Each May, the Institute of the Americas convenes the La Jolla Conference to foster debate and dialogue on our hemisphere’s most critical energy policy and investment themes. And each year 2-3 topics dominate the conference’s formal presentations, panel discussions, off-the-record roundtables, and cocktail banter. That the uncertainty gripping the globe has not spared Latin America was crystal clear as participants gathered for the XXVI annual La Jolla Conference on May 24-25.
The arrival of the Trump administration has seen an endless catalogue of contretemps, and many that directly and indirectly affect energy policy and the broader relationship between the US and Latin America. But the winds of change and uncertainty are not only blowing through the marble and wood paneled corridors of Washington, DC.
Countries across the region have been faced with economic pressures from depressed commodity prices, and political and social unrest has served to somewhat counter efforts to attract investment or push forward major energy policy overhauls, most notably in Mexico and Brazil.
Successive panels and speakers underscored that it is not time for the fainthearted, or risk-averse investor but also pointed to opportunities. The proverbial show goes on and progress is being made.
And all of this is occurring at the same time as a major disruption of how the world generates and consumes energy, and from what sources. Nowhere was this point more evident than the spirited debate that coursed through the conference as to the most appropriate role for renewable energy.
Panelists agreed that chaos appears to be the norm for the new administration in Washington, DC and as UCSD Professor David Victor aptly noted predicting what the Trump administration will do is akin to predicting the path a box of feathers will take after being dumped off a cliff.
Fortunately, the hugely divisive rhetoric aimed at Mexico in the early days of the administration has become more tempered, including a more measured approach to NAFTA and possible renegotiations. When it comes to the burgeoning energy trade between the US and Mexico, particularly in terms of natural gas and refined products, it is an important leverage point and one that can and should continue to positively inform the binational relationship in this new era.
As the panels and discussions continued on the conference’s second day, the dominant topic shifted. Indeed, the conference went from being all about Trump to an all-out debate on how far and fast renewable energy can be incorporated across the region. Regardless of the panel, the topic of where renewables fit into the region’s energy mix, and at what percentage, what price, and at what pace percolated through the discussions.
Those advocating a very forward-leaning 100% renewable energy posture – call them the California contingent – went head to head with the more moderated energy transition view, one that in most cases includes a critical role for natural gas. But make no mistake that no one argued against renewable energy, rather it was a debate over how much renewables should we rely upon and when.
Panelists argued that the renewable wave sweeping the region, and the reason for the daylong debate over the efficacy of a 100% renewables target, are the fact that governments are seeking renewables not just for climate and emissions reductions goals, but rather for cost reasons.
Despite social unrest, a sluggish economy and the long shadow cast by the US election and unfortunate spotlight placed upon the country by the new administration, Mexico has made considerable progress with its energy reform.
Representatives from Pemex, CNH and ASEA all touted the massive regulatory reform that has in many cases been enacted from scratch, along with the continued advance and attraction of upstream oil and gas investment. By the time of the conference, more than two billion dollars had been invested by way of 34 projects tendered since the reform became law. Panelists from Mexico concurred that much work remained in order to consolidate the reform, but none shied from the demands ahead nor were they overly concerned with the impending election cycle and its populist shadows.
The Temer administration in Brazil has set in motion an aggressive reset and reform agenda for the nation’s energy sector and particularly investment in the upstream. Over the last several months, major regulations have been rewritten pertaining to oil and gas investment, and a moribund effort to draw investment via auctions at the National Petroleum Agency (ANP) has been jumpstarted.
The Director General of ANP, Decio Oddone offered a keynote address focused on the plans the regulatory agency is taking in order to attract greater investments and described this moment as historical for Brazil. Oddone outlined four variables that could serve to revitalize the sector: 1) The agenda of tenders for new exploration areas; 2) The improvement of policies in the area of energy and regulation; 3) The modernization of the supply chain; and 4) Petrobras’ divestment plan.
Guyana also figured prominently with its recent deepwater oil discoveries in the Liza and Payara fields operated by ExxonMobil. The country surely stands on the cusp of a historical and transformational opportunity. Government and society face a steep learning curve as heretofore nonexistent institutions are stood up, regulatory practices are implemented, and energy governance is developed.
A robust panel and conversation centered on regulation, the role of stakeholder engagement and balancing regulation and investment. The discussion ranged across the oil and gas sector, but also examined the electric sector and particularly large scale projects and transmission lines. Panelists agreed that companies have a social responsibility to the communities, the so-called social license to operate.
When queried as to the keys to effective regulation, one that balances investment with risks and manages stakeholder engagement, the panelists responded with a variety of thoughts: “Be consistent in the long term,” one noted. “Above all else strive for transparency, that is tell people what you are doing,” suggested another. “Be brave when you make a mistake; say how you are addressing it,” cautioned another. “Collaboration,” one responded succinctly.