April 2019

April 2019

Welcome to the April edition of Energy Panorama and our countdown to the XXVIII La Jolla Conference on May 22-23.

We are pleased to feature reports based upon discussions at our Mexico and Argentina Roundtables in February and March.

The Argentina report is part one from our two-day event and focuses on the challenges that companies face in developing Vaca Muerta, one of the world’s biggest shale plays and the first to come into large-scale production outside North America. Indeed, the resources are so vast that the production growth has turned around more than a decade of dwindling oil and natural gas output, and led to bright forecasts. But as the discussions at the roundtable underscored and are encapsulated in our report, Argentina’s notorious economic and financial volatility have stunted growth for decades. And the country is hurtling toward a presidential election in October.

Our discussions in Mexico and subsequent Roundtable report focused on an assessment of the Lopez Obrador government’s vision and outlook for energy self-sufficiency and the role for oil & gas and electricity. The Roundtable was timed to coincide with 100-day mark for the government, a useful marker to take stock of the policy proposals and implementation strategies of the new administration.

Given the timing of the event, a great deal of attention was placed on the government’s effort aimed at reducing theft and illegal taps, the so-called huachicoleo. Secretary of Safety and Citizen Security Alfonso Durazo offered closing keynote remarks and an update on the gains the government had made to address the issue of theft and losses.

Discussions also focused on a critical challenge facing the new government: recovering Mexico’s declining oil production as well as how to manage the dramatic transformation of the electric sector and cost-competitive marketplace that each day is incorporating more megawatts of clean power.

Indeed, one of the most important outcomes was the discussion of how to advance expansion of the electric sector and a possible mechanism for long term power auctions under the current market rules. Our non-resident fellow, Leonardo Beltran, synthesized the idea into an op-ed published in Reforma; the link can be found below.

As the calendar turns to May be sure to make plans to join us in La Jolla for the XXVIII La Jolla Conference on May 22-23. But make sure you arrive the afternoon of May 21st to take full advantage of the activities we have organized. And don’t forget to leave your ties at home!


Latest Reports

Argentina Energy Roundtable 2019: Huge Energy Potential, Big Challenges – Part I

Mesa Redonda sobre Energía en México 2019 – Informe

Podcast

XXVIII La Jolla Conference Curtain Raiser

Analysis

Impulsando la competitividad eléctrica

ENERGY MATTERS © vol. 4 – ANZMEX editorial by IOA Board Member Chris Sladen

ENERGY MATTERS © vol. 3 – ANZMEX editorial by IOA Board Member Chris Sladen

In the News

Aprovechan desdén petrolero de México

Adelantan a México en hidrocarburos

Colombia Inks Offshore Oil Deals with Ecopetrol, Repsol, ExxonMobil

JEMSE fue parte de la Mesa Redonda del Instituto de las Américas

Argentina Energy 2019: Oil & Gas, Lithium and Energy Transition

Argentina Energy 2019: Oil & Gas, Lithium and Energy Transition

On March 27-28, the Institute of the Americas convened its annual Energy Roundtable in Buenos Aires with the participation of over 100 representatives from the federal, provincial and city government, regulators, industry, academia and civil society.

The two day Roundtable counted several high level panels and an intense discussion of oil and gas issues as well as the emerging role for the lithium market and the broader contours of how the global energy transition is unfolding in Argentina. A unique lunch panel featured a debate with renowned political analysts and their insights on the intersection of energy and politics as the country heads into a presidential election this October.

Not surprisingly, much of the discussion centered on the ongoing structural adjustments and reforms enacted by the Macri administration, particularly those aimed at subsidies and fiscal incentives both in terms of consumers but also energy producers.

Vaca Muerta and the country’s success in developing the massive unconventional resource potential was also heavily debated. Though important gains have been made to reduce logistical and operation costs, continued focus on efficiency measures and creating a more competitive ecosystem is a must, panelists underscored. There is no doubt that further efforts are required to boost the amount and capabilities of service and equipment providers, but also to greatly increase the number of operators in the country’s oil and gas sector.

Furthermore, how to create sufficient infrastructure to “move the molecules” remains a key piece to the challenge. Gains have been made utilizing long-inactive pipelines and infrastructure and reopening natural gas exchanges with Chile and Brazil in the short to medium term makes eminent good sense.

A majority of panelists agreed that the key to fully monetizing Vaca Muerta’s potential was to fully plug Argentina into the global liquefied natural gas (LNG) market. To do so will require all segments of the country’s energy sector to participate in the strategic development of the resource – the government, YPF, private sector participants, regulators and civil society. The technology, geography and volumes, not to mention contractual arrangements, are but a few of the elements that will require attention and crucial decisions in the coming months and years. Further, one panelist argued that political consensus and a law supported across party lines stipulating and protecting investment in such a major infrastructure project is needed to reduce the so-called country risk component.

Beyond the fiscal impacts debated, Argentina’s energy sector is also undergoing a broader transformation and disruption brought about by global trends. Indeed, the policy efforts aimed at increasing renewable energy deployment through the government’s RenovAr program was discussed. Panelists agreed that the effort to date had been important but a thorough cost benefit analysis was required in order to best consolidate and determine the gains and to continue forward momentum. Moreover, a new distributed generation law passed last year is being developed for implementation. Benchmarking against international examples from California to Germany to Chile were discussed during the Roundtable.

And, of course, the role that mobility and electric vehicles are playing in the discussion of energy and emissions reduction is an increasing topic for debate in Argentina. Programs and goals set by the City of Buenos Aires, but also efforts made at the provincial level, have led to an uptick over the last year or so in options for citizens to utilize electric transportation, both mass transit and individual vehicles.

Finally, the topic of lithium featured an illuminating discussion of the potential for Argentina to position itself as a global player. However, the market is still quite small, prices are volatile and the number of projects that exist solely on paper far exceeds the reality that global headlines portray for lithium. But as several panelists argued, therein is the opportunity for oil and gas companies to bring to bear financing and operational insights to the sector and perhaps facilitate some of the dormant projects and boost the development of Argentina’s lithium market.

March 2019

March 2019

Welcome to the March edition of Energy Panorama. We spent the last week of the month in Buenos Aires for our two-day Roundtable.

Our Roundtable featured keynote remarks from Secretary of Energy Gustavo Lopetegui (see presentation below), participation by Deputy Assistant Secretary Elizabeth Urbanas from the US Department of Energy, the president of state energy firm YPF, the chairmen of Argentina’s national electricity and natural gas regulators and several other private sector representatives and government officials.

Across two days and several high level panels there was intense discussion of oil and gas issues as well as the emerging role for the lithium market and the broader contours of how the global energy transition is unfolding in Argentina. A unique lunch panel featured a debate with renowned political analysts and their insights on the intersection of energy and politics as the country heads into a presidential election this October.

Not surprisingly, much of the discussion centered on the ongoing structural adjustments and reforms enacted by the Macri administration, particularly those aimed at subsidies and fiscal incentives both in terms of consumers but also energy producers.

Vaca Muerta and the country’s success in developing the massive unconventional resource potential was also heavily debated. Though important gains have been made to reduce logistical and operation costs, continued focus on efficiency measures and creating a more competitive ecosystem is a must, panelists underscored. There is no doubt that further efforts are required to boost the amount and capabilities of service and equipment providers, but also to greatly increase the number of operators in the country’s oil and gas sector.

Furthermore, how to create sufficient infrastructure to “move the molecules” remains a key piece to the challenge. Gains have been made utilizing long-inactive pipelines and infrastructure and reopening natural gas exchanges with Chile and Brazil in the short to medium term makes eminent good sense.

A majority of panelists agreed that the key to fully monetizing Vaca Muerta’s potential was to fully plug Argentina into the global liquefied natural gas (LNG) market. To do so will require all segments of the country’s energy sector to participate in the strategic development of the resource – the government, YPF, private sector participants, regulators and civil society. The technology, geography and volumes, not to mention contractual arrangements, are but a few of the elements that will require attention and crucial decisions in the coming months and years. Further, one panelist argued that political consensus and a law supported across party lines stipulating and protecting investment in such a major infrastructure project is needed to reduce the so-called country risk component.

Beyond the fiscal impacts debated, Argentina’s energy sector is also undergoing a broader transformation and disruption brought about by global trends. Indeed, the policy efforts aimed at increasing renewable energy deployment through the government’s RenovAr program was discussed. Panelists agreed that the effort to date had been important but a thorough cost benefit analysis was required in order to best consolidate and determine the gains and to continue forward momentum. Moreover, a new distributed generation law passed last year is being developed for implementation. Benchmarking against international examples from California to Germany to Chile were discussed during the Roundtable.

And, of course, the role that mobility and electric vehicles are playing in the discussion of energy and emissions reduction is an increasing topic for debate in Argentina. Programs and goals set by the City of Buenos Aires, but also efforts made at the provincial level, have led to an uptick over the last year or so in options for citizens to utilize electric transportation, both mass transit and individual vehicles.

Finally, the topic of lithium featured an illuminating discussion of the potential for Argentina to position itself as a global player. However, the market is still quite small, prices are volatile and the number of projects that exist solely on paper far exceeds the reality that global headlines portray for lithium. But as several panelists argued, therein is the opportunity for oil and gas companies to bring to bear financing and operational insights to the sector and perhaps facilitate some of the dormant projects and boost the development of Argentina’s lithium market.

p>March also featured participation in a panel at the Mexico Institute at the Wilson Center in Washington, DC focused on energy under the AMLO administration and our analysis and commentary on the question of distributed generation in Argentina as well as part of our podcast series.


Argentina Energy Roundtable

Secretary of Energy Gustavo Lopetegui’s Presentation

Videos

Litio en Jujuy

The Outlook for Mexico’s Energy Sector under the AMLO Administration

Podcast

Argentina´s Distributed Generation Market: The Devil is in the Details

Analysis

Argentina´s Distributed Generation Market: The Devil is in the Details

In the News

Quién se inmola por la Argentina

Country Focus: Industry sees USMCA as chance to prod Mexico into comprehensive chemical management

Pobreza Energética, posibilidad real de combatirla en México


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