Oil rout: How Latin America is easing the impact on operators

Governments and regulators in Latin America have taken a series of steps designed to mitigate the impact of a sharp oil price downturn on operators.

BNamericas provides a snapshot of measures introduced in Brazil, Mexico, Colombia, Argentina, Bolivia and Trinidad & Tobago over the past month. 

BRAZIL

Oil and gas regulator ANP said it will grant operators in Brazil nine additional months to conclude the exploration activities defined in their contracts.

ANP director Cesário Cecchi explained that the decision addresses low oil prices, adding that further extensions could be offered, depending “on the post-crisis resumption.” Oil institute IBP had asked for exploration deadlines to be pushed back by two years.

Meanwhile, the agency said it received requests related to the mothballing of 16 offshore fields, all operated by Petrobras in the states of Sergipe, Alagoas, Rio de Janeiro, Rio Grande do Norte, and Ceará. The company also requested to deactivate 12 onshore fields in Rio Grande do Norte, Sergipe, and Bahia states, and local company Energizzi wants to deactivate one field.

These areas represent production of 65,000b/d, according to ANP director Marcelo Castilho. Petrobras, however, plans to cut output by 200,000b/d.

MEXICO

Mexican state company Pemex will halt crude production at newly drilled oilfields and refine more in an effort to overcome the crisis, according to President Andrés Manuel López Obrador. 

It was not clear how much production would be affected and whether it would exceed a 100,000b/d quota already agreed with the OPEC+ group of producing countries.

Pemex last year announced a plan to redevelop about 20 oilfields that could produce around 50,000b/d of crude.

Meanwhile, Pemex has begun reducing non-essential staff aboard its Gulf of Mexico oil platforms to curb the spread of the virus.

The vessels have been left with between half and a quarter of their normal personnel, according to sources.

COLOMBIA 

Colombian oil and gas regulator ANH is extending deadlines for payments of economic rights by block operators. 

The announcement forms part of a package of measures designed to mitigate the effects of supply and demand shocks. 

Other steps taken by ANH include, a postponement of the PPAA biding schedule and an extension of deadlines for exploration obligations.

In addition, the agency has granted operators the chance to redirect investments in stalled exploration projects to other upstream activities.

"In this way, [we] ensure the continuity of operations of the hydrocarbon industry in the midst of the complex current circumstances," ANP said. "In addition, [we] seek to lay the foundations for a rapid reactivation of the sector once the [crisis] is overcome."

ANH said the deadline extensions did not include royalty obligations for production. 

ARGENTINA

Argentina has suspended policies and incentives aimed at accelerating hydrocarbon production from the Vaca Muerta shale play.

The government maintains discussions with oil and gas producers and is considering support measures, such as setting a minimum oil reference price for local producers at US$45/b, with the aim of raising domestic production and limiting imports. 

In early April, the tender for the construction of the first section of a 15Mm3/d (million cubic meters a day) gas pipeline was postponed for the third time after no bid was submitted.

The project, which would link Tratayén in Neuquén province to Salliqueló in Buenos Aires, is estimated to require investment of US$800m,

BOLIVIA

Bolivia’s hydrocarbons ministry has outlined a roadmap to navigate the current oil pricing environment impacted by depressed energy demand brought on by the global health crisis.

The ministry posed the question of whether to prioritize more expensive local fuel production or ramp up imports of cheaper refined products. The ministry argues, however, that the latter would curb alternative energy efforts, lead to unemployment and impact balance of payments.

The sector authority highlights the negative impact of the oil price crash on natural gas sales to Argentina (IEASA) and Brazil (Petrobras) as Bolivia uses international crude benchmarks in its gas pricing formula.

Although the ministry expects gas shipments to increase to Argentina in May ahead of the southern hemisphere winter, it expects sales to be lower compared to “normal” periods.

TRINIDAD & TOBAGO

Mechanisms to facilitate the resurgence of Trinidad and Tobago’s economic activity across different sectors, including energy, after the coronavirus pandemic, will need to be explored, according to Prime Minister Keith Rowley.

Rowley made the comment following a first meeting of a team tasked with preparing a recovery road map, a draft document for which is expected to be ready by the end of May.

In its annual economic survey released this month, Trinidad and Tobago’s central bank highlights that “the government has estimated that the virus- and price war-induced shocks to energy prices will push the projected budget deficit for fiscal 2019/20 to US$8.53bn compared to the budgeted US$5.0bn.”