nation’s econ- to the country’s national grid. The minister said started again. This will be difficult due to the omy. While a modest economic recovery the Dominican Republic currently generates fact that Covid-19 has led to a collapse in was expected in 2019-2021 due to increased enough electricity to meet consumer demand, prices for ammonia and methanol, the two natural gas production, the Covid-19 crisis adding that the administration is instead Continued on page 6

COPYRIGHT © 2020, INTER-AMERICAN DIALOGUE PAGE 3 LATIN AMERICA ENERGY ADVISOR September 4, 2020 seeking to lower generation costs. According to the national statistics office, the Dominican s Republic had around 4,571 megawatts of total installed capacity last year, with approximately Subscriber Notice 1,106 megawatts coming from wind, solar and hydropower sources. Online Event: 24th Annual CAF Conference

POLITICAL NEWS SPEAKERS INCLUDE Luis Almagro Angel Melguizo Venezuela’s Capriles Secretary General, VP of External & Regulatory Backs Elections in OAS Affairs, AT&T Latin America Luis Carranza Julissa Reynoso Break With Guaidó President, CAF – Develop- Partner, ment Bank of Latin America Winston & Strawn Venezuelan opposition figure Henrique Carissa F. Etienne Paula Santilli Capriles, who unsuccessfully ran twice against Director, CEO, President Nicolás Maduro, on Wednesday said PAHO PepsiCo Latin America he would support congressional elections scheduled for December, The Wall Street Jour- ...AND MANY OTHERS nal reported. Capriles’ support for the vote was a break from National Assembly President and Sept. 9, 10 and 11, 2020 opposition leader Juan Guaidó, who has vowed to boycott the election, citing concerns that To register for the event, click here Maduro’s government will rig the vote. Dozens of countries around the world consider Guaidó to be Venezuela’s legitimate interim president. “We’re not going to leave the people without an option [in the elections],” Capriles said Wednes- Guaidó’s leadership, including a failed raid by to die while trying to save others is a crisis on day in a webcast. Capriles said the vote should mercenaries in May and a failed military revolt a staggering scale,” said Steve Cockburn, the be delayed because of the Covid-19 pandemic, in April 2019. In related news, authorities in head of economic and social justice at Am- but he added that Venezuelans should not Colombia announced Wednesday that they had nesty International. “Every health worker has sit out the election. “The only way to save arrested three Venezuelans who were allegedly the right to be safe at work, and it is a scandal this country is by opening political paths,” he part of the May plot to unseat Maduro, the that so many are paying the ultimate price,” said. On Wednesday, a spokesman at the U.S. Associated Press reported. he added. Cockburn also called for “global co- State Department said Maduro’s government operation” to ensure health care workers have controls the country’s electoral council and its Mexico Leads World access to adequate protective equipment. Peru press and has named its supporters to head is also among the countries with the highest Venezuelan opposition parties, The Wall Street in Deaths of Health Covid-19 fatality rates for health care workers, Journal reported. “Venezuelans recognize that with 183 recorded deaths. Amnesty Interna- the political fraud scheduled for December will Workers: Amnesty tional warned the figures are likely to be a sig- in no way be free or fair,” said the spokesman, nificant underestimate due to underreporting in the newspaper reported. “Maduro will continue More health workers have died from Covid-19 many of the countries included in the analysis. to try to divide and exploit Venezuelans as in Mexico than in any other country in the An extremely low coronavirus testing rate has long as he remains in the presidential palace in world, according to a report Amnesty Interna- been an issue in Mexico, where fewer than Caracas.” Capriles is unable run for president tional released Thursday. At least 7,000 health one in 100 Mexicans is tested, the Associated because he is among opposition figures who workers have died from the virus around the Press reported. According to figures released were previously banned from holding office. world, of which at least 1,320 died in Mexico, last week, 97,632 nurses, doctors and hospital However, Capriles said he would support oppo- followed by approximately 1,077 died in the employees in Mexico have tested positive for sition candidates in the December election. He United States, 649 in the United Kingdom and Covid-19 since the beginning of the pandemic. also criticized what he said were mistakes by 634 in Brazil. “For over seven thousand people The number represents about 17 percent of the

NEWS BRIEFS country’s total number of recorded cases, the a deal with three main groups of creditors AP reported. earlier in August. Last Friday, Reuters reported Imprisoned Gang that the government had high confidence that Members Release 10 creditors overall would back the deal. The gov- ECONOMIC NEWS ernment added on Monday that the agreement Guards in Guatemala would help to lower average interest payments Ten prison guards taken hostage by incar- Argentina Debt on bonds governed by foreign law to 3 percent cerated members of the Barrio 18 gang were from 7 percent. Argentina now must focus on released hours after captivity and negotiations Deal Has ‘Massive’ talks with the International Monetary Fund to with police in Guatemala, the Associated Press replace a defunct $57 billion lending program reported Tuesday. Interior Minister Gendri Acceptance: Guzmán that was agreed to in 2018, said Guzmán. The Reyes said three guards were freed first, and government also will need to turn its attention the remaining seven were released early on Private creditors have overwhelmingly toward smaller regional debt restructurings and Tuesday. The gang members had captured the accepted an offer to restructure $65 billion in provincial debt, he added. [Editor’s note: See guards at the “Little Hell” prison in Escuintla Argentine debt, allowing the country to avoid related Q&A in the Aug. 13 issue of the daily department. another default and protracted legal battles, Latin America Advisor.] the government announced Monday, the Associated Press reported. Argentine Economy Remittances to Latin JPMorgan Eyes Transfer Minister Martín Guzmán announced that 93.55 percent of bondholders accepted the deal and America Varied Over of Brazil Private Banking that Argentina would save $37.7 billion over Business to Bradesco the next 10 years. “The offer had a massive Year’s First Half: Pew acceptance by our creditors as a result of JPMorgan Chase & Co. has reached a deal the dialogue process that was established in Money transfers to several Latin American with Brazil’s Banco Bradesco to potentially nations varied during the first six months of transfer its private banking clients to the South the year, with lower remittances year-over-year American lender, Reuters reported Tuesday, to Colombia, El Salvador, Guatemala and Hon- citing a document filed by Bradesco. JPMorgan The offer had a massive duras, while they were up for Mexico and the has approximately 20 billion reais ($3.71 bil- acceptance by our cred- Dominican Republic, according to an analysis lion) under management in its Brazilian private itors as a result of the of central bank data published by the Washing- banking unit, a source told Reuters. Bradesco, dialogue process...” ton-based Pew Research Center on Monday. Brazil’s second-largest private lender, also said — Martín Guzmán Across the six nations included in the study, JPMorgan will still provide Brazilian clients remittances totaled $981.2 million in April, 17 with products and services abroad. percent lower as compared to the same month recent months,” said Guzmán, the AP reported. last year. El Salvador saw the sharpest decline President Alberto Fernández also celebrated in money transfers that month, registering a 40 Chile Estimates the bondholders’ acceptance. “We have the percent drop as compared to April 2019. Remit- Less-Severe Economic peace of mind that we have not betrayed the tances to Colombia during those four weeks trust of the Argentines because we did things were down 38.5 percent. Mexico experienced Decline This Year as we said we were going to do them. This time the smallest drop in remittances among the six Chile’s central bank on Wednesday forecast the debt will not be paid by those who have the countries in April, at just 2.6 percent, while in a less steep economic decline for this year, least,” he said. Fernández also thanked world March, money transfers to Mexico hit a record a contraction of between 4.5 percent and 5.5 leaders, including Mexican President Andrés monthly high of $4 billion, up 35 percent from percent, better than the between 5.5 percent Manuel López Obrador and Pope Francis, for the previous year. The increase in March was and 7.5 percent contraction it had predicted in their support during the negotiations. The deal in part driven by a favorable exchange rate June. This implies an “important recovery” in will help Argentina avoid its ninth sovereign between the Mexican peso and the U.S. dollar, the second half of the year, central bank chief default and also revive its economy, which is a rise in the number of individual remittance Mario Marcel said in the statement, adding expected to contract 12.5 percent this year, transactions and a higher average amount sent that the most recent data suggests econom- its third year of recession, Reuters reported. in each transaction, the Pew Research Center ic activity is bouncing back in some of the “Now there are other challenges, the first of said in a statement. [Editor’s note: See related sectors hit by pandemic-related lockdowns, which is to reactivate the domestic market,” Q&A in the Aug. 13-26 issue of the Dialogue’s including commerce and some services. said Fernández. Argentina’s government struck biweekly Financial Services Advisor.]

FEATURED Q&A / Continued from page 3 LATIN AMERICA ENERGY ADVISOR is published weekly by the Inter-American Dialogue Copyright © 2020 and corresponding price volatility may result the oil and gas taxation regime, gas pricing in a negative 4.5 percent GDP contraction by and the incentive regime, as well as the reg- Erik Brand the end of 2020, as predicted by the IMF. In ulatory environment. The government also Publisher [email protected] the ruling party’s manifesto for 2020-2025, promises to ensure that the local private Prime Minister Rowley’s government has sector obtains a larger share in production Gene Kuleta Editor indicated plans to diversify the country’s [email protected] energy sector by increasing exports of en- Anastasia Chacón González ergy services and emphasizing a transition Economic diversifica- Reporter & Associate Editor to renewable energy initiatives. However, tion away from oil and [email protected] portions of the 2020 manifesto contained gas ... is critical to the significant similarities to unaccomplished future development of portions of the party’s 2015 manifesto, the country.” Michael Shifter, President suggesting that Rowley’s government has its — Indra Haraksingh Rebecca Bill Chavez, Nonresident Senior Fellow work cut out for it in the next five years.” Sergio Bitar, Nonresident Senior Fellow Joan Caivano, Senior Advisor Indra Haraksingh, lecturer in the and exploration activities, while at the same Michael Camilleri, Director, Rule of Law Program Department of Physics at the time it is intent on facilitating international Kevin Casas-Zamora, Nonresident Senior Fellow University of the West Indies: partnerships. One major effect of the turmoil Héctor Castro Vizcarra, Nonresident Senior Fellow A “The comments of former Prime in prices is the determination to promote Julia Dias Leite, Nonresident Senior Fellow Minister Persad-Bissessar were made in increased use of renewable energy through Ariel Fiszbein, Director, Education Program the context of an election campaign and incentives, concessions and enabling legis- Peter Hakim, President Emeritus against the background of a dramatic fall lation. The proposed commercial scale solar Nora Lustig, Nonresident Senior Fellow in market prices for the country’s energy power project with partners LightSource Manuel Orozco, Senior Fellow exports and the closure of several upstream BP and Shell, and the Airport Authority of Margaret Myers, Director, Asia and facilities that had become less remunerative Trinidad and Tobago’s proposed solar park Latin America Program enterprises. To what extent plant closures are examples of the direction in which the Xiaoyu Pu, Nonresident Senior Fellow Jeffrey Puryear, Senior Fellow resulted from general market conditions, country is moving, toward economic and Mateo Samper, Nonresident Senior Fellow including the impact of the fallout from the environmental stability. Economic diver- Tamar Solnik, Director, Finance & Administration Covid-19 pandemic, or from the negotiated sification away from oil and gas in many Lisa Viscidi, Director, Energy Program price for natural gas that upstreamers were sectors, including ICT, is critical to the future Denisse Yanovich, Director of Development, contracted to pay, is a matter of debate. The development of the country.” External Relations & Special Projects government claims that it has successfully settled some production sharing arrange- The Advisor welcomes comments on its Q&A Latin America Energy Advisor is published weekly, with the exception of some major ments and has set as a manifesto promise section. Readers can write editor Gene Kuleta U.S. holidays, by the Inter-American Dialogue the attainment of consensus with all relevant at [email protected]. 1155 15th Street NW, Suite 800 Washington, DC 20005 Phone: 202-822-9002 stakeholders on appropriate adjustments to www.thedialogue.org ISSN 2163-7962

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