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Latin American Energy Policy in the Obama Administration
have sparred against the US, the new administration creates a fair expropriations in Latin America have chilled foreign investment in the
amount of uncertainty. For Latin American countries more open to hydrocarbons sector.
14,15
rapprochement with the US, especially in the energy sector, there
should be new opportunities. Mexico presents an especially interesting case for the new energy
relationship between the US and Latin America. Mexico is currently the
These opportunities will include increased development of oil and third largest supplier of oil to the US.
12
The Mexican Constitution assures
gas resources, even though US imports of oil will probably decrease that the State has the exclusive right to exploit its oil and gas resources.
16
over time. The US Energy Information Administration (EIA) has Mexico expropriated the Mexican oil industry in 1938.
17
Ever since,
released a preview of its 2009 Annual Energy Outlook, which sovereign control of hydrocarbons has become an absolute fundamental
includes a forecast of energy use up to 2030.
11
The EIA recognises of Mexican sovereignty.
18,19
As a result, exploration and production
an increase in the use of renewables and biofuels over the next 20 companies working in Mexico do not take legal or beneficial ownership of
years,
11
but nonetheless expects oil use to remain at its current level mineral resources. Rather, these companies enter into service contracts
up to 2030.
11
Increased liquid fuel demand will largely be met with the state-run oil company, Petróleos Mexicanos (PEMEX).
19
Indeed,
through biofuels.
11
The EIA also believes that US reliance on an exploration and production or service company working in Mexico
imported oil will decrease over the next 20 years.
11
cannot even receive payment in hydrocarbons, but only in cash.
16
If the US remains a substantial importer of oil, but shifts its exporters Mexico recently passed reforms designed to increase participation of
away from the Middle East and difficult Latin American partners such private companies in the development of Mexican oil and gas resources.
as Venezuela and Bolivia, the US will open to new oil partners. At The reforms allow for cash bonuses for new technology or performance
present, Canada and Mexico are the first and third largest exporters of efficiencies, but service providers remain prohibited from taking title to
oil to the US, respectively.
12
Saudi Arabia is the second largest exporter hydrocarbons.
20
The reform is also intended to make PEMEX more
to the US, and the top 15 exporters include Iraq and Kuwait, so transparent and to increase efficiencies in the contracting process.
20
reducing imports from the Middle East will create a substantial gap to However, it is far from certain that these reforms will increase
be filled.
12
There are, in addition to Mexico, a number of Latin the participation of exploration and production companies in the
American countries in the top 15 exporters to the US: Venezuela, development of Mexico’s oil and gas resources.
20,21
Most publicly traded
Ecuador, Brazil and Columbia.
12
Canadian tar sand development and exploration and production companies, and many private companies,
similar unconventional development will certainly cover some portion want to be able to show increased reserves on their books, which is
of that deficit. However, the US will need to build bridges to Latin difficult when access to the mineral estate is restricted to a service
American and Africa to maintain a stable supply of crude oil over the contract. Similarly, the inability to take payment in kind restricts the access
next two decades. of such companies to the oil market.
The Obama administration sees energy development as a useful way to Still, the Mexican reforms are an early indication that some Latin American
develop its relationship with Latin America more generally. Andres countries are inclined to take steps to foster increased investment in the
Oppenheimer of The Miami Herald, one of the most astute observers of development of oil and gas resources. If the Obama administration is
US–Latin American relationships, recently reported that the Obama successful in building a new partnership for the Americas, these sorts of
administration sees energy as “a new path to relations within the initiative may increase. If, however, the Obama administration cannot
hemisphere”.
13
Energy provides an opportunity to open a dialogue with overcome the long history of mistrust between the US and Latin America,
Latin American countries on issues other than free trade and antidrug the pendulum may swing back towards increased protectionism and
efforts.
13
There are, therefore, public policy considerations that will drive resource nationalism. The partnership envisaged in Barack Obama’s Miami
the US towards increasing its energy trade with Latin America. speech will rest on the reconciliation of numerous public policy and
economic issues. It is clear that the energy requirements of the US and the
While the US may hope to increase oil imports from Latin America, some desire of the US to minimise its reliance on Middle Eastern and
Latin American countries may resist increasing exports to the US. Venezuelan oil provide an opportunity for the development of oil and gas
However, any such effort will need to overcome the trend towards greater resources in the remainder of Latin America. A successful partnership of
‘resource nationalism’ in Latin America.
14
Recent nationalisations and the Americas would allow that opportunity to be realised. ■
1. Davidow J, The Bear and the Porcupine: The US and Mexico, 8. Latin America sees Obama bridging ideological divide, sandiego.com/uniontrib/20081121/news_lz/el1/martin.html
Pribceton: Marks Weiner Publishers, 2004. Reuters, 5 November 2008. 15. Anderson S, Expropriation, Nationalisation and Risk
2. US–Latin America: New Era Opens, Energy Compass no. 6, 9. Painter J, Latin America awaits Obama action, BBC. Available at: Management, Exploration and Production – Oil and Gas Review,
6 February 2009. news.bbc.co.uk/2/hi/americas/us_elections_2008/7710855.stm OTC Edition, 2008.
3. A New Partnership for the Americas, BarackObama.com. 10. CNN transcript, American Mining, 3 February 2009. 16. Neto-Advogados P (ed), Latin American Law: Oil & Gas, 2000.
Available at: obama.3cdn.net/f579b3802a3d35c8d5_9 11. EIA, Annual Energy Outlook 2009: Early Release, 17 17. Smith E, Dzienkowski J, Andersen O, et al., International
aymvyqpo.pdf December 2008. Available at: www.eia.doe.gov/oiaf/aeo/ Petroleum Transactions, 1993;367–9.
4. Sweet L, Obama Latin America Speech in Miami, Chicago aeo2009_presentation.ppt 18. Howell J, Privatization of PEMEX, Law & Bus Rev Latin America,
Sunday Times, 23 May 2008. Available at: blogs.suntimes.com/ 12. EIA, Crude Oil and Total Petroleum Imports Top 15 Countries, Spring 2007);
sweet/2008/05/obama_latin_america_speech_in.html 18 February 2009. Available at: www.eia.doe.gov/pub/ 19. Editorial, Mexico’s Lost Opportunity: watered down oil reform
5. President For Life? Venezuela’s Hugo Chavez, unfettered by oil_gas/petroleum/data_publications/company_level_imports/ fails to fix big problems, Dallas Morning News, 3 November
term limits, Wall Street Journal, 17 February 2009. current/import.html 2008.
6. Ecuador’s president expels US official, Petroleum World. 13. Oppenheimer A, Obama’s Latin American Priority: Energy, 20. Mexico: Energy Reform Fudged, Business Latin America,
Available at: ww.petroleumworld.com/story09020910.htm Miami Herald, 22 February 2009. 10 November 2008.
7. Morales enacts new Bolivian constitution, Petroleum 14. Martin J, Tissot R, US ‘Change’ and Latin America, San Diego 21. EIN Viewswire, Mexico Industry: Energy Reform Sidesteps
World.com, 9 February 2009. Union Tribune, 21 November 2008. Available at: www.signon Core Issues, 31 October 2008.
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EXPLORATION & PRODUCTION – VOLUME 7 ISSUE 1
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