Energy Latam Blog | 2015 Dec | W3-4

Weekly Highlights


Pemex‘s oil price hit a low (Spanish) last week when the Mexican mix fell to $27 per barrel, and it continued flirting with record prices (Spanish) as it closed yesterday at $26.54 USD. Prices at this level hover close to the cost of production (estimated to be between $23 and $29 USD (Spanish) for the heavily indebted Pemex. Brent prices continue to fall due to OPEC failure to come to an agreement regarding production levels that are pushing storage levels to new highs.

This new low came after Pemex experienced record third-quarter losses, 40 percent (English) of which its acting finance director attributed to the peso exchange rate and falling crude prices. In response to this situation, Pemex is seeking to monetize some of its assets (English), including selling stakes in its Salina Cruz, Salamanca, and Tula facilities (see map below). Those three refineries are also part of an overhaul (English) whose objective is to increase profitability.



In other developments, Round 1.3, the final onshore oil auction of the year, ended by awarding all 25 (English) of the contracts up for bidding. The contracts include government royalties ranging from 18 to 93 percent (Spanish). While some observers question the judgment (English) of the bidders, the outcome far exceeded expectations of awarding only 20 percent of the contracts. Mexico will continue auctions in 2016 with an offshore deepwater round.

Although Pemex has begun implementing measures (Spanish) to discourage illegal fuel pipeline taps, the measure of this variety of theft increased 55 percent from 2014. Pipeline theft represents not only a loss for Pemex but a health and safety risk for end users as well as the surrounding communities.


As last week’s events continue unfolding in the Brazilian political economic sphere, one columnist at the Wall Street Journal reflects on the confluence of forces (English) that contributed to the current situation in that country. Though its recent investment rating downgrading is nothing to celebrate, the president of Petrobras expressed optimism (Portuguese) about plans the company has for the future after a couple of years of correction and divestment (Portuguese).


In contrast to financial and governance woes facing Petrobras, Ecopetrol announced that though it is reducing investment for 2016 when compared to 2015, it will be able to maintain the same daily oil production levels (Spanish) by accessing capital markets and using internal resources. Ecopetrol will also begin operating Reficar, its ultra-modern refinery near Cartagena, Colombia, and evaluating recent finds.  Leadership at Ecopetrol has indicated it will focus on fiscal discipline, cutting costs, and increasing efficiency during 2016.


Last week, Eulogio Del Pino, president of Petróleos de Venezuela (PDVSA), and Delcy Rodriguez, Venezuela’s foreign minister, met with OPEC member representatives in Caracas to discuss ways to increase oil prices given the glut of oil currently on the market. The price per barrel of Venezuelan oil reached new lows for the year last week, and Del Pino expressed serious concerns (Spanish) regarding the possibility of reaching 100 percent oil storage capacity in early 2016. The Venezuela government relies heavily upon revenues from PDVSA.

In elections last week, Venezuelan citizens handed victory to the opposition, but the ruling party was defiant (English). Some observers have expressed that the deep polarization in Venezuela has been ignored for too long (English). Even with it’s massive oil reserves, Venezuela’s dysfunctional economy has absurdly high rates of inflation that affect quality of life (Spanish).

In other developments, Petróleos de Venezuela (PDVSA) is scheduled to commence drilling off the coast of Cuba in the Gulf of Mexico in December 2016. Along with Sonangol of Angola, PDVSA will be drilling (Spanish) in Cuba’s ZEE.

Video of the Week: Catarata (Waterfall) Series

This week ELB begins a waterfall series. Enjoy our first beauty!

This waterfall is located in two countries in South America, and much of it flows into the ominously named Devil’s Throat. It is pretty universally considered “awesome,” and lest tourists lose their way, there are two airports nearby that are named for this impressive natural wonder.


Previous Image of the Week: Bolivia’s Nevado Sajama

Claudia V. Espinosa

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