LATIN AMERICA ADVISOR ENERGY ADVISOR A WEEKLY PUBLICATION OF THE DIALOGUE www.thedialogue.org April 23, 2021

BOARD OF ADVISORS FEATURED Q&A TOP NEWS Nigel Blackaby Global Head, RENEWABLES NEWS International Arbitration Group, Freshfields Bruckhaus Deringer Will the New CEO Engie to Power Jeffrey Davidow Anglo American Senior Counselor, The Cohen Group of ’s Eletrobras Mine in Peru Jonathan C. Hamilton Engie Energía is set to power An- Partner, glo American’s Quellaveco copper White & Case Privatize the Firm? mine in Peru with 100 percent Raul Herrera renewable energy. Partner, Page 2 Corporate & Securities Practice, Arnold & Porter James R. Jones RENEWABLES NEWS Chairman, Monarch Global Strategies Brazil, U.S. in Jorge Kamine Talks for Biofuels Partner, Corporate & Financial Services, Treaty: Minister Willkie Farr & Gallagher Brazil’s energy and mining Craig A. Kelly minister said the two countries Senior Director, are working on a cooperation Americas Int’l Gov’t Relations, Rodrigo Limp Nascimento, a former energy secretary, was tapped to head Brazilian state utility Exxon Mobil treaty to develop “the biofuels of Eletrobras amid the company’s privatization plans. // File Photo: Brazilian Government. the world.” Jorge León Page 4 Energy Economist, BP Brazil’s government has named Rodrigo Limp Nascimento Jeremy Martin as the new chief executive officer of state utility Eletrobras. OIL & GAS Vice President, Energy & Sustainability, Institute of the Americas He replaces Wilson Ferreira, who resigned in January over Expects Q what he referred to as a lack of political backing in Congress Mayya Novakovskiy Oil Output to Manager, Western Hemisphere, for the company’s privatization plans. Limp’s appointment sparked some Chevron Reach One Mn criticism, as the government reportedly ignored a recommendation by a Larry Pascal BPD by 2027 Chairman, headhunter firm that was hired to pick Eletrobras’ new CEO, prompting Guyana expects crude oil output Americas Practice Group, at least one company board member to resign in protest. Is Limp the Haynes & Boone to reach one million barrels per best person to lead Eletrobras, and what issues can he be expected to day by 2027, which would position R. Kirk Sherr President, prioritize? What is the state of Eletrobras’ privatization plans, and what the South American nation as a potential leading supplier of Clearview Strategy Group are the benefits and drawbacks of such a move? Can progress in Mark Thurber oil in the Western Hemisphere, Partner, the company’s privatization efforts be expected soon, and what are the said Natural Resources Minister Hunton Andrews Kurth most important obstacles standing in the way? Vickram Bharrat. Jose L. Valera Page 2 Partner, Mayer Brown LLP Erich Decat, political analyst at XP Investments: “On its Lisa Viscidi Program Director, search for its next CEO, Brazilian state electricity company Inter-American Dialogue Eletrobras hired a specialized headhunter firm, but the gov- Vanessa Wottrich ernment decided to bypass it and appoint its own candidate. Principal Analyst for Latin America, A Equinor That decision did not negatively affect Eletrobras’ share price in the slightest—because investors welcomed the choice. Rodrigo Limp is a for- mer secretary of energy, with strong congressional relationships, which is why investors like him. In fact, Limp, as a congressional advisor, par- ticipated in the 2017 negotiation of a failed bill aimed at privatizing the company. At the time, different political interests derailed the attempt. However, legislators are currently debating a provisional measure based Continued on page 3 Bharrat // File Photo: Guyanese Government.

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OIL AND GAS NEWS because its intent is to make sure the oil NEWS BRIEFS sector develops quickly, and with it see an Guyana Expects Oil increase in oil revenues for the government,” Engie Peru to Power Raúl Gallegos, director of Control Risks, told Anglo American Mine Output to Reach One the Energy Advisor in a Q&A published Nov. 27. “The ability of the government to manage oil With Renewable Energy Million BPD by 2027 revenue responsibility and transparently is an- South Africa-based and British-listed mine other matter,” he added. In the current structure Anglo American announced last week that Guyana expects crude oil output to reach one of Guyana’s natural resources fund, which the it has signed a deal with Engie Energía Perú million barrels per day by 2027, positioning the central bank manages, the president has the to provide 100 percent renewable energy to South American nation as a potential leading ultimate say over how resources are spent and the company’s Quellaveco copper mine in the supplier of oil in the Western Hemisphere, invested, Gallegos said. Andean nation, which is expected to begin a government official said last week, Argus production in 2022, Reuters reported. Anglo Media reported. “By 2027, we are hoping that American already has renewable energy com- there will be at least seven floating production, ’ New CEO mitments in Brazil and Chile. storage and offloading (FPSO) vessels in the country, and that we will be producing either Signals Continuity close [to] or even over one million barrels per at Swearing-in day,” said National Resources Minister Vickram Canada’s Conservative Joaquim Silva e Luna, the new CEO of Brazilian Party Backs Carbon Tax state oil company Petrobras, will respect the Canada’s Conservative Party last week The Guyanese government company’s current pricing policy and continue reversed its climate change stance by backing investments in deepwater assets, he said at his carbon pricing and adopting the fee on also expects oil income swearing-in ceremony on Monday, Reuters re- emissions and fuels in a move that may upset to surpass $1 billion per ported. His speech signaled some form of con- many of its supporters, Reuters reported. year by 2025. tinuity of the previous management’s policies, Under leader Erin O’Toole, the party plans to which the market generally viewed as positive. scrap Prime Minister ’s national Brazil-listed preferred shares in Petrobras rose carbon tax, which is set to increase to 170 about 2.6 over the course of his brief com- Canadian dollars ($135.64) a ton by 2030, and Bharrat. Currently, the Liza 1 well, which oil ments on Monday, and they were among the instead cap prices at 50 Canadian dollars a ton major ExxonMobil operates on the country’s largest gainers on Brazil’s benchmark Bovespa for taxpayers. Some analysts say this may lead deepwater Stabroek block, is producing index by mid-day, trading up 3.9 percent. to higher fuel bills. 120,000 barrels per day (bpd). Exxon forecasts output will reach 750,000 bpd by 2026, the same year by which it expects to have five FP- Venezuela’s Maduro SOs operating in Guyana. The company’s vice Full Repairs to Mexico’s president for deepwater projects, Jayme Meier, Vows to Resolve Minatitlán Refinery to said last year that Exxon also sees potential for Diesel Shortages Take 90 Days: Pemex as many as 10 FPS0s soon after 2026. Bharrat Full repairment of the Minatitlán refinery in said Guyana expects oil income to exceed $1 Venezuelan President Nicolás Maduro on billion per year by 2025, though he did not de- Mexico’s Veracruz state will likely take 90 days, Wednesday vowed to resolve widespread although some production could resume as tail price assumptions. “That would augur well diesel shortages that farmers say are compli- for Guyana,” he said, Argus Media reported. “It soon as April 30, state oil company Pemex said cating the planting and harvesting of crops, last week, Argus Media reported. The refinery, means more direct proceeds from the oil and Reuters reported. Maduro also called on the gas industry will be coming in.” The adminis- which can process as many as 285,000 barrels oil minister to increase domestic production of per day, was shuttered earlier this month tration of President Irfaan Ali, who took office fuel, blaming U.S. sanctions on state oil com- last August, is currently preparing a request for following a major fire that started in a pump pany PDVSA for the shortages. The adminis- house. The country’s environmental and work- company proposals to market its share of oil tration of former U.S. President Donald Trump from the Liza 1 well. “The Ali government will place safety agency, ASEA, has initiated an last year declined to renew an exemption from inspection of the refinery to determine whether continue to take a business-friendly approach sanctions for diesel supplied to Venezuela to dealing with oil companies, particularly the fire was caused by a result of violations to by non-U.S. companies, a measure that had safety protocols.

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been in place on humanitarian grounds. There FEATURED Q&A / Continued from page 1 had been some speculation that the diesel exemption from sanctions could be reinstated on the 2017 bill, with the same content. Due dent Bolsonaro’s correct perception, despite under U.S. President Joe Biden, but his admin- to his background, Limp knows how to over- his initially liberal rhetoric, that privatization istration so far has signaled continuity of all come congressional opposition. Currently, could lead to higher electricity prices, as oc- sanctions against the Andean nation. “We must investors are focused on the sponsor of the curred in the late 1990s. Throughout history, regularize the issue of diesel with national bill, which is in the lower house of Congress. successive governments repeatedly used production,” Maduro said, urging Oil Minister The changes he has signaled to the original Tareck El Aissami to resume normal supply proposal have made some funds and banks within 60 days. “If we could import, we would apprehensive. One of the proposed changes It is unlikely that is to privatize the company by splitting it be buoyant. We will be buoyant in the produc- Eletrobras’ privatiza- into three. Recently, the sponsor started tion of oil products,” he added. In addition to tion will march at the U.S. sanctions, years of mismanagement and debate with congressional party leaders. lack of funding have hit the country’s oil sector. This is when opposition against proposals pace that free- Venezuela’s Paraguaná refining complex has usually emerges. The discussion will drag marketers desire...” been operating below capacity for years. “Many on in the lower chamber until mid-May. The — Francisco Ebeling Barros crops will be lost this year due to a lack of has to give its final say by July 23. diesel, which is also expected to affect the Despite the controversy that the privatization transportation of medicines, food, cooking of Eletrobras has created, there is room for gas and gasoline,” Antero Alvarado, managing Congress to pass the bill. The new CEO will Eletrobras as an instrument of electricity partner and Venezuela director at Gas Energy be key to the outcome.” price stability, often at the cost of the com- Latin America, told the Energy Advisor in a Q&A pany’s short-term profitability. Bolsonaro published March 26. “This could make daily life Francisco Ebeling Barros, knows that high electricity prices may bear much more complex for those of us living in independent energy consultant significant political costs and could even Venezuela,” he added. based in Berlin: “Despite the threaten his re-election plans. Moreover, A Eletrobras board’s disappoint- Bolsonaro also needs support from the mar- ment with Limp being named the company’s ket to ward off the risk of being impeached. Canada Lawmakers new CEO, some commentators have wel- Because of this unstable political equilibri- comed this choice. Some believe Limp has um, it is unlikely that Eletrobras’ privatization Call on Enbridge, U.S. the disposition to carry out the company’s will march at the pace that free-marketers to Resolve Issues privatization plans, which Ferreira no longer desire, and Limp’s tenure as CEO could be a saw as a top priority. This reflected Presi- short one.” Continued on page 6 Canadian lawmakers last week called for action from leaders of Calgary-based energy United States is critically important to the not just a pipeline—it’s an economic lifeline in transportation company Enbridge and the U.S. continued operation of Line 5,” the report said, Canada and the United States,” he added. state of Michigan to resolve a dispute that Reuters reported. “Line 5 is a significant aspect arose after Michigan Gov. Gretchen Whitmer of Canada’s economic relationship with the ordered Enbridge to shut down a four-mile United States and contributes to secure energy RENEWABLES NEWS section of the cross-border Line 5 oil pipeline supplies in both countries,” it added. The by May 12 due to concerns that it could leak, report also recommended that Canadian Prime Reuters reported. The pipeline, which runs Minister Justin Trudeau and his ministers Brazil Needs $10 Bn under the Straits of Mackinac in the Great pursue “frequent and direct dialogue” about the to Reach Carbon Lakes, transports as much as 540,000 barrels pipeline with U.S. President Joe Biden and his per day of crude oil and natural gas. Shutting administration. If diplomatic efforts fail, Cana- Neutrality: Salles it down may lead to fuel shortages and job da may seek legal action to settle the dispute, losses on both sides of the border, according although state-to-state negotiation would be Brazilian Environment Minister Ricardo Salles to a report that a special committee of the Ca- preferable, according to the committee. “The said Brazil needs $10 billion in foreign aid per nadian House of Commons published following stakes could not be higher,” Vern Yu, Enbridge’s year in order to achieve net-zero carbon emis- weeks of hearings on the issue. “The Special executive vice president and president of sions by 2050, a decade ahead of its initial plan Committee feels that continued engagement liquids pipelines, said in a statement. “Line 5 is of 2060, Reuters reported last week. His com- between the Governments of Canada and the

COPYRIGHT © 2021, INTER-AMERICAN DIALOGUE PAGE 3 LATIN AMERICA ENERGY ADVISOR April 23, 2021 ments came as Brazil is in talks on a separate potential agreement with the United States to ADVISOR Q&A raise funds to fight surging deforestation in the South American country’s Amazon rain forest. Salles told the wire service he did not expect a What Will Result From Efforts deal to be announced at this week’s U.S. Earth Day summit. at Vaccine Diplomacy?

The administration of U.S. percent for Sinopharm), yet Latin American Piñera Inaugurates President Joe Biden recently governments have prioritized getting some- said it is working on a plan thing over efficacy. The Russian Sputnik V Sonnedix’s 170-MW Q to send 2.5 million doses of vaccine, despite safety concerns due to a PV Farm in Tarapacá Covid-19 vaccines to Mexico and another lack of information about its testing, has dis- 1.5 million to Canada. In the meantime, proportionately been accepted by countries Chilean President Sebastián Piñera last week Russia has provided millions of doses of with leftist-populist political orientations, in- presided over European solar power company Covid vaccines to Latin American countries, cluding Venezuela, Bolivia, Nicaragua, Argen- Sonnedix’s inauguration of its 170-megawatt including Bolivia. Additionally, China has tina and Mexico. It has also gone to Guyana, photovoltaic solar farm in Tarapacá, Chile, signed deals to provide vaccines to several Guatemala and Paraguay, which have limited alongside Energy Minister Juan Carlos Jobet countries including El Salvador, to which resources to acquire vaccines elsewhere. and regional authorities, Renewables Now China is donating 150,000 doses. What will Additionally, most ‘vaccines’ found in the reported. Located in the Tarapacá region of the result from major world powers’ efforts at black market bear Russian or Chinese labels. Atacama Desert, which has the highest solar vaccine diplomacy? Which countries will The impact of Russia’s vaccine diplomacy is radiance in the world, the Sonnedix Atacama see the biggest benefits from their efforts limited by the reluctance of many countries farm is the company’s largest solar project to to distribute Covid vaccines in Latin Amer- to accept Sputnik V, as well as Russia’s date, receiving an investment of more than ica? Which countries in the region are not inability to get adequate quantities to those $180 million and featuring around 500,000 so- getting access to vaccines, and why? who accept it. China has used its vaccines lar mono panels and 48 central inverters. “Very to induce Brazil to let Huawei participate few countries in the world have the potential R. Evan Ellis, Latin America in an upcoming 5G auction (successfully), of Chile in solar energy,” said Piñera at the research professor at the U.S. and to pressure Paraguay to de-recognize event, according to a statement by Sonnedix Army War College Strategic Taiwan (unsuccessfully). As the United published in PV Magazine. “This project will A Studies Institute: “China and States completes vaccination of the majority change the life of people in Chile,” he added. Russia, with the pandemic more controlled of its population by July, it will likely expand The plant is expected to generate approximate- than the United States at home, have vaccine assistance to Latin America, yet the ly 470 gigawatt-hours of electricity per year, exploited vaccine sales and donation to region will likely make significant economic according to the company. Sonnedix has 11 pursue agendas abroad. Cansino, Sino- and political concessions to China in the solar PV plants in Chile. In addition to projects pharm and Sinovac are being shipped to 12 interim to get its vaccines.” currently under construction, the company con- Latin American countries, although only in trols a total capacity of almost 400 megawatts three do they exceed 10 percent of vac- in the Andean nation, according to its website. cines received: Chile (60 percent), Peru (45 EDITOR’S NOTE: More commentary on this percent) and Argentina (30 percent). The topic appears in the Q&A of Tuesday’s issue Chinese vaccines are generally less effective of the Latin America Advisor. Brazil, U.S. Working than their western counterparts (50 percent on Biofuels Treaty: for Sinovac, 66 percent for Cansino and 79

Albuquerque he was open to more international partnerships newable Fuels Association. “The U.S.-Brazil re- on the issue. Brazil is a major producer of eth- lationship is and needs to be more than a bump Brazil is working with the United States on es- anol, which is largely used to power cars. The in the road with the ethanol issue,” Renata tablishing a cooperation treaty to help develop two countries are leading producers of ethanol Amaral, co-director of the certificate program “the biofuels of the world,” Brazilian Energy and fuel. In 2017, Brazil and the United States on the WTO and U.S. trade law at American Mining Minister Bento Albuquerque said last together accounted for about 85 percent of University’s Washington College of Law, told week, Reuters reported. Albuquerque also said global ethanol production, according to the Re- the Energy Advisor in a Q&A published on Aug.

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NEWS BRIEFS 28. “If we had dynamic biofuels policies around and provocative performances. “Those lumpen the world, trade (and consumers) would benefit mercenaries who make money on the back of Indigenous People Protest greatly,” she added. the destiny of all, those who call for invasion, Bolsonaro’s Commercial those who continuously offend in words and acts ... would be well advised that this people’s Mining Bill in Brazil POLITICAL NEWS patience has limits,” he said. [Editor’s note: See About 100 Indigenous people from six states Q&A in Wednesday’s issue of the daily Latin across Brazil gathered in Brasília on Monday to America Advisor.] protest proposed legislation that would make Cuba’s Communist mining on their lands legal, CNN reported. Party Selects Díaz- Protesters carried banners reading, “Invaders ECONOMIC NEWS get out! Miners get out, agrobusiness get out! Canel as New Leader Bolsonaro get out!,” in reference to President , whose government sponsors As expected, Cuba’s Communist Party on Mon- United Nations Seeks the commercial mining bill. Congress had day selected the country’s president, Miguel $29.2 Million for dismissed the proposal last June, but lobbyists Díaz-Canel, as its new leader, the Associated from the mining sector have been pushing for Press reported. Díaz-Canel, 61, succeeded Relief in St. Vincent its revival, according to the report. Raúl Castro, 89, as president in 2018. Castro stepped down as the party’s leader on Friday The United Nations on Tuesday launched an as the party opened its eighth congress. appeal for $29.2 million in global funding to U.N., Venezuela Díaz-Canel’s naming as the party’s leader help St. Vincent and the Grenadines following on Monday came as the four-day congress major eruptions of the La Soufrière volcano. Reach Agreement on concluded. Wearing a dark suit and red tie in “The funding will provide immediate lifesav- Food Aid to Children contrast to Castro’s military fatigues, Díaz- ing humanitarian assistance, including clean The United Nations World Food Program has Canel vowed to consult Castro on important water, and support a sustainable recovery for reached a deal with the government of Venezu- decisions, Reuters reported. “He will always be everyone impacted,” the United Nations said elan President Nicolás Maduro to provide food present, aware of everything going on, fighting in a statement. “The UN and partners will also to school children in the South American coun- energetically and sharing ideas and thoughts assess the economic, social and environmen- try, Reuters reported Monday. The program on the revolutionary cause through his advice, tal toll on all the countries touched by the will reach 185,000 children this year, the World orientation and alerts in the face of any error or fallout, including ash removal and improving Food Program said in a statement. Child mal- deficiency,” Díaz-Canel said in his first speech environmental health provisions.” The United nutrition has increased in Venezuela amid a as the party’s leader. Before joining Castro’s Nations said that it also is seeking to prevent collapse of the country’s economy. “This is the government in 2009 as Cuba’s education the spread of Covid-19 in the Caribbean nation. first step toward a series of ambitious projects minister, Díaz-Canel was the Cuban Communist “Entire villages have been covered in ash, build- that will provide food support,” Maduro said. Party’s chief in two provinces. Since succeed- ings damaged, schools and businesses closed, ing Castro as president, Díaz-Canel has vowed crops and livestock destroyed, and residents continuity. While he is not expected to move left with limited access to clean drinking wa- Cuba away from its one-party political system, ter,” the United Nations added. Didier Trebucq, Two Mexican Police he will be under pressure to carry out further the United Nations’ resident coordinator for Officers Injured economic reforms. The country’s economy Barbados and the Eastern Caribbean added, in Drone Attack shrank 11 percent last year amid the coronavi- “The level of destruction that has befallen this rus pandemic and U.S. sanctions. Shortages of beautiful country and the widespread disrup- Two police officers were injured in the Mexican even basic goods have forced Cubans to wait tion caused by this event will forever be etched state of Michoacán on Tuesday when attack- in lines for hours at stores across the country. in my mind. The devastating impact of this ers, believed to be linked to the Jalisco New Díaz-Canel said in his speech on Monday that event on thousands of people is undeniable.” Generation Cartel (CJNG), dropped explosive the economy is durable and that the country St. Vincent’s prime minister, , devices onto them using drones, BBC News had preserved achievements such as uni- said officials in the Caribbean nation are still reported. Drones are thought to be the latest versal health care and education while also trying to quantify the damage from the volcanic weapons in the country’s drug war. The drones supporting other countries by sending them eruptions, but he added that rebuilding will take used in the attack appear to have been rigged Cuban doctors, Reuters reported. Díaz-Canel “hundreds of millions of dollars” and “massive” in similar ways to two drones found in the car also issued a warning to dissidents and artists humanitarian relief, the Associated Press of suspected CJNG members last August. who have been gathering for small protests reported.

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FEATURED Q&A / Continued from page 3 LATIN AMERICA ENERGY ADVISOR is published weekly by the Inter-American Dialogue ISSN 2163-7962 Ana Karina Souza, partner at the federal government’s attempt to have Machado Meyer Advogados: a closer alignment between the company’s Erik Brand “Eletrobras’ privatization plans leadership and the government’s privatiza- Publisher [email protected] are closer to achieving con- tion plans. However, major obstacles remain, A Gene Kuleta crete results with Provisional Measure No. such as Congress’ current political agenda, Editor 1,031/2021, which President Jair Bolsonaro which includes the creation of a congres- [email protected] enacted on Feb. 23. The provisional measure sional investigation commission to probe Anastasia Chacón González provides that Eletrobras’ privatization shall the Brazilian government’s response to the Reporter & Associate Editor take place in the form of a capital increase, Covid-19 pandemic.” [email protected] with the dilution of the current controlling Diana Roy stake held by the Brazilian federal govern- Vítor Sousa, equity research Editorial Intern ment, and the prohibition that any share- analyst at Genial Investimentos: [email protected] holder or group of shareholders hold rights “I’m not positive about Limp’s that exceed 10 percent of the voting shares nomination. Despite his high A Michael Shifter, President of Eletrobras. The creation of a special education level and long track record as a class of preferred shares, to be held by the public employee, he has no experience in Rebecca Bill Chavez, Nonresident Senior Fellow Brazilian federal government with protec- working for private corporations. Eletrobras Bruno Binetti, Nonresident Fellow tive veto rights in order to avoid a share- is not just the biggest company in the power Sergio Bitar, Nonresident Senior Fellow holding concentration above 10 percent industry, it is also one of the most complex. Joan Caivano, Senior Advisor of the voting shares of Eletrobras, is also Coupled with that, the way in which he Michael Camilleri, Director, Rule of Law Program contemplated. Other highlights include the was chosen—bypassing all the statutory Kevin Casas-Zamora, Nonresident Senior Fellow government’s decision to allocate a larger procedures—was really negative. For the Julia Dias Leite, Nonresident Senior Fellow Ariel Fiszbein, Director, Education Program portion of Eletrobras’ privatization resourc- company’s possible privatization scenario, Sandra García Jaramillo, Nonresident Senior Fellow es (50 percent) to reduce tariff increases, more important than the new CEO and how Selina Ho, Nonresident Senior Fellow through the Energy Development Account, clever he may be is the political will to move Edison Lanza, Nonresident Senior Fellow and the exclusion of subsidiaries Itaipú forward with such plans. I am not convinced Nora Lustig, Nonresident Senior Fellow and Eletronuclear from the privatization that the Brazilian government truly has a Margaret Myers, Director, Asia Program plans. The federal government’s objective desire to go through with privatization plans Manuel Orozco, Senior Fellow with the provisional measure is to expedite this year; and 2022 is an electoral year.” Xiaoyu Pu, Nonresident Senior Fellow the company’s privatization process, but Jeffrey Puryear, Senior Fellow it is still uncertain whether the Brazilian The Advisor welcomes comments on its Q&A Tamar Solnik, Director, Finance & Administration Congress will approve its conversion into section. Readers can write editor Gene Kuleta Lisa Viscidi, Director, Energy Program law within 120 days. Recent changes in the at [email protected]. Denisse Yanovich, Director of Development management of Eletrobras were dictated by Latin America Energy Advisor is published weekly, with the exception of some major U.S. holidays, by the Inter-American Dialogue 1155 15th Street NW, Suite 800 s Washington, DC 20005 Event Notice www.thedialogue.org Subscription inquiries are welcomed at [email protected]

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