Latin American Oil Research Articles

Difficulties experienced by Latin American oil and gas companies in the integrated adoption of practices aligned with the UN SDGs

PurposeThis paper aims to understand the difficulties faced by Latin American oil and gas (O&G) companies in adopting integrated practices aligned with the UN Sustainable Development Goals (SDG) Agenda.Design/methodology/approachA Delphi study was conducted with 14 experts with extensive knowledge and experience in the O&G sector to collect opinions and investigate sustainable practices in the Latin American context.FindingsA consensus was reached after two rounds, demonstrating a unified view of sustainability experts on the difficulties faced by O&G companies to adopt practices aligned with the SDGs. The difficulties identified through the Delphi method were allocated into five clusters named: “public sector and governments,” “civil society,” “corporate issues,” “technology and innovation” and “financial aspects.” These clusters were used to discuss the main challenges associated with implementing business practices that recognize the SDGs and their achievement as a synergistic reinforcing system rather than an additive structure.Originality/valueThis study provides further insights into the underexplored subject relating to the challenges experienced by Latin American O&G companies in the implementation of the SDGs, adopting the perspective of academic and industry experts in this field. The findings can help professionals in O&G companies implement sustainable practices, policymakers in debates about futures laws and regulations and academic in future research.

Does sustainability improve financial performance? An analysis of Latin American oil and gas firms

The growing concern about environmental, social, and governance (ESG) issues raises questions about the presence of financial incentives that naturally offset —at least partially— the higher operating costs stemming from ESG-related investment policies in the oil and gas sector, which is characterized by its strong environmental impact. Building on Campbell and Shiller's present value decomposition and using an instrumental variables-based methodology to address measurement errors in ESG scores, in this paper we analyze the effects of corporate ESG performance on expected dividend growth and discount rates for oil and gas firms in Latin America (Latam). On the one hand, our results suggest that ESG policies developed by oil and gas firms in Latam are related to lower medium-term discount rates. On the other hand, ESG practices adopted by oil and gas companies are also related to lower future dividend growth. These findings suggest that the lower discount rates resulting from active ESG policies at least partially offset the costs derived from the green transition of the oil and gas sector in Latam, meaning that the efforts made by oil and gas companies to improve their ESG performance, together with public initiatives aimed at covering a portion of the costs derived from corporate ESG policies, can make some unexploitable oil reserves in Latam become viable.

Toward energy finance market transition: Does China’s oil futures shake up global spots market?

China is breaking through the petrodollar system, establishing RMB-dominating crude oil futures market. The country is achieving a milestone in its transition to energy finance market internationalization. This study explores the price leadership of China’s crude oil futures and identifies its price co-movement to uncover whether it truly shakes up the global oil spots market. First, we find that for oil spots under different gravities, China’s oil futures is only a net price information receiver from light-, medium-, and heavy-gravity oil spots, but it has a relatively stronger price co-movement with these three spots. Second, for oil spots under different sulfur contents, China’s oil futures still has weak price leadership in sweet, neutral, and sour oil spots, but it has strong co-movement with them. Third, for oil spots under different geographical origins, China’s oil futures shows price leadership in East Asian and Australian oil spots at the medium- and longrun time scales and strong price co-movement with East Asian, Middle Eastern, Latin American and Australian oil spots. China’s oil futures may not have good price leadership in global spots market, but it features favorable price co-movement.

Addressing the UN SDGs in sustainability reports: An analysis of Latin American oil and gas companies

This article aims to establish an overview of the sustainable practices developed by the major oil and gas enterprises in Latin America and analyse how these practices are related to the Sustainable Development Goals (SDGs) 7, 9, 11 and 12. The methodological strategy used was the content analysis of the sustainability reports published by companies in the sector. Considering the ten oil and gas companies with the highest revenue in Latin America, 7 of them published sustainability reports in 2020 (base 2019), and these reports were analysed via content analysis technique. The findings showed that 244 sustainable practices were reported in sustainability reports by these seven companies. These practices were summarised by twenty different keywords (the practice can be represented by more than one keyword) and related with the targets of SDGs 7, 9, 11 and 12. It was found that few practices were related with the following targets: (a) greater access of small-sized companies, especially from developing countries, to financial services (target 9.3), (b) encouragement of companies to use sustainable practices and add sustainability information in their reporting cycle (target 12.6) and (c) the rationalisation of inefficient fossil-fuel subsidies (target 12.c). However, one company stands out amongst its competitors, having practices that, on average, were related with a higher number of targets of SDGs 7, 9, 11 and 12. This research has an exploratory character. The information reported here is of great value in guiding CSR actions of companies in the oil and gas sector and future research in the area to discuss how such companies can contribute to targets 9.3, 12.6, and 12.c.

Guillaume Fontaine, Cecilia Medrano e Iván Narváez. 2020. The Politics of Public Accountability. Policy Design in Latin American Oil Exporting Countries.

Guillaume Fontaine, Cecilia Medrano e Iván Narváez. 2020. The Politics of Public Accountability. Policy Design in Latin American Oil Exporting Countries.

Fontaine, G., Medrano, C., Narváez, I. (2020). The Politics of Public Accountability Policy Design in Latin American Oil Exporting Countries. Palgrave MacMillan. Switzerland. 227 pp.

Fontaine, G., Medrano, C., Narváez, I. (2020). The Politics of Public Accountability Policy Design in Latin American Oil Exporting Countries. Palgrave MacMillan. Switzerland. 227 pp.

Competitiveness analysis of the oil industry in the main Latin American oil countries, 1996-2017

The objective of this research is to analyze the main determinants of competitiveness in the oil industry in the main Latin American oil countries during the period 1996-2017. For this purpose, panel data econometric methods are applied in this research, namely, cross-section dependence (Pesaran), second generation unit root, cointegration (Kao and Fisher–Johansen), and heterogeneous causality tests (Hurlin and Dumitrescu). In this way, it is demonstrated that most of the variables are characterized by a cross-section dependence and there is evidence of cointegration relationships between the variables in the long term. Using the estimator Fully Modified OLS (FMOLS), it is determined that there is a positive relationship between competitiveness and oil barrel production, referring to the fact that an increase in oil barrel production creates an increase in competitiveness, while there is a negative relationship between competitiveness with the real exchange rate and the crude oil barrel price, referring to an increase in the real exchange rate and the oil barrel price in each country generate a decrease in the competitiveness of the oil industry.

Return transmission and asymmetric volatility spillovers between oil futures and oil equities: New DCC-MEGARCH analyses

Applying our newly extended vector autoregressive (VAR) dynamic conditional correlation (DCC) asymmetric spillover (AS) multivariate exponential generalized autoregressive conditional heteroscedasticity (MEGARCH) model with skew-t errors, this paper investigates return transmission and volatility spillovers between oil futures and international oil and gas sector equity returns. Employing a global perspective, and using six international oil and gas sector equity index returns for North America, Latin America, Developed Europe, Emerging Europe, the Far East, and BRIC alongside the WTI oil futures return, we obtain the following findings. First, we reveal unidirectional return transmission from oil futures to oil equities for Developed Europe, Emerging Europe, the Far East, and BRIC. Second, we find unidirectional return transmission from North American oil equities to oil futures, and mostly bidirectional return transmission between oil futures and Latin American oil equities. Moreover, we reveal unidirectional asymmetric volatility spillover effects from all the six oil equities to oil futures except for the Far East, where we observe mostly bidirectional asymmetric volatility spillovers. Furthermore, using the conditional variances and covariances from our new model, we also compute more precise time-varying optimal hedge ratios and optimal portfolio weights, and clarify that in international markets, hedging oil equities with oil is cheaper than vice versa.

E&P Notes (June 2018)

E&P Notes Total, Google Cloud To Team on AI for Upstream Matt Zborowski, Technology Writer Total and Google Cloud are teaming up to combine artificial intelligence (AI) with subsurface data analysis in an effort “to explore and assess oil and gas fields faster and more effectively,” the French supermajor said in a press statement. Google Cloud has previously stated its intention to further its involvement with the oil and gas industry. Under an agreement, the companies intend to develop AI programs to interpret subsurface images from seismic studies using computer vision technology and automate the analysis of technical documents with natural language processing technology. Total geoscientists will work with Google Cloud’s machine learning personnel as part of the same project team based in Google Cloud’s “advanced solutions lab” in California. Pioneer Unveils Strategy To Boost Permian Production, Control Costs Matt Zborowski, Technology Writer A more crowded Permian Basin means higher drilling, completions, and operating expenses for exploration and production firms, many of which have already spent billions of dollars over the past couple of years to gain core acreage positions in the region. Confident in its ability to take on these cost increases is long-time Permian operator Pioneer Natural Resources, which traces its roots in the basin back to the early 1960s with predecessor company Parker & Parsley. The company is in the midst of a plan to increase its production to 1 million BOE/D by 2026 while divesting its non-Permian assets. Shale Output Redefining US Production Stephen Rassenfoss, JPT Emerging Technology Senior Editor Recent snapshots of last year’s US energy production show how the shale oil and gas business has gone from a revolution to an evolving production machine. The centers of oil and gas production remain constant in the recently released production figures from the US Energy Information Administration (EIA), which show that the big-gest concentration of gas production is from a cluster of states—Pennsylvania, Ohio, and West Virginia. They just edged out Texas, which declined a bit last year. A look at the production changes by state shows Louisiana and Ohio as the fastest-growing states, benefitting from the growing domestic and global markets for US gas. Abu Dhabi Plans International Tender for Oil and Gas Exploration Blocks Abu Dhabi National Oil Company (ADNOC) is planning its first-ever competitive tender for international partners to participate in the exploration and development of oil and natural gas, in an effort to boost production in the UAE. Placed for bid will be four onshore and two offshore blocks, with bidding expected to conclude by October and ADNOC to announce the winners by year’s end, company CEO Sultan Ahmed Al Jaber said at a recent news conference. The partners would bear the exploration costs, and with the startup of production, ADNOC would assume a 60% interest. Total Becomes Founding Partner of Smart Energy Fund in China Total’s venture capital arm invested around $50 million to launch the Cathay Smart Energy Fund, alongside the provincial government of Chinese province Hubei (through Hubei High Tech Fund) and Cathay Capital. Finalized on 27 March, this ranks as one of Total Energy Ventures’ (TEV) biggest investments to date in a fund. Dedicated to China’s energy sector, it will focus on renewable energies, the energy Internet, energy storage, distributed energy, smart energy, and low-carbon businesses. “Everything changes at lightning speed. If you’re not paranoid, if you don’t check your rearview mirror constantly, you’re at risk of being overtaken,” said Girish Nadkarni, TEV’s CEO in a statement. International Majors Expand Footprints in Brazil, Mexico Matt Zborowski, Technology Writer A wide array of international oil companies shored up their presences in Brazil and Mexico in March following a pair of auctions. The events furthered energy reforms for the two Latin American oil and gas powers, both months away from presidential elections in which leftist candidates have vowed to dial back the changes. Preceding Brazil’s 15th Round on 29 March was news that two blocks in the Santos Basin would not be offered after a court determined they would earn more value for the country as part of production-sharing contracts. Those blocks, which garnered strong interest, will be awarded in June.

Lien-ing on PDVSA: The Positive Side of Negative Pledge

This Proposal remedies a crucial issue: the holdout creditor’s ability to thwart a PDVSA and Republic of Venezuela restructuring. It addresses this concern by unburdening the corporation of its attachable assets in order to frustrate asset-seeking potential holdouts before negotiations to exchange old PDVSA instruments for new Republic bonds. There is express contractual authorization – a permitted lien exception to the negative pledge clause – in PDVSA’s bonds and promissory notes that gives the corporation the right to pledge all of its assets to the Republic and give the Republic a senior lien, prioritized above all other creditors. Upon completion, the transaction leaves PDVSA as an unattractive target for holdouts. As this language is not found in any issuances by other state-owned oil companies (including multiple Latin American oil companies similarly situated to PDVSA) that otherwise contain very similar contractual language, it is the strongest contractual weapon in PDVSA’s arsenal. After this permitted lien is utilized to successfully compel the holdout creditors to participate, we advocate for the use of Original Issue Discount on the bonds to reduce PDVSA’s overall debt stock during the exchange of old debt for newer consolidated debt.

Manager’s Flexibility & Cancellation Option: Insights of a Case Study in the Latin American Oil Industry

Purpose: This article focused on the main business insights of the use of Real Options valuation analysis in the eyes of a finance professional. It used a case study of an investment opportunity in the oil and gas field services industry in Latin America to discuss the methodology implementation and its insights. As a secondary objective, it discussed the insights and options embedded in this investment opportunity.Methodology: The investment opportunity was examined using the Real Options Analysis (ROA) framework and the results compared to the traditional methodology of Net Present Value. The valuation technique was performed as if it had been applied at the time the project was approved.Findings: The most important of Real Option valuation is not the results, but how one arrives at them. After the project value is calculated and the project approved or not, the Real Option valuation requires and supports the monitoring of the project. By understanding how the options are created, managers can make better decisions about the project after it was approved.Practical implications: A relevant contribution from the study was the discussion, as a practitioner, of the methodology implementation in a real world corporation. Originality & value: The case study evaluated two types of real options: first, the effect of an option to cancel a contract that was assessed from the perspective of the client contracting the project; and second, the option to abandon and defer, from the perspective of the company that will perform the investment to provide the services. By incorporating the cost of the put option that the company puts forth for the client (cancellation option) it reduces the project value by giving flexibility to its clients.

Nationalisation and privatisation in state-owned oil multilatinas

This multi-case study paper analyses the influence of both nationalisation and privatisation patterns on five major Latin American oil companies: Petrobras, PEMEX, PDVSA, Ecopetrol and YPF. The paper uses case study methodology in which each case was studied individually to identify unique case features, and to eventually conduct a cross-case analysis in which patterns are studied. Data was collected from publicly available secondary sources. After a careful examination and analysis of the selected cases, it can be concluded that semi-privatised Latin American oil companies directly compete with private companies in terms of revenues, growth and international presence. Based on analysis and comparisons, this study concludes that private participation might have had a positive effect in Latin American oil companies internationally.

Linear solution schemes for Mean-SemiVariance Project portfolio selection problems: An application in the oil and gas industry

We study the Mean-SemiVariance Project (MSVP) portfolio selection problem, where the objective is to obtain the optimal risk-reward portfolio of non-divisible projects when the risk is measured by the semivariance of the portfolio׳s Net-Present Value (NPV) and the reward is measured by the portfolio׳s expected NPV. Similar to the well-known Mean-Variance portfolio selection problem, when integer variables are present (e.g., due to transaction costs, cardinality constraints, or asset illiquidity), the MSVP problem can be solved using Mixed-Integer Quadratic Programming (MIQP) techniques. However, conventional MIQP solvers may be unable to solve large-scale MSVP problem instances in a reasonable amount of time. In this paper, we propose two linear solution schemes to solve the MSVP problem; that is, the proposed schemes avoid the use of MIQP solvers and only require the use of Mixed-Integer Linear Programming (MILP) techniques. In particular, we show that the solution of a class of real-world MSVP problems, in which project returns are positively correlated, can be accurately approximated by solving a single MILP problem. In general, we show that the MSVP problem can be effectively solved by a sequence of MILP problems, which allow us to solve large-scale MSVP problem instances faster than using MIQP solvers. We illustrate our solution schemes by solving a real MSVP problem arising in a Latin American oil and gas company. Also, we solve instances of the MSVP problem that are constructed using data from the PSPLIB library of project scheduling problems.

THE MONTH IN BRIEF: OPEC's blushes saved after Doha fiasco when Kuwaiti oil workers go on strike, Latin American oil in crisis, and are the Saudis getting out of oil?

This section summarizes downstream developments of the previous month. Exploration & Production are covered in “Upstream Review”.

SURVEY: Latin American oil producers hit by falling prices and rising debt

An analysis of the effect of falling crude prices and rising levels of debt on Latin America's oil production and exports by Oil and Energy Trends' Consulting Editor, Dr Paul McDonald.

Impact of Oil Prices on Economic Growth in Latin American Oil Exporting Countries (1990-2014): A Panel Data Analysis

This paper is aimed at assessing the impact of oil prices on the GDP growth rate of a sample of net oil exporting Latin American countries during the period 1990-2014. The obtained empirical results from pooled regression and panel data analysis allowing for idiosyncratic differences among the observation units (countries) suggests that the relative economic importance of oil exports and crude oil price fluctuations (West Texas Intermediate and Brent) has a positive relationship and a highly significant effect on the levels of economic activity in Latin American countries.

Genome-wide analysis of LTR-retrotransposons in oil palm.

BackgroundThe oil palm (Elaeis guineensis Jacq.) is a major cultivated crop and the world’s largest source of edible vegetable oil. The genus Elaeis comprises two species E. guineensis, the commercial African oil palm and E. oleifera, which is used in oil palm genetic breeding. The recent publication of both the African oil palm genome assembly and the first draft sequence of its Latin American relative now allows us to tackle the challenge of understanding the genome composition, structure and evolution of these palm genomes through the annotation of their repeated sequences.MethodsIn this study, we identified, annotated and compared Transposable Elements (TE) from the African and Latin American oil palms. In a first step, Transposable Element databases were built through de novo detection in both genome sequences then the TE content of both genomes was estimated. Then putative full-length retrotransposons with Long Terminal Repeats (LTRs) were further identified in the E. guineensis genome for characterization of their structural diversity, copy number and chromosomal distribution. Finally, their relative expression in several tissues was determined through in silico analysis of publicly available transcriptome data.ResultsOur results reveal a congruence in the transpositional history of LTR retrotransposons between E. oleifera and E. guineensis, especially the Sto-4 family. Also, we have identified and described 583 full-length LTR-retrotransposons in the Elaeis guineensis genome. Our work shows that these elements are most likely no longer mobile and that no recent insertion event has occurred. Moreover, the analysis of chromosomal distribution suggests a preferential insertion of Copia elements in gene-rich regions, whereas Gypsy elements appear to be evenly distributed throughout the genome.ConclusionsConsidering the high proportion of LTR retrotransposon in the oil palm genome, our work will contribute to a greater understanding of their impact on genome organization and evolution. Moreover, the knowledge gained from this study constitutes a valuable resource for both the improvement of genome annotation and the investigation of the evolutionary history of palms.Electronic supplementary materialThe online version of this article (doi:10.1186/s12864-015-2023-1) contains supplementary material, which is available to authorized users.

New Challenge in Latin American and Caribbean Oil Spill Control: Offshore Prevention and Response after the DWH Milestone

ABSTRACT With offshore activities at different exploration and production stages in virtually all South American countries with sea coasts, a Central American country, and some Caribbean countries, the Deepwater Horizon (DWH) disaster has not gone unnoticed among the governments and the oil industry in the area. Organizational and human errors committed and highlighted in the investigations that have successively come to light in such a world power as the U.S.—a leader in the sector—, bring to mind the realities and systemic safety failures of the schemes and procedures in force, both in the oil industry and regulatory authorities, to control these potential environmental disasters. The offshore issue has become a priority in the Latin American and Caribbean oil industry and grows because of the recurrent confirmation of new oilfields and their successful exploration by international oil companies through block concessions, which is the only way to access the required effective technology for exploitation. Over the past decades and without exception, Latin America and the Caribbean has gone through emergency situations with spills from oil tankers, explosions and fires in refineries, pipeline fires and sabotage, and explosions and sinkings of oil rigs. The shy cooperation attempts between states and national oil companies obtained few concrete results despite the efforts of regional organizations such as ARPEL. This paper emphasizes the weaknesses in response procedures and standards through specific examples of recent incidents in “the Big Three” (Brazil, Mexico, and Venezuela), which could become worse in the current offshore deep and ultra-deep water scenario. It challenges the National Contingency Plans that must now include offshore goals and an organization scheme, such as the Incident Command System, which must be adapted as soon as possible due to the new scenarios and the need for effective inclusion of environmental actors previously relegated. The paper also outlines response strategies applied in DWH and their possible use in offshore scenarios in the region, which will require coordinated efforts by all stakeholders. It emphasizes that this is an excellent opportunity for operational improvement of the Latin American and Caribbean oil sector with respect to safety, emergencies, and spill control.

FOCUS: Latin American oil: Which way next?

FOCUS: Latin American oil: Which way next?

Major Trends in the Historiography of the Latin American Oil Industry

The historiography of Latin America's oil industry has evolved since the period between the 1960s and the 1980s, when most scholars were focusing on the rise of nationalism in reaction to the multinationals' control of the oil sector. Beginning in the 1990s, the emergence of new methodologies enabled historians to study other aspects of the industry, such as its environmental and cultural impact, local elites' role in its development, the industry's impact on the long-term development of Latin American countries, and the organizational evolution of state-owned oil companies. However, the literature continues to be dominated by studies of Mexico, while the subject of oil consumption is largely ignored.