LATIN AMERICA ADVISOR ENERGY ADVISOR A WEEKLY PUBLICATION OF THE DIALOGUE www.thedialogue.org September 11, 2020 BOARD OF ADVISORS FEATURED Q&A TOP NEWS Nigel Blackaby Global Head, OIL & GAS International Arbitration Group, Freshfields Bruckhaus Deringer Will a New Secretary Mexico Likely to Mary Rose Brusewitz Cut 2021 Crude Member, Clark Hill Strasburger Change Argentina’s Output Targets: Jeffrey Davidow Lawmaker Senior Counselor, The Cohen Group Energy Direction? Ruling party legislator Erasmo González said Mexico will likely Jonathan C. Hamilton Partner, be forced to cut crude oil produc- White & Case tion targets after missing this Ana Heeren year’s goal. Managing Director, Page 2 FTI Consulting Raul Herrera RENEWABLES Partner, Corporate & Securities Practice, AES Tiete, Unipar Arnold & Porter James R. Jones Partner on Wind Chairman, Project in Brazil Monarch Global Strategies Brazilian energy firm AES Jorge Kamine Argentina’s new energy secretary, Darío Martínez (L), met with President Alberto Fernández (R) Tiete and Unipar Carbocloro have Partner, in late August to discuss the future of the energy sector. // Photo: Argentine Government. Corporate & Financial Services, formed a joint venture to develop Willkie Farr & Gallagher a 155-megawatt wind project in Craig A. Kelly Sergio Lanziani resigned last month as Argentina’s energy Brazil’s Bahia state. Senior Director, secretary. Darío Martínez, a lawmaker representing Neuquén Page 2 Americas Int’l Gov’t Relations, Exxon Mobil province—where the massive Vaca Muerta shale oil and gas OIL & GAS Jorge León Q formation is located—will replace him. What led to Lanziani’s Energy Economist, departure? Is Martínez the best person to head the energy sector, and Brazil Oil Exports BP how might his priorities as secretary differ from his predecessor’s? What Jeremy Martin Down in August: Vice President, Energy & Sustainability, is the current state of the South American country’s oil and gas sector? Ministry Data Institute of the Americas Brazilian crude exports fell about Mayya Novakovskiy 30 percent in August as compared Manager, Western Hemisphere, Víctor Bronstein, director of the Centro de Estudios de Chevron to a month earlier but were up 15 Energía, Politica y Sociedad (CEEPYS) in Buenos Aires: percent year-on-year, according Larry Pascal Chairman, “Lanziani’s departure was expected several months ago as he to preliminary data from the trade Americas Practice Group, was never really able to settle into his position and advance ministry, which is currently led by Haynes & Boone A Marcos Jorge de Lima. his projects. He did not choose most of his collaborators; rather, they R. Kirk Sherr Page 2 President, were distributed according to the different sectors of the ruling coali- Clearview Strategy Group tion, which attacked the coherence of his team and made management Mark Thurber difficult. In addition, due to his own mistakes, shortly after taking office Partner, Hunton Andrews Kurth he lost the political support that led him to head the energy secretariat. Jose L. Valera The situation made Production Minister Matías Kulfas, on whom Lanziani Partner, Mayer Brown LLP depended, directly assume management of the energy portfolio, leading Lisa Viscidi to the development of the Gas 4 Plan to favor investments in Vaca Muer- Program Director, ta. It is truly difficult to say if Darío Martínez is the best suited to lead Inter-American Dialogue Argentina’s energy secretariat. Unlike Lanziani, he has a more political Vanessa Wottrich Principal Analyst for Latin America, than technical background. Before taking office as secretary, he served Equinor as a national deputy at the head of the Energy and Fuel Commission. Surely, coming from the province of Neuquén—where almost 90 percent of Vaca Muerta is located—the government’s priority will be the develop- de Lima // File Photo: Brazilian Government. Continued on page 3 COPYRIGHT © 2020, INTER-AMERICAN DIALOGUE PAGE 1 LATIN AMERICA ENERGY ADVISOR September 11, 2020 OIL AND GAS NEWS barrels per day (bpd) for next year is stretched, NEWS BRIEFS adding, however, that state oil company Pemex Brazil Crude Exports is still on track to increase its production from BI Energia in Talks With current levels. In July, the firm saw its lowest Gov’t of Rio Grande do Down in August, in levels of production since October 1979, at 604 million bpd, down 4.2 percent year-over-year, Norte Over Wind Project Part Due to China according to data from the National Hydrocar- Italian-Brazilian energy firm BI Energia is bons Commission. In the first seven months in talks with the government of Brazil’s Rio Brazilian crude exports were down about 30 of the year, crude production levels in Mexico Grande do Norte state to discuss the feasibility percent in August as compared to July, at averaged 1.692 million bpd, below the 1.83 of developing an offshore wind project with a around 1.29 million barrels per day (bpd) of million bpd the Finance Ministry expected. 624 megawatt capacity, Renewables Now re- oil, in part due to congestion at Chinese ports Pemex was among the companies that saw the ported Monday. The proposed wind farm, which following severe floods in the Yangtze basin, sharpest drop in output in July, Publimetro re- would have 52 wind turbines of 12 megawatts Argus Media reported Monday. However, as ported. Combined with lower selling prices, the each, would be able to generate around 3.15 compared to the same month a year ago, below-target production levels have slashed million megawatt-hours per year. It would cover the government’s oil revenue to just 56 percent an area of 300 square kilometers, including one of its target. González told Bloomberg News offshore and one onshore substation, accord- that the budget proposal, which the govern- ing to the report. Around 88 percent of all ment presented to Congress on Tuesday, is “the Brazilian crude exports in most complex of the last nearly 100 years in August were to China. the modern history of our country” due to the pandemic. González also said the importance AES Tiete, Unipar Form of public health has made it very difficult to de- Joint Venture to Develop sign the plan, which stipulates higher spending Wind Farm in Brazil Brazilian crude exports rose almost 15 percent, on public health. Brazilian energy firm AES Tiete announced last according to preliminary data from the trade week that it has officially formed a joint venture ministry, known as MDIC. Around 88 percent with Unipar Carbocloro to develop a 155-mega- of all crude exports in August were to China, Argentina Uncovers watt wind project that is part of AES Tiete’s 73 percent higher than the approximately 1.94 Scheme to Steal Oil Tucano wind complex in Brazil’s Bahia state, million bpd Brazil sold to the Asian giant in Renewables Now reported Sept. 4. The compa- July, according to MDIC data. As compared to From Key Pipeline nies expect the wind farm to begin generation August 2019, the Netherlands, France and Por- in the second half of 2022. AES Tiete had tugal increased their share of Brazilian crude, Argentina has uncovered a large-scale previously said the project would require an while the United States reduced its share in the scheme to steal crude from a key pipeline investment of about 4 million reais ($756,000) same period, Argus Media reported. [Editor’s that transports crude to the country’s three per megawatt for the plant to be built. note: See related Q&A in the July 31 issue of largest refineries, Argus Media reported Sept. the Energy Advisor.] 3. Authorities in the provinces of Buenos Aires, Santa Fe, Neuquén and Río Negro last week Mexico Likely to Cut arrested 23 people and conducted 39 raids in Cuba Expands Solar PV connection with the case. The theft occurred Plant With ADFD Funding at the YPF-operated Rosales-La Plata pipeline, 2021 Oil Production Cuba has recently expanded a 10-megawatt which is approximately 548 kilometers long solar photovoltaic plant to 15 megawatts of Target: Lawmaker and has the capacity to hold some 325,000 bar- total capacity, financed by the Abu Dhabi Fund rels of crude per day. It supplies the La Plata for Development, or ADFD, Renewables Now Mexico will likely be forced to cut its targets refinery as well as Raizen’s Dock Sud and Ax- reported Tuesday. The project was upgraded for crude oil production next year after missing ion’s Campana refining facilities. Federal police with the savings from a concessionary loan of this year’s goal, ruling party legislator Erasmo chief Eduardo Villalba said authorities are now $15 million, said ADFD, adding that benefits González told Bloomberg News in an interview in the second part of the investigation, which from this project prompted it to support a published Sept. 3. González, who heads the includes finding the channels through which second solar scheme of 14.3 megawatts that lower house’s Budget Committee, said the gov- the theft ring brought the stolen oil to market, will include 4 megawatts of battery storage ernment’s initial output target of 2.027 million Diario Río Negro reported. Argentine state oil capacity. COPYRIGHT © 2020, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ENERGY ADVISOR September 11, 2020 company YPF said it was still evaluating the FEATURED Q&A / Continued from page 1 impact of the oil theft, which is common in other Latin American countries but had not ment of this formation of unconventional bpd. Gas production decreased approximate- been uncovered in Argentina until now, Argus resources. This clearly differentiates him ly 12 percent in July year-on-year (averaging Media reported. “In terms of quantity, we have from his predecessor, who was a nuclear 126.8 million cubic meters per day at actual not determined that yet because the pipeline engineer and emphasized the development heat value).