June 2020 – @alvaroriosroca – Last week we were able to participate in the 29th annual energy conference held by the Institute of the Americas in La Joya, California. This time, unfortunately, it was held virtually. It is an important conference due to the high participation of Ministers, high authorities of public entities and institutions from the different Latin American countries, companies from the energy sector and independent analysts.
From the presentations and discussions, we definitively rescue the concerns and measures that are being taken and will be taken in order not to allow the dismantling of the hydrocarbon sectors in the different countries. In particular, I would like to highlight what the National Agency of Hydrocarbons (ANH) of Colombia, the agency that manages the upstream of (Perupetro), the Minister of Energy of Ecuador and also some reflections made on Argentina in relation to this issue of dismantling.
All these countries produce hydrocarbons and in one way or another are also exporters of gas or oil. In other words, their economies have a certain or great dependence on this sector, and that is why the concern expressed and the measures that are being taken or evaluated to be taken in order to avoid dismantling.
When we speak of dismantling, we refer to maintaining state or private companies with sufficient incentives to continue exploring and exploiting, to maintain domestic supply and exports in the medium and long term, that infrastructure projects have continuity, that the vast majority of service companies throughout the chain do not go bankrupt and evaporate and that professionals do not take different directions and lose technical human capital, which is essential for this industry. Venezuela dismantled its hydrocarbon sector and that is how it has done, as we can all see.
Let us not forget that the hydrocarbon industry is being and will be impacted in the next two to three years significantly. The mobility of the planet will be quite reduced this whole 2020. Habits like working from a home office, reduced travel and tourism, less interest in buying and much more will keep demand and prices very low and will not return to normal in the next two to three years.
State-owned and public companies, mainly exploration companies, are having sharp reductions in revenue and therefore are aggressively cutting back on investment budgets, personnel and other reductions to keep up with cash flow to keep operating. Thousands of jobs worldwide and throughout the region have already been cut and billions of dollars that were intended to be invested are being cut.
Thus, in the countries we have pointed out, a series of measures and incentives are being taken to make the country competitive, so as to maintain an adequate level of investment and not to dismantle its hydrocarbon sectors. Royalties, fees, taxes, deadlines and exploratory programs, prices, lifting of subsidies, etc. etc. are being implemented and analyzed.
And for home in Bolivia what are we doing so that the engine of the economy is not totally dismantled? Our Ministry is unfortunately more concerned about delivering food and fumigation by the hand of YPFB (with TV cameras behind) than about the sustainability of this very important sector of our economy. We have not seen one iota of concern. As one colleague says, they are in another.
We remind our Minister that the little exploration that was going on is evaporating and that in about half a decade or so we will have to import all the diesel and gasoline and other oil derivatives that we will consume. That in 7 to 8 more years we will not have a single molecule of gas to export. Don’t say we didn’t notice. We have been doing it for more than half a decade without any success and the impacts of COVID 19 should shake us up even more.
* Former Minister of Hydrocarbons of Bolivia and current Managing Partner of Gas Energy Latin America.