A new study helps assess risk in oil and gas operations in South America.
Fiscal and economic uncertainty softens the enthusiasm of E&P company executives searching for South American opportunities. Often moving targets, political and fiscal issues such as differing state taxes and laws can be difficult to decipher. Yet these countries lack the capital to finance the development or rehabilitation of their energy industries, and their governments need to attract foreign investment to maintain or boost production levels.
A study by Philip Dawes, to be published in August, lists South American nations in order of attractiveness for oil and gas investments and assesses the fallout from recent political and economic crises.
For those companies that can understand and deal with unfamiliar territory and rapidly changing markets, South America offers opportunities that cover the entire E&P spectrum. Brazil, for example, is relatively unexplored and offers an extremely broad range of prospects. In contrast, Venezuelan market openings are linked to enhanced oil recovery and natural gas opportunities.
Signals of sparse investment - overreliance on hydroelectric power, lack of gas-processing infrastructure and a relatively immature oil and gas sector, with the exception of Venezuela - indicate South America has reached an E&P turning point. Examples of energy shortages and the need for further investment just to meet demand are common. Last month Brazil introduced an indefinite energy-rationing program. Until new gas pipelines from Argentina and Bolivia come online - 100 MMcf/d of natural gas will come from Argentina in a joint Petrobras-Repsol YPF project and a further 10 MMcf/d from Bolivia - there is not much relief in sight for the Brazilian consumer.
By looking at national energy budgets, the forces that are reshaping the political and macroeconomic landscape and investment suitability, Dawes highlights business opportunities and growth areas.
Further information on the report is available from the SMi Group, mwilkinson@smi-online.co.uk.
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