November 2017 – @alvaroriosroca – Southern Cone is Argentina, Brazil, Chile, Uruguay, Paraguay and tangentially Peru. Something more than 2 decades ago, a lot of infrastructure was built to integrate the region with natural gas, electric power and other products such as LPG and petroleum derivatives, except for Peru. Several of these gas pipelines and power lines are under-used and generate opportunities for the future.
Entering the subject, in Chile and Peru, commercial energy transactions inside and outside the countries are captured by the private sector and state companies such as Enap, Petroperú and Electro Perú in an open and competitive market.
Argentina and Brazil are implementing structural reforms to their legal and regulatory frameworks and privatizing a series of assets throughout the energy chain, so that their state-owned companies YPF, Petrobras and Electrobras cease to be monopolistic and openly compete with private capital for the markets.
Paraguay is an electric country with strong state participation, through its companies ANDE and Petropar it must compete with the private sector to supply fuels in its domestic market. In Uruguay, UTE, the electric company and ANCAP, the hydrocarbons company, although they control a large part of the supply chain, they must also compete with private sector companies.
In almost all countries, international market prices are being practiced (and some, like Argentina, are on the way to doing so), avoiding subsidies. Therefore, the transactions and buying and selling of energy (natural gas, LPG, electricity, petroleum derivatives, and so on) will take place competitively inside and outside the countries, and where the state energy companies will also have to adapt and become competitive. Governments will be mere facilitators so that transactions between countries are more fluid.
When we hear in the media that a Minister of Energy will start buy-sell negotiations of LPG / natural gas / electric power / et cetera with another Minister of Energy, we can deduce that it is more a political declaration and the commercial commitments will not materialize in these meetings.
The private and public companies in the chain are and will be responsible for the commercial transactions of the energy resources and not so the Ministries or current governments. Electric power purchases are now made by scheduled bids where you must compete with economic dispatch or freely with large users or in the spot market. The Ministries do not nor will not buy electric power.
The Bolivia-Brazil contract concludes in 2 to 3 years. We cannot imagine how the Ministry of Energy of Brazil could face negotiations on prices, volumes, TOP, PDO, and so on, with the Bolivian Ministry, while at the same time it’s in the process of attracting capital under a competitive regime.
There is definitely a new modality in energy transactions in the Southern Cone
* Current Managing Partner of Gas Energy Latin America.