The 25th annual La Jolla Energy Conference (www.iamericas.org/lajolla) sponsored by U.C. San Diego’s Institute of Americas ended May 26. The event brought together more than 35 public and private sector speakers. Investors, attorneys and business leaders from the US, Mexico, Brazil, and numerous other countries in the Americas attended. The conference provided information on energy policy and its direction in Latin America and specific countries. Technologies, economic trends and energy innovations were discussed, including a demonstration of electric vehicles.
Changing policies and a more welcoming environment for foreign investment was a major area of interest in Argentina, Brazil and Mexico. Argentina’s new government is making a major shift away from Cristina Kirchner’s nationalistic energy policies. Daniel Redondo appointed by President Macri to head the Secretariat of Strategic Planning spoke on Argentina’s “Energy Reset and Renewal”. The new government is seeking some 150 billion dollars of investment over the next 10 years. Much of this will go toward the Vaca Muerta fields.
Mexico also has opened its energy sector to foreign investors through auctions for both onshore and offshore production. The first auction generated little foreign interest. But Mexico has persevered and has attracted more foreign and national investors in subsequent auctions.
A representative from Brazil’s energy giant Petrobras – Orlando Ribeiro – attended the La Jolla conference. This was noted as Petrobras has been absent from La Jolla in recent years. Rebeiro is the general manager of Libra Asset Development, which manages Brazil’s largest and most productive offshore oil fields. The fields produce almost half of Brazil’s total oil output. Ribeiro pointed to the increased productivity of Libra’s deep-sea wells and to the current lifting cost of around US$ 8.00 per barrel. While Libra’s cost of operation is heartening in isolation, it is also important to note that Fitch Ratings handed out a press release at the conference about the downgrade of Petrobras stock to BB (EXP) or speculative “junk” status.
The downgrade of Petrobras illuminates an issue that loomed in the background. None of the panels directly addressed Petrobras’ downgrade or the corruption, mismanagement and political use of the energy sector by partisan sectors in Brazil and elsewhere. But speakers such as Duncan Wood, from Princeton’s Woodrow Wilson Mexico Institute said that PEMEX, like Petrobras, suffered from corruption, lack of transparency and a deep insularity that inhibit self-criticism. Because of the changes in government (Argentina and Brazil) and the constraints imposed by reduced oil prices, there is guarded hope and a somewhat sober expectation that private participation can lead to better management and the fulfillment of social demands for more accountability and productivity in the energy sector. In Brazil, for example, the Pre-salt wells were suppose to pay for education and socio-economic growth. But they have so far failed because of the perfect storm of low energy prices, corruption and government instability and mismanagement.
Jeremy Martin and Jamal Khokhar deserve kudos. Jeremy has directed the Institute of America’s Energy Desk for over 10 years and his depth of knowledge and breadth of contacts contributed immensely to the success of the La Jolla event. Khokhar recently became the Institute’s president. He was instrumental in using his prestige and contacts as former Canadian Ambassador to Brazil to bring sponsors and participants, making the conference a success.