Latin America - Energy

Argentina

• The Northeastern Gas Pipeline project, designed to import Bolivian gas to cover rising domestic output shortfalls, is facing delays because of the slower-than-expected development of Bolivian reserves. Financial backers have been reluctant to commit to the project because of doubts over the availability of supplies. The $1.8bn pipeline is designed to ship up to 20m cm/d. The country imports 4bn cm/d of gas from Bolivia. As a result, the government is examining options to begin the project without a secure source of supply. Domestic production has stagnated, forcing the country to rely on LNG imports as well as costly diesel and fuel oil (see p12).

Bolivia

• Russia's Gazprom plans to take a 20-24.5% stake in Petroandina, a joint venture between state-owned YPFB and Venezuela's national oil company, PdV. Petroandina controls 12 exploration blocks. Gazprom is also in talks with Total to take a stake in the Azero block in the southeast. Gazprom is also looking at participating in gas-infrastructure projects under the terms of a previously signed memorandum of understanding with YPFB.

Brazil

• State-controlled Petrobras is on schedule to begin test production from its Tupi pre-salt discovery this month. The initial well test is expected to produce 14,000 b/d, but Petrobras officials believe the field could ultimately produce 1m b/d. The company estimates recoverable reserves at the field of 5-8bn boe.
• Petrobras has begun talks with South Korean shipbuilders on a package of orders for drillships and support vessels that could reach $30bn. Around $15bn is being budgeted for drillships and the firm is also looking for 240 other vessels ranging from FPSOs to supply vessels. Petrobras is due to let a separate tender for local firms in May for the construction of 28 deep-water rigs to be delivered between 2013 and 2017.
• An arbitrator has ordered Petrobras to pay $466m to buy out its partner Transcor Astra Group in a refinery in Pasadena, Texas. Petrobras agreed to buy out Astra in 2006, but the transaction ran into difficulties after the parties disagreed over the value of the 100,000 b/d refinery. Separately, Petrobras will delay plans to upgrade a Japanese refinery it acquired last year. The company purchased an 87.5% stake in the Japanese plant with the intention of converting it into a heavy-crude refinery capable of processing Brazilian heavy oil. Instead, the company plans to use some of the storage capacity at Okinawa to bolster its oil marketing presence in Asia.
• State-owned power firm Eletrobras has drawn up its first medium-term investment plan, for 2009-12. The company will spend R$30bn ($13.6bn), with 48% going on generation assets. Eletrobras plans to add 7 GW of new generating capacity and to build 15,000 km of transmission lines.
• Chevron has exited the country's fuels-marketing sector, selling its operations to local Ultrapar Participacoes. For a price of $0.5bn, on top of an initial $38m deposit, Ultrapar gains a network of around 2,000 Texaco-branded service stations, an equity interest in associated terminal operations and Chevron's local commercial and industrial fuels business.

Chile

• Commissioning of Quintero GNL, the country's first LNG import terminal, will be delayed by one month, until June. The facility is not yet ready to receive its first cargo, to be supplied by BG Group, the project leader, from Egypt or Trinidad. The delay puts in doubt plans to begin commercial operations by the end of June. The partners in Quintero GNL are: BG (40%), state-owned Enap (20%), Endesa (20%) and Metrogas (20%).

Colombia

• Oil production reached its highest level in nine years in the first quarter of 2009. With better exploration terms attracting new drilling, production reached 0.637m b/d in the first quarter, up from 0.561m b/d during the same period a year ago. Production is expected to reach 0.700m b/d by the end of the year. Until recently, analysts had expected the country to become a net oil exporter, because of sharply falling production at large fields, such as Cusiana, and a dearth of new discoveries. Output is still well below the record level of 0.830m b/d, set in 1999.

Mexico

• State-owned Pemex has launched a $12.2bn plan to add new refining capacity to deal with the country's growing dependence on imported fuels. The company will now build a new refinery near an existing plant at Tula, north of Mexico City, as well as overhaul its Salamanca refinery, outside Guadalajara. The plan will boost the country's crude-processing capacity by 250,000 b/d, as well as slash fuel oil production at the two existing refineries. The two refineries produce over 125,000 b/d of fuel oil, but as the country moves away from oil-fired power generation to natural gas, Pemex has a mounting surplus of unwanted fuel oil.
• The finance ministry forecasts crude exports will fall by 18% in 2010, to 1.125m b/d, from a predicted 1.37m b/d in 2009. Production and exports are suffering from the decline of the country's largest oilfield, Cantarell, which has seen output fall to 0.77m b/d this year from a peak of over 2m b/d just five years ago. Exports are also being reduced by increased domestic refinery runs.
• Pemex has awarded a $0.65bn drilling contract to Weatherford to drill 500 wells in the country's large Chicontepec region, which is estimated to hold 139bn barrels of oil in place and 50 trillion cf of gas. The US oilfield services company won two previous Chicontepec drilling contracts in 2008, for up to 600 wells. In March, Pemex awarded a $0.69bn drilling contract to Schlumberger, also for the Chicontepec area, where challenging geology makes oil production very difficult and expensive. Pemex hopes to produce 12bn barrels of oil and 31 trillion cf of gas from the region's 29 fields.

Venezuela

• France's Total is in advanced talks with China and the government to produce crude for export to China. The proposal calls for a joint venture between Total and China National Petroleum Corporation (CNPC) to bid for one of the Carabobo blocks, in the country's Orinoco heavy-oil basin, which is being auctioned this summer. Around 200,000 b/d of heavy crude from the block would be upgraded domestically and then exported to China, where it would be processed at a refinery in Guangdong jointly owned by CNPC and state-owned oil company PdV. Venezuela could receive bids in excess of $1bn for the block. The winning bidder will hold the rights to 40% of the block, with PdV owning the remaining share.

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