The government introduced multiple service contracts (MSCs), a new mechanism designed to encourage private sector participation (and especially that of foreign capital) by grouping into larger bid packages a number of smaller contracts that would otherwise have been offered individually. Initial bidding went well, with state oil company Pemex awarding contracts for the Cuervito, Mision and Reynosa-Monterrey blocks in the Burgos basin, while the Ricos and Corindon-Pandura blocks drew no bids.
Pemex is continuing its refinery upgrade program, preparing the US$3bn Fenix petrochemicals project, and was a frequent visitor to financial markets, where it sold close to US$7bn of bonds at home and abroad in 2003.
Trying to put off the date at which the country becomes a net oil importer, the government is becoming ever more creative in how it shapes the sector.
This year it split state oil company Ecopetrol into three parts, leaving one unit focused on the core business, creating a new unit to handle non-core business, and a third unit that becomes the country's regulator, the ANH.
With this year's high profile drilling targets at Niscota and Gibraltar turning in disappointing results, the sector must have its fingers crossed for a future reversal of fortunes.
Like Colombia, Ecuador's production is declining, and the ninth round, originally planned for April, has been put off until March 2004. A separate bidding process to increase production on its four main fields has drawn more interest, and upstream investment is expected to increase since the OCP heavy crude pipeline started pumping in the fourth quarter.
President Hugo Chavez survived another scare with the December 2002-February 2003 general strike that crippled the oil sector. He responded by laying off about half of state oil company PDVSA's workers, splitting the company into eastern and western divisions, and succeeding in the short term at least in reestablishing pre-strike production levels at reduced costs.
However, the post-strike sector has not been able to shake off claims that victories are pyrrhic in that safety and technical standards have slipped. BP sold its operating stakes in the country's Boqueron and Desarrollo Zulia Occidental (DZO) fields to British independent oil company Perenco for US$160mn, and by the end of the year, PDVSA had gone back on earlier declarations regarding the promising Tomoporo upstream project, saying it would not invite any private sector partners.
The energy and mines ministry finished the year accepting bids for blocks 2 and 4 (from ChevronTexaco and Statoil, respectively) of the US$4bn Deltana LNG project, and at the time of going to press was still considering a bid from ChevronTexaco for block 3.
Plans to export liquefied natural gas (LNG) to the North American market were the final straw that brought down President Gonzalo Sanchez de Lozada in October. His successor, Carlos Mesa, has played strongly to public opinion while hinting that he will support the gas project.
While the LNG project is not expected any time before the turn of the decade, the government is trying to industrialize its huge gas reserves by stepping up a residential distribution program, and by substituting vehicular natural gas (VNG) for liquefied petroleum gas (LPG).
With negligible reserves, the strength of state oil company Enap is in its refining operations. Constantly improving product quality to cater for contaminated capital city Santiago, the company was able to take advantage of PDVSA's post-strike weakness and won two supply contracts for the Central American market.
Then in November, Enap announced plans to merge its two refineries into a single company that would be the biggest refinery on the Pacific coast outside of North America.
With domestic rates still "pesofied" and frozen, upstream investments are concentrated heavily on oil, which can be sold internationally at healthy prices, instead of gas, where the slow pace of investment has made shortages a distinct possibility, and has prompted Techint to consider a US$1bn pipeline to import Bolivian gas to the country's northern provinces.
US oil company Hunt is leading the consortium that will export Camisea gas as LNG, and signed a memorandum of understanding to supply a regasification terminal at Lazaro Cardenas in Mexico that Belgium's Tractebel is developing. State investment promotion agency Perupetro signed only two exploration and production contracts in 2003, but expects to ink six in 2004.
The Santos gas discovery mentioned earlier looks set to change everything in the southern cone gas market. Now backed by far higher domestic reserves, Brazil's government has a much stronger hand in its talks with the Bolivian government to reduce the price of gas imports from its western neighbor. By the end of the year, state oil company Petrobras had already started the bidding process to pipe future Santos production up to the northeast of the country, where there is already a 1 billion cubic feet a day gas deficit. Several states are bidding to host a new refinery planned by Petrobras, and the strategically important state of Rio de Janeiro has introduced a number of pieces of state legislation designed to favor its chances.
Rio is one of the states that will most benefit from the US$1bn financing that national development bank BNDES has set aside for the shipbuilding industry, with heavy emphasis on platform support vessels, which is big and advanced enough for the federal government to think it has a competitive advantage on a worldwide scale. Fears that President Luiz Inacio Lula da Silva would backtrack on open market reforms proved unfounded, and Petrobras strategy remains unchanged. On the international front, the absorption of Perez Companc in Argentina went ahead as planned, and increased the company's foreign production to 252,069 barrels a day by November.
Petrobras picked up most blocks offered by oil regulator ANP in the round 5 concession bidding in August, and bought acreage in the Campos, Santos and Potiguar basins. The relatively low participation of other companies is expected to be reversed in round 6, scheduled for August 2004.
TRINIDAD & TOBAGO
Methanol Holdings Trinidad Ltd (MHTL) started construction of its US$500mn 'M5000' methanol project at the Point Lisas industrial estate, and Canadian methanol company Methanex went through with the purchase of 90% of the 850,000 ton/year Titan methanol plant in Trinidad from Beacon Energy and BP.
BP also sold a further 20% in BPRY Caribbean Ventures - the 100% owner of BP Trinidad & Tobago (BPTT) - to Spain's Repsol YPF, with which the Spanish company expected its 2003 net production in the islands to increase to 105,000 barrels of oil equivalent a day (boe/d), from 28,000boe/d in 2002. Finally, Train 3 of the Atlantic LNG plant started operations, and the government approved the US$1.2bn Train 4. In the upstream sector, the energy ministry postponed the deadline for receiving bids on 10 offshore oil and gas blocks.
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