"Latin America Perspectives and Opportunities"


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"Latin America Perspectives and Opportunities"

  1. 1. CERAWeek 2007 Latin America José Sergio Gabrielli de Azevedo Perspectives and CEO and President Opportunities February, 2007
  2. 2. Latin American Share of Oil World Reserves Latin American oil reserves are becoming increasingly important 1984 1994 2004 R/P* = 26.77 R/P* = 41.78 R/P* = 41.84 4.8% 8.0% 8.5% 5.0% 3.8% 3.5% 8.8% 5.1% 13.4% 9.4% 6.4% 7.6% 56.5% 65.1% 61.8% 7.9% 11.7% 12.7% Total Total Total 762 billion barrels 1,017 billion barrels 1,194 billion barrels Middle Orient Europe & Eurasia Africa North America Pacific Asia Latin America In 20 years, Latin America proven reserves increased from 36.6 billion barrels (1984) to 103 billion. Source: BP Statistical Review of World Energy * Reserves/Production Latin America (years) 2
  3. 3. Net Oil and Oil Products Availability Latin America (LA) Ability to produce non-conventional heavy oil will play an increasing role in LA Mbpd Russia Asia United States OECD(- Mexico) Projected growth in oil production and demand suggests balance and independence of supply from politically unstable regions Source: Internacional Energy Agency Reference Scenario 3
  4. 4. Gas Rich Region with limited infrastructure Proven Reserves as of January 1, 2005 4.3 T m3 Ample gas reserves will allow for: 0.55 T m3 151.9 Tcf 19.4 Tcf ::: Regional growth in consumption 0.41 T m3 substituting some demand for oil 14.5 Tcf Venezuela Trinidad ::: Higher exports of liquids Mexico 0.33 T m3 Brazil 11.7 Tcf Perú 0.31 T m3 10.9 Tcf But: ::: Will require increasing energy 2005 Gas Bolivia 0.50 T m3 Proven Reserves 26.1 Tcf 17.7Tcf integration and World: 0.74 T m3 ::: Substantial investments in 179,8 T m3 / 6,350 Tcf South and Central America: Argentina infrastructure covering great 7,02 T m3 / 247,9 Tcf distances and environmetally sensative regions Source: Cambridge Energy Research Associates. 4
  5. 5. Relative importance of oil sector varies widely among the main players in the region affecting legislation, pricing and curbing integration prospects 106% Consumption of oil as % of Production 2005 80% 58% 53% 42% 27% 18% 15% Brazil Bolivia Oil Argentina Mexico Colombia Ecuador Venezuela Bolivia Gas Source: BP Statistical Review 2006; EIA; INE/BO; Superintendence de Hidrocarburos de Bolivia 5
  6. 6. International prices affect each country's trade balance differently % Exports of oil as % of total Goods 87 Exports 2005 (in US$) % 60 % 36 % 26 % 15 % 11 9% 7% Venezuela Ecuador Bolívia (gas) Colômbia México Bolívia (oil) Argentina Brasil Source: BP Review 2006; EIA; INE/BO 6
  7. 7. Domestic Pricing is also affected by the relative importance of oil sector 7 Subsidized prices reduce financing 1 .1 possibilities 93 September 2006 (in US$ per liter) 0. 67 1 0. 5 0 .6 0 .5 6 0 .4 38 0. 3 0 .0 Venezuela Ecuador Bolivia Argentina México Colombia Peru Brazil Source: ARPEL 7
  8. 8. Regulatory Challenges – Recent Trends • Countries that have recently changed or have manifested a desire to change legislation towards higher Government Participation in production and revenues: Venezuela, Ecuador, Bolivia • Countries that are in the process of liberalizing legislation to encourage foreign participation: Colombia & Peru • Countries that have consolidated reforms: Argentina (w/ price controls) & Brazil (w/o price controls); • Mexico remains the most closed oil economy but there are indications that a move towards opening to investment is possible. 8
  9. 9. Bio-fuel usage in OECD Countries will benefit LA Global warming, energy security and/or cost effectiveness are encouraging renewable fuels with two important initiatives: (i) ethanol and (ii) biodiesel. Both can be produced and consumed in Latin America advantageously. Production of biofuels in LA will also contribute to displace production of liquids increasing export availability. 9
  10. 10. Latin America offers excellent resources to expand agricultural production More than 3 times the average world per capita water availability Higher Potable Water availability per capita 24,973 11,196 7,055 4,050 3,966 Africa Latin America Asia OCDE World Availability per capita (m3/year) Nearly half world sugar cane production Nearly 1/3 world main oil seed production Million Metric Tons Million Metric Tons 1,328 359 Sugar cane production Soybeans, Groundnuts, Sunflower, 631 Rape Seed, Cotton Seed 95 World South and Central America World South and Central America and Caribbean and Caribbean 10
  11. 11. Brazil is the 1st country to reap benefits from Ethanol Original drivers were energy security and CNG economic attractiveness; ETHANOL Today environmental benefits are also GASOLINE considered. 160000 Fuel demand for Otto Cycle Vehicles 140000 120000 10000 80000 60000 40000 20000 Accumulated effective economy: 1000 BEP Source: MME, BEN 2006 1 Billion boe ~US$ 52 bi 0 1972 1976 1980 1984 1988 1992 1996 2000 2004 During this period, ethanol utilization saved 644 million ton. of CO2 emission 11
  12. 12. Ethanol market may double its size with growth potential in all sugar cane producing countries North and Europe Central America Brazil 37% 35% 9.8% South America Asia 38% 16.2% Current Market Distribution of World Consumption Ethanol global market is 46.5 Billion Liters Ethanol as a Fuel is 30.6 Billion Liters, or 67% of total ethanol production Today the ethanol consumption is 2,6% of gasoline MKT Increasing ethanol to 10% of gasoline will represent 118 Billion Lt 12
  13. 13. Today : Sugar cane has the highest energy output/input ratio Raw Material Energy output / energy input Wheat 1.2 Corn 1.3 – 1.8 Sugar Beet 1.9 Sugar Cane (under Brazilian Production Conditions) 8.3 Tomorrow Lignocelluloses Biomass technology will double ethanol per ha. yield Molasses yields only 85 L of ethanol, 1 metric ton of sugar cane But Cane bagasse yields 185 L of ethanol Base calculation 13
  14. 14. 2nd Generation Biodiesel (BTL) will expand biodiesel prospects Application of Fischer-Tropsch gas to liquids technology BTL also nicknamed “Designer Fuel”- because fuel specifications can be adjusted to engine Biomass Solid Fuels Syngas requirements altering form Gasification and length of molecules Sequestered CO2 Fisher-Tropsch Conversion Naphtha Product Waxy Syncrude Work-up Diesel BTL uses whole plant, thus requiring less land area per unit of energy produced compared to biodiesel or ethanol 14
  15. 15. Principal Conclusions, Hurdles and Challenges • Latin America is in a privileged position regarding oil reserves, and But the main hurdles energy independence; and challenges are: • Use of natural gas prospects are • Heavy oil production technology encouraging and should contribute development will expand LA reserve to increase liquid fossil fuel exports growth possibilities; availability but integration and • Successful Doha Round Negotiations financial issues are a main are essential to permit greater concern; trade of agricultural commodities and • Land, water and human resource increase agricultural productivity availability and biodiversity place considering comparative advantages; Central and South America and • Technological breakthroughs in Caribbean in a privileged position to enzyme technology for the use of use and supply OECD countries Lignocelluloses biomass and BTL; with renewable fuels, and also further liberating liquid fossil fuels • Further progress in regional for export. integration.
  16. 16. CERAWeek 2007 Latin America José Sergio Gabrielli de Azevedo Perspectives and CEO and President Opportunities February, 2007