LATIN AMERICA ADVISOR
ENERGY ADVISOR A PUBLICATION OF THE DIALOGUE
www.thedialogue.org BOARD OF ADVISORS Mary Rose Brusewitz Partner, Strasburger & Price Jeffrey Davidow Senior Counselor, The Cohen Group Ramon Espinasa Consultant, Inter-American Development Bank Luis Giusti Senior Adviser, Center for Strategic & International Studies
For the week ending July 24, 2015
Was Mexico’s First Round One Tender a Major Flop?
Jonathan C. Hamilton Partner, White & Case
Jorge Kamine Counsel, Skadden Arps
Mexico last week held the ﬁrst of ﬁve public tenders in its Round One oil auction, part of the historic opening of the nation’s energy sector. // Image: Mexican Government.
Craig A. Kelly Director, Americas Int’l Gov’t Relations, Exxon Mobil
Charles Shapiro President, World Affairs Council of Atlanta R. Kirk Sherr President, Clearview Strategy Group Garrett Soden Director, Etrion Corporation Mark Thurber Partner, Andrews Kurth Alexandra Valderrama Manager, International Government Affairs, Chevron Lisa Viscidi Program Director, Inter-American Dialogue Max Yzaguirre President and CEO, The Yzaguirre Group
Three executives at Brazilian construction conglomerate Camargo Corrêa were convicted Monday of money laundering, corruption and other charges, becoming the ﬁrst construction industry leaders sentenced in connection with the scandal.
OIL & GAS
James R. Jones Co-chair, Manatt Jones Global Strategies
Larry Pascal Chairman, Americas Practice Group, Haynes & Boone
Three Execs Convicted in Petrobras Scandal
Raul Herrera Partner, Corporate & Securities Practice, Arnold & Porter
Jeremy Martin Director, Energy Program, Institute of the Americas
OIL & GAS NEWS
Mexico on July 15 held the ﬁrst of ﬁve public tenders as part of its Round One oil auction. Only two of 14 areas available were auctioned off, falling short of the 30 percent rate the government had said would make the auction a success and putting a damper on enthusiasm about the opening of the nation’s oil sector to foreign and private investors for the ﬁrst time in decades. Was the ﬁrst tender a ﬂop, and why were so few blocks auctioned off? Will the other scheduled rounds attract more bids and investment? What needs to be done to ensure the other bid rounds go better?
John Padilla, managing director of IPD Latin America: “Although ofﬁcials have tried to put a good face on it, Mexico’s ﬁrst tender was clearly a huge disappointment. Many aver that low oil prices were to blame. That is not the case, though they may have prevented the more aggressive bids the government had hoped for—and has beneﬁted from for decades in the energy sector space. It was not a lack of prospectivity either. Government ofﬁcials appear to have concluded that it was size (one of the largest blocks, Block 7, received multiple bids—that block also beneﬁted from 3D seismic) and the required guarantees. The government has now said that it will resize the blocks and lower required guarantees (which were indeed excessive). Though these changes may help, they still do not address all that ails Round One. The principal three variables that prevent signiﬁcant round success continue to be: 1) Materiality (larger blocks will help to some extent, but size is not the only variable); 2) The contract is not a true production-sharing agreement, but rather a hybrid with a service Continued on page 3
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