2. Energy Use, Economy, and Carbon Emissions
7. Environment and Energy Efficiency
4. Oil and Gas 
Oil in the Americas
Overview
Central America
Natural Gas in the Americas
Overview
Oil and Gas Privatization
in the Americas
Oil
and Gas Integration within the Americas-Recent Developments
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Transnational Gas/Oil Projects within the Americas
Oil in the Americas Overview ...
The top oil producers in the Americas in 1998 were: the United States, Venezuela, Mexico, and Canada. The United States was the largest net oil importer (by far), with slightly more than half of U.S. oil imports coming from the Americas. Brazil also is a significant net oil importer. Top crude oil exporting countries in the Americas are: Venezuela, Mexico, Canada, Argentina, Colombia, and Ecuador.
Most Latin American oil producers, like other world oil producers, saw oil revenues fall sharply during 1998 and early 1999 due to a collapse in world oil prices. This had serious implications on budgets, economies, and oil expansion plans throughout the region. As of July 1999, oil prices had recovered to a large degree.
CARIBBEAN BASIN
The Caribbean is a major oil refining center, with refining capacity of more than 1.6 million barrels per day (bbl/d). Smaller refineries are geared primarily to local demand, while the larger refineries in the Netherlands Antilles, Trinidad and Tobago, and the U.S. Virgin Islands serve both local and export markets. U.S.-based Coastal’s Aruba refinery is undergoing a $250 million renovation, set for completion in the first half of 2000, to increase its capacity to 280,000 bbl/d. Mobil closed its refinery on Barbados in 1998.
Oil production could increase in Suriname, as offshore oil exploration and joint ventures with foreign firms proceed.
Oil Production and Consumption, N. America Graph
Oil Production and Consumption--C. & S. America Graph
Guatemala is the only oil-producing country in Central America. Its reserves have attracted interest because of their proximity to the similar productive Tabasco formations in Mexico. Guatemala’s oil reserves are concentrated in the remote northern Peten jungle region.
COLOMBIA/ECUADOR
In Colombia, falling investment in oil exploration (the result of extremely high tax rates as well as guerilla attacks on oil installations and personnel) could result in the country becoming a net oil importer by 2006. Energy Minister Luis Carlos Valenzuela has asked Congress to approve changes in association contracts with private companies.
The majority of Ecuador’s oil production is located in the country’s eastern region, the Amazon Basin (Oriente). Ecuador’s two largest fields are Shushufindi and Sacha.
In March 1999, Ecuador’s new Energy Minister, Rene Ortiz, announced that the government would hold a series of tenders aimed at finding partners to help boost output from Ecuador’s seven largest oil fields. The goal is to double Ecuador’s oil production from around 380,000 bbl/d now to 750,000 bbl/d or more within a few years (at a cost of $1-$2 billion). Ecuador’s oil infrastructure, including the TransEcuadorean Pipeline (Sote), has been a major bottleneck in Ecuador’s oil expansion plans and needs expansion.
ARGENTINA
Argentina’s crude oil production has been stable, at around 850,000 bbl/d. YPF, the country’s former state oil monopoly (privatized in 1993) and still the country’s largest oil producer (by far), has reduced planned investments for 1999 by 20%, to $1.2 billion. YPF is a major player not only in Argentina, but in Bolivia, Brazil, and elsewhere as well. Argentina may invest around $15 billion in its energy sector over the next decade.
BRAZIL
On June 15-16, Brazil held its first open oil exploration round, at which 12 out of 27 areas on offer were sold. Besides the bidding itself, the significance of this event was another indication that the 45-year monopoly on the country’s oil sector by federal oil holding Petroleo Brasileiro SA (E.PTB), known as Petrobras, has ended. Brazil hopes to attract $6 billion in foreign investment (including $2 billion for the deepwater Roncador field) to expand its oil production capacity from around 1.2 million bbl/d to 2 million bbl/d by 2005, with the goal of national self-sufficiency. Petrobras is expected to finalize over three dozen exploration and production (E&P) partnerships. Petrobras already has signed E&P deals with Argentine firms (Perez Companc and YPF) and U.S. firms (Coastal, Union Pacific, and Santa Fe Energy). A larger, $1.5 billion venture with Shell, Exxon, and Texaco on the highly promising Albacore East field in the offshore Campos basin is on hold due to a dispute over fiscal terms. On June 14, 1999, the Brazilian government decided to extend from three to seven years its exemption period for taxes on imported capital goods for the oil industry.
In April 1999, Amerada Hess began exploring for oil and gas in deep water Santos and Campos Basins off Brazil’s coast. This marks the first foreign involvement in Santos and Campos, Brazil’s prime oil-producing basins.
Brazil’s heavily subsidized sugar cane to alcohol motor fuel program is being wound down, mainly for budgetary reasons.
NORTH AMERICA
U.S. oil production is increasing in the Gulf of Mexico, while other areas, including Alaska’s North Slope, are declining. Estimates of Mexico’s proven oil reserves were cut sharply (by state oil company Pemex) at the end of 1998.
VENEZUELA
Venezuela is the only OPEC member in the Americas, and produces around 3 million bbl/d of crude oil. Venezuela has some of the largest oil and natural gas reserves (not counting an estimated 1.2 trillion barrels of bitumen reserves) in the world. State oil company PdVSA is the world’s second largest oil company and a major source of Venezuelan government revenues. Record low oil prices during 1998 and early 1999 severely hurt Venezuelan oil export revenues. In an effort to boost oil prices, Venezuela agreed, along with other major world oil producers, to a series of cutbacks in oil production.
Oil Mergers and Acquisitions Activity in 1998 Pushed in part by low oil prices during 1998, but also by the desire for oil reserves, cost cutting, and higher refining/marketing shares, merger activity in the oil business accelerated sharply in 1998. The three largest merger announcements came from BP and Amoco, Exxon and Mobil, and Total and PetroFina. In addition, on April 1, 1999, BP Amoco agreed to purchase ARCO. BP and Amoco completed their $53 billion merger on December 31, 1998, a day after the deal received regulatory approval from the U.S. Federal Trade Commission, subject to certain conditions. The proposed BP-ARCO deal would be worth $26 billion, and would control, among other things, about 75% of Alaskan North Slope crude oil output and 72% of the Trans-Alaska Pipeline System. Meanwhile, the $75 billion merger between Exxon and Mobil, which would form the world?s largest company (in terms of revenues) could be completed by the third quarter of 1999, pending regulatory approval. |
Natural Gas in the Americas Overview ...
Major natural gas producers in the Americas in 1997 were: the United States (accounting for around 65% of total gas production in the region) and Canada (around 21% of regional gas production). Mexico, Venezuela, Argentina, Trinidad and Tobago, Colombia, and Brazil also produced significant amounts of natural gas in 1997.
Gas trade in the Americas is growing rapidly, especially from Canada to the United States, but also with numerous pipeline projects in South America (i.e. Argentina, Bolivia, Brazil, Chile, Uruguay). Liquefied Natural Gas (LNG) also is becoming an increasing option for several countries, including Trinidad and Tobago (exporter) and Brazil (importer).
MEXICO
Since 1995, private concerns have been allowed to transport, store and distribute natural gas in Mexico.
Pemex expects its natural gas output to top 5 Bcf per day in 1999, with an estimated 20% being produced from the Burgos deposits, in the country’s northeast region.
CARIBBEAN
Trinidad and Tobago began exporting natural gas in April 1999, with the startup of its $1 billion liquefied natural gas (LNG) plant in Point Fortin. The facility, built by Atlantic LNG, is a joint venture among Amoco (34%), British Gas (26%), Repsol (20%), Cabot (10%), and NGC (10%). The first LNG production train processes up to 475 million cubic feet per day (Mmcf/d) of natural gas (supplied by Amoco), allowing annual exports of about 3 million metric tons of LNG. Cabot and Enagas, a subsidiary of Repsol, have 20-year contracts to purchase the LNG for markets in the northeastern United States, Puerto Rico, and Spain. The country hopes to earn $4-$6 billion over the first 20 years of the project. Negotiations are well underway for two more trains, each of which are to produce 3 million metric tons a year, to be operating by 2002-03.
Proven reserves of natural gas in Trinidad and Tobago have increased from 8 trillion cubic feet (Tcf) to 19 Tcf over the past 5 years
“SOUTHERN CONE”
Natural gas usage in the “Southern Cone” region of South America is poised for unprecedented growth, although concerns exist about a potential oversupply of gas in the region.
Gas demand is growing rapidly in Chile, especially for power generation. Most of this gas will be imported from neighboring countries, including Argentina, where gas production is increasing rapidly.
PERU
Gas production could grow significantly in Peru, with its giant, multi-billion dollar Camisea gas field project in the Amazon rain forest. Camisea, which President Fujimori has called “the project of the century” for Peru, could, however, have serious implications for the environment as well as for indigenous peoples living in the area. Camisea is located about 300 miles (500 km) from Lima and has proven natural gas reserves of an estimated 13 Tcf.
Natural Gas Consumption, North America Graph
Natural Gas Consumption, South America Graph
BRAZIL
Natural gas currently makes up only a small share (3% or so) of Brazil’s energy supply, but this share is expected to grow sharply, to 12% or more. This will necessitate a large expansion of Brazil’s gas pipeline infrastructure.
A Petrobras/Shell joint venture has been established with the aim of building South America’s first LNG import terminal, to be located at Recife on Brazil’s northeastern coast.
Petrobras has discovered significant gas reserves in the northern Amazon basin region near Manaus, providing a boost to Brazil’s plans for building a series of gas-fired electric power plants in that region.
VENEZUELA
Venezuela’s state energy company, PdVSA, would like to double Venezuela’s gas production over the next 10 years, investing up to $5 billion. PdVSA Gas, a subsidiary of PdVSA, was set up in early 1998. Minister of Petroleum and Mines, Ali Rodriguez, has stated that Venezuela intends to shift the focus of foreign investment from oil to natural gas, especially “non-associated” gas, and petrochemicals.
According to PdVSA, Venezuela will require at least $1.2 billion over the next 5 years to expand and improve gas transmission and distribution infrastructure within Venezuela.
In March 1999, El Paso Energy announced that it had withdrawn from the $400 million PIGAP II natural gas injection project – the world’s largest – due to financing problems.
A Quick
Snapshot of Oil and Gas in the Americas... Table [Source] 
Oil and Gas Privatization in the Americas ...
CANADA
Much of Canada’s energy sector (including Petro-Canada) is at least partly government-held. Historically, the Canadian government has supported oil and gas field “mega-projects” (i.e., huge gas reserves near Sable Island), but this could change as privatization moves gather momentum in coming years, and also due to environmental considerations.
MEXICO
The Mexican state still dominates domestic energy resources at all levels, and unlike most Latin American energy markets in the past decade, Mexico thus far has resisted substantial amounts of privatization. Pemex accounts for 40% of government revenues. The prospect of any substantial stake for the private sector in Mexico’s oil sector appears unlikely in the medium term, although the IMF and the United States made movement towards privatization one of the key conditions in their 1995 rescue package for Mexico. Mexico’s Comision Reguladora de Energia (CRE) is the state agency responsible for fostering the expansion of private gas distribution projects in Mexico.
Pemex lacks technology needed to exploit Mexico’s deepwater reserves in the Gulf of Mexico. International oil majors, if allowed in, could do so, however. Pemex has announced that it will also seek $5.8 billion in private investments to modernize refineries and boost production, as operating budgets have been slashed three times in 1998 due to lower oil revenues. The Mexican government also plans to continue its troubled project of attempting to sell minority stakes in Pemex’s petrochemical plants to private investors.
ECUADOR/PERU
Petroecuador’s monopoly is set to end following 1998 constitutional reforms. Meanwhile, Ecuador has lifted Petroecuador’s exclusivity over several oil-bearing areas in the Amazon region. Petroecuador’s President, Jorge Pareja, said in early May that the country’s downstream sector, including four refineries operated by Petroecuador, would become available to private investment, beginning with the Esmeraldas refinery.
Particularly in light of the new finds in the Camisea Field, Peru hopes to increase its oil production through privatization. Peru’s hydrocarbon sector was opened to competition in the early 1990s.
ARGENTINA
Liberalization of Argentina’s oil sector has been underway since the early 1990s. On May 10, 1999, the board of Argentine oil company YPF unanimously approved Repsol’s $13.4 billion all-cash offer for the remaining 85.01% of YPF which it does not own. A Repsol/YPF merger would create one of the world’s 10 largest oil companies pending Argentine government approval.
BOLIVIA
Bolivian officials have said they hope to sell assets of state oil company YPFB by July 30, 1999, and also plan to sell three state-owned refineries (Cochabamba, Sucre, Santa Cruz).
BRAZIL
State oil company Petrobras lost its constitutional monopoly in 1995, and the government plans to sell of 30% of its ownership stake this year, reducing its total stake in Petrobras to 51%. The Brazilian government does not plan a full-scale privatization of Petrobras at the current time. Brazil’s state-owned gas distribution companies, meanwhile, are slated to be privatized. In mid-April 1999, Brazil’s largest gas distributor – Comgas – was sold to a consortium led by British Gas. This marked the first major privatization since Brazil’s devaluation crisis in January 1999. It also was an important part of Brazil’s ongoing “energy revolution,” which is opening up the country’s energy sector to the private sector.
In early May 1999, Brazil’s National Petroleum Agency (ANP) began allowing imports of fuel oil. According to a 1997 oil reform law, ANP must free imports of gasoline, diesel, jet fuel, and other petroleum products by August 2000.
COLOMBIA
About 75 foreign oil countries are now operating in Colombia. Colombia estimates that $4 billion of mostly private investments will be brought in by 2000.
VENEZUELA
In early April 1999, Venezuelan President Chavez stated that no part of PdVSA would be sold, but that private investors would be welcome to help develop the country’s energy resources. Venezuela’s oil refining sector was partly opened to private investment in 1989. Venezuela now is considering further opening the business to private capital.
In early June 1998, Venezuela opened up its natural gas industry to private companies by executive decree. Soon after (in July), TransCanada Pipelines, Enron Corp., and Tecnoconsult SA won a contract from PdVSA to build, own, and operate two, $450 million natural gas liquids extraction facilities (Accro III and IV) in eastern Venezuela, where large natural gas reserves have been found. Work on the project is tentatively scheduled to begin sometime in early 1999, with operation scheduled to begin in 2001.
Oil and Gas Integration Within the Americas–Recent Developments
Increasing regional trade and infrastructure integration along with the growing demand for natural gas has resulted in the construction of multiple cross-border pipelines throughout the Americas. This trend is expected to continue due to the lowering of trade barriers in the energy sector, the easing of restrictions on international investment, and the increasing need for a clean burning reliable fuel source. As a result, the energy infrastructure of the Americas should become increasingly interconnected over the next decade.
North America
- Canada, the United States, and, in the future, Mexico, are moving towards a unified North American market for natural gas. Pipeline projects to export natural gas from the producing regions of western Canada to the U.S. Midwest represent a major change in the North American gas market.
- Pipeline capacity and U.S. access to Canadian gas supplies increased by 75% (to 11.4 Bcf per day) between 1990 and 1997.
- Canadian gas exports to the United States more than tripled between 1985 and 1997, reaching 13% of total U.S. gas consumption.
- Canada exports about half of its total gas production to the United States.
- The Canadian Energy Pipeline Association estimates that up to $14.5 billion will be spent on new and expanded pipelines in coming years. Between 1998-2000, five major new natural gas pipeline projects will send an additional 1.1 Tcf per year of gas into the United States. After these projects come on line, Canada will have about 18% of the U.S. gas market.
- In 1995, Mexico approved the Natural Gas Law, modifying Article 27 of the Mexican Constitution, to open the country’s gas storage, distribution, and transmission sector to foreign investment.
- Mexico allows private (including foreign) companies to import and export natural gas, although it restricts ownership in more than one function within the industry.
- Mexico expects its use of natural gas to more than double by 2007.
- Rapidly growing northern Mexico represents a prime market for gas imports from the United States.
- In July 1999, Mexico eliminated a 4% tariff on natural gas imports from the United States and Canada.
- Currently, Mexico’s Pemex holds exclusive rights to the extraction and sale of natural gas, therefore maintaining a monopoly on all distribution and storage. However, natural gas distribution is scheduled to be sold by 2001.
Central America
- Talks are underway to construct a natural gas pipeline connecting gas fields in southern Mexico to Guatemala, Honduras, El Salvador, and possibly Nicaragua and Costa Rica as well.
South America
- As a result of the recently signed peace accord between Ecuador and Peru, there is consideration to connect Ecuador with Peru’s Oleaoducto Norperuano oil pipeline, which has a capacity varying between 70,000 bbl/d and 200,000 bbl/d.
- Venezuela’s President Hugo Chavez has recently promoted the idea of creating a regional alliance (Petroamerica) for marketing oil and oil products as well as for petrochemical development.
- In an effort to become a regional energy hub, Bolivia recently passed the “Ley Corazon”, which established 11 corridors in which foreign companies are permitted to operate power and gas export facilities.
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