www.thedialogue.org August 4-8, 2008 FEATURED Q&A BOARD OF ADVISORS What is the Outlook for Wind Energy in Latin America? Jeffrey Davidow James R. Jones President, Co-chair, With oil prices forecasted to and the resulting increase in energy needs, Institute of the Manatt Jones remain at or above historic which have brought the region to look at Americas Global Strategies LLC highs, wind energy may be renewable energy and wind in particular becoming more viable as an as a viable option to diversify their energy Ramon Espinasa Doris Rodriguez Q alternative energy source, as indicated by matrices and help satisfy their growing Consultant, Partner, the announcement last week by Spain’s Inter-American Andrews Kurth LLP electricity needs. Several countries, like Development Bank Grupo Enhol and Chile's Haciendas Brazil, Chile, the Dominican Republic, Talinay of a billion-dollar joint venture Everett Santos and Peru, are already taking steps in terms Luis Giusti President, that would have a capacity to produce 500 of regulation, and the rest [of the coun- Senior Adviser, DALEC LLC megawatts of electricity for Chile. What tries] should follow the same road to make Center for Strategic & is the outlook for wind energy in Latin way for this energy source, which every International Studies R. Kirk Sherr America? Should governments in the day is more profitable, although it still CEO, region be doing more to encourage wind needs a push by governments to hasten its David Goldwyn Arrakis Geodynamics energy generation, and if so, what? President, Ltd. Q&A continued on page 4 Goldwyn International Guest Comment: Mauricio Strategies LLC Roger Stark Partner, Trujillo: "We are definitely seeing Jonathan C. Hamilton K&L Gates an interesting activation of the Partner, wind energy sector in all of Latin White & Case LLP Roger Tissot A America. Week after week advances are Independent Energy made toward the implementation of mas- Raul Herrera Consultant Partner, sive wind parks in different countries, such Corporate and Max Yzaguirre as Brazil, Mexico, Chile, Argentina, and Securities Practice Chief Executive Officer, soon Peru. The case of Central America is Arnold & Porter LLP The Yzaguirre Group also important, since it is a region on LLC. which oil prices are having a big impact William Irwin and which at the same time has very good Manager, International wind resources, factors that are driving the Government Affairs Blackout Hits Lima as Demand Chevron Corporation industry's development. There are several Puts Pressure on Generators initiatives for the implementation of wind parks on a grand scale that for a long time Cars traveled on darkened streets in Subscribers may pose questions to the have been trying to get off the ground but Lima, Peru on Thursday after a blackout Board of Advisors for the Featured Q&A by have only done so in recent years. This is left hundreds of thousands without contacting Editor Robert Simpson at: thanks to wind energy's greater competi- power. See story on page 3. [email protected] tiveness, oil prices, the threat of climate Photo: Agencia Andina. change, and sustained economic growth Inside This Issue FEATURED Q&A: What is the Outlook Trinidad Seeks New Markets for Blackout Hits Lima as Generators for Wind Energy in Latin America? .....................1 its Oil in the Wake of PetroCaribe .......................2 Struggle to Keep Up With Demand.....................3 Petrobras Agrees to Switch to Brazilian Firm Signs MOU to Research Alert: Dominican Republic's Service Contract in Ecuador ................................2 Build Dam in Mozambique....................................2 Electricity Sector Remains Troubled...................3 Oilworkers Agree to Call Off Strike Dominican Government Agrees Support for New Constitution After Reaching Deal With Petrobras ..................2 to Buy Shell's Refinery Stake...............................2 in Ecuador Continues to Rise ...............................4 Copyright © 2008, Inter-American Dialogue Page 1 of 6 Inter-American Dialogue’s Latin America Energy Advisor August 4-8, 2008 ENERGY SECTOR BRIEFS Oil & Gas News Oilworkers Agree to Call Off Strike After Reaching Deal With Petrobras Brazilian Firm Signs MOU to Build Dam in Mozambique Petrobras Agrees to Switch to Brazilian state oil company Petrobras on Mozambique signed a memoran- Service Contract in Ecuador Monday averted a strike by agreeing to dum of understanding with compensate workers for time spent travel- Brazilian construction and engineer- Brazilian national oil company Petrobras ing from oil platforms to the shore, ing firm Camargo Correia to build has agreed to switch to a service contract Reuters reported. The Norte Fluminense a $3.2 billion hydroelectric dam in with the Ecuadorean government under union had threatened to strike for five days the African country, Reuters report- which it will be paid a fee for extracting oil starting on Tuesday and shut down the rather than being Campos Basin, which accounts for about ed. Camargo Correia may also oper- allowed to keep and sell 85 percent of Brazil's petroleum output. In ate the dam, which is expected to part of the oil itself, the compromise reached earlier this week, produce up to 1,500 megawatts of Ecuadorean Oil Minister Petrobras will count the days spent travel- electricity. Camargo Correia still Galo Chiriboga said ing back to shore as paid half days, and the needs to find additional funding Thursday, according to compensation will be retroactive from before a deal is finalized, said Reuters. Chiriboga said January 2005. Petrobras platform staff Mozambique's planning and devel- Chiriboga the government and currently work 14 days offshore followed opment minister, Aiuba Quereneia. Ecuadorean govern- Petrobras would meet by 21 days off, according to energycur- ment file photo. immediately to work out rent.com. Last week, under the threat of a Dominican Government Agrees details of the new service contract, includ- strike from the larger oil workers union to Buy Shell's Refinery Stake ing economic conditions, but he gave no FUP, Petrobras agreed to raise profit shar- The Dominican Republic's govern- details on when the deal would be signed, ing terms for workers from 12.9 percent to ment on Tuesday reached an agree- ment for the purchase of Royal Dutch Shell's stake in the Refidomsa Petrobras' executive director for energy told reporters refinery, EFE reported. The $110 in Quito that the company plans to keep investing in the million deal gives the government full control of the refinery. Finance Andean nation after the contract switch. Minister Vicente Bengoa and Shell representatives said the purchase would be closed within 90 days fol- according to the report. Petrobras' execu- 15.2 percent. In related news, Petrobras lowing an asset inventory and a tive director for energy, Decio Oddone, CEO Jose Sergio Gabrielli said last Friday financial audit of Refidomsa. told reporters in Quito that the company the company plans to start production at plans to keep investing in the Andean its massive offshore Tupi oil field in the Venezuela's Citgo Grants $1.5 nation after the contract switch and first quarter of next year, according to Million to Maryland Charity expects to increase output by 5,000 barrels Bloomberg News. Initial output will be Venezuelan-owned oil company per day this year. Ecuadorean President between 20,000 and 30,000 barrels per day Citgo is making a $1.5 million Rafael Correa is expected to meet today (bpd), and will rise to 100,000 bpd in with Chinese consortium Andes 2010, Gabrielli said. donation to a Maryland-based non- Petroleum and Spain's Repsol to secure profit group, the charity said deals similar to the one reached with Trinidad Seeks New Markets for Monday. The gift, which will be Petrobras. As part of negotiations with its Oil in the Wake of PetroCaribe spread out over four years, will help foreign oil companies, the government in fund programs for low-income and June offered to lower a windfall tax on the Venezuela's PetroCaribe initiative, which immigrant workers. Chavez is using companies' earnings for one year from 99 provides subsidized oil to countries in the Citgo to create a constituency in the percent to 70 percent if they agree to drop Caribbean, is pushing Trinidad and United States and also to embarrass lawsuits challenging the tax. Since the Tobago out of the Caribbean petroleum the Bush administration over its windfall tax was imposed last year, the market, Reuters reported on Monday. social policy shortcomings, Michael companies have halted most investment in Trinidad and Tobago's state oil company Shifter, the vice president for policy Ecuador's oil sector, and some have filed Petrotrin has seen its Caribbean sales fall at Inter-American Dialogue, told the for arbitration in international court. to nearly half their normal level of 60,000 Ecuador produces around 500,000 barrels barrels per day (bpd) since Venezuelan Washington Post Tuesday. per day, nearly half of which is produced President Hugo Chavez started by private firms. PetroCaribe in 2005. Recent changes to Copyright © 2008, Inter-American Dialogue Page 2 of 6 Inter-American Dialogue’s Latin America Energy Advisor August 4-8, 2008 PetroCaribe, including Chavez's promise to allow 70 percent financing if oil prices top $150 per barrel, have further Research Alert decreased Trinidad and Tobago's ability to compete, the report said. Petrotrin is Dominican Republic's Electricity Sector Remains Troubled expected to lose market share in Guyana, which recently joined PetroCaribe, and in Fitch Ratings on Monday released a special report suggesting that the Dominican Jamaica, where Venezuela is financing the Republic's electricity sector is "on the brink of financial distress," and stating that it expansion of a refinery owned by state oil will be up to the government of President Leonel Fernandez, recently re-elected in a company Petrojam.