energy

Inside This Issue

FFEEAATTUURREEDD QQ&&AA:: What Lessons Can LatinAmerica Learn From the Gulf Oil Spill? ..............1

Peru Resumes Oil Concession Bidding Process After Scandal............................2

Petrobras May Postpone $25 Billion Share Sale if Markets Worsen: CEO...................2

Eskenazi: Repsol Planning to Raise $3 Bn in YPF Share Sale.............................2

Report: Ecuador, China Agree on Terms for $2 Billion Hydro Dam ...........................3

Spain's Iberdrola to Invest More Than $1 Billion in Brazil Through 2012................3

U.S. Firm and Spain's Gamesa Seal 10-Year Deal for Mexico Wind Farms.................3

Jamaica Gets OAS Help for Biofuels Development .....................................3

Political and Economic News: Mexico, Haiti, Venezuela and more.................4-5

QIn the wake of a massive oil spillin the Gulf of Mexico, Brazil'sNational Petroleum Agency(ANP) is requiring all oil compa-

nies operating in the South Americancountry to review their emergency plans.In addition, the ANP and state oil compa-ny Petrobras sent specialists to monitorcleanup efforts underway in the gulf.Could an incident similar to gulf oil spillhappen in Brazil or elsewhere in LatinAmerica? Have oil companies and regula-tors like the ANP taken the necessarysteps to prevent such an occurrence?How will the lessons of the BP spillimpact offshore oil development in Braziland other places in Latin America?

AJeremy Martin, director of theenergy program at the Instituteof the Americas: "As of yet, thegulf oil spill has not caused any

major rethinking about offshore drillingamong Latin American energy leaders. Atlast week's annual La Jolla EnergyConference, the incident in the gulf and itsimplications were prime discussion topics.Ongoing containment efforts and longer-term impacts were clearly on the mind ofattendees. Most agreed that the ramifica-tions are still unclear, though signs emerg-ing in the United States point to increasedoversight, higher insurance costs and per-haps a step back from opening new off-shore plays. A speaker from Statoil spokeof the reverberations in Norway, where the

accident is causing that nation to take acloser look at new offshore plays. Therewas a general consensus that once a bettersense of what occurred and what workedto solve the problem are available, therewill be important lessons learned that canbe applied across the region from the deepwaters off Brazil to the Gulf of Mexico.Some noted that much like Brazil's off-shore industry developed and implement-ed enhanced safety measures in the wakeof the 2001 P-36 platform disaster in itswaters, so will innovation and advances

Copyright © 2010, Inter-American Dialogue of 6

Continued on page 6

www.thedialogue.org May 17-21, 2010

Jeffrey Davidow President,Institute of theAmericas

Ramon Espinasa Consultant,Inter-AmericanDevelopment Bank

Luis GiustiSenior Adviser, Center for Strategic &International Studies

Jonathan C. HamiltonPartner,White & Case LLP

Kirk HaneyCEO,SG Biofuels

Raul HerreraPartner, Corporate andSecurities PracticeArnold & Porter LLP

William IrwinManager, InternationalGovernment AffairsChevron Corporation

Paul IsbellDirector, Energy ProgramElcano Royal Institute

James R. JonesCo-chair,Manatt JonesGlobal Strategies LLC

Jorge KamineCounsel, Skadden, Arps, Slate,Meagher & Flom LLP

Larry PascalPartner,Haynes and Boone

Everett Santos President, DALEC LLC

R. Kirk SherrCEO, Arrakis Geodynamics

Roger Stark Partner,Curtis, Mallet-Prevost,Colt & Mosle LLP

Mark Thurber Partner,Andrews Kurth LLP

Roger TissotAssociate Consultant,Gas Energy LatinAmerica

Max YzaguirreChief Executive Officer,The Yzaguirre Group

BOARD OF ADVISORSFEATURED Q&A

What Lessons Can Latin America Learn From the Gulf Oil Spill?

CEO José Sergio Gabrielli said a $25 bil-lion share offering to accompany a gov-ernment recapitalization of Petrobras iscurrently on track for July or August, butthat it could be postponed if equity mar-kets worsen. See story on page 2.

File Photo: Petrobras.

CEO: Petrobras May PostponeShare Sale if Markets Worsen

Oil & Gas News

Peru Resumes Oil ConcessionBidding Process After Scandal

Peru's government on Friday restarted abidding process for 25 oil blocks nearlytwo years after bidding was suspended inthe midst of a scandal over the awardingof contracts to a Norwegian company,EFE reported. "It's very important toresume the international auction after thedifficult moments we endured," DanielSaba, president of state-owned Petroperu,told the wire service." Twenty-four of theexploration blocks are in the Marañón-Ucayali river basins and the Madre deDios region in the southwestern part ofthe country. The otherblock is in an area onthe border of thenorthwestern regionsof Lambayeque andPiura. The biddingprocess will end Oct.14 when the govern-ment will award con-cessions. The biddingprocess was suspendedlast year after therelease in 2008 of recorded telephone con-versations in which officials allegedly dis-cussed bribes to favor Norway's DiscoverPetroleum. The company has denied anywrongdoing. People with ties to the rulingAPRA party were implicated in the scan-dal, which remains under investigation.The scandal led President Alan García'sentire cabinet to resign. In related news,Houston-based BPZ Energy Resourcessaid Friday it signed a contract withPetroperu to deliver 400,000 barrels fromits Albacora field in northwest Peru. Thecompany will deliver the crude toPetroperu's Talara refinery 100 milessouth of Albacora and has already sent28,500 barrels, according to a pressrelease.

Petrobras May Postpone $25 BillionShare Sale if Markets Worsen: CEO

Brazil's state-controlled oil companyPetrobras could postpone a planned saleof $25 billion in shares if equity markets

worsen, CEO José Sergio Gabrielli saidWednesday. "If the crisis is as it is now, wecan go on," Gabrielli said in an interviewwith Bloomberg Television. "If it goesdeeper and spreads over more than it isnow, then we have to consider." The sharesale would be the Western Hemisphere'slargest in at least a decade. The companyhas been planning to sell the shares in Julyor August. Petrobras last Friday said itsfirst-quarter net profit increased 23 per-cent from last year to 7.7 billion reais($U.S. 4.3 billion) on higher oil prices,increased exports, a domestic sales recov-ery and a stronger real. Earnings beforeinterest, taxes, depreciation and amortiza-tion rose 12 percent to 15.8 billion reais.Oil and gas production rose 3 percent inthe first quarter, during which Petrobrasmade investments of 17.8 billion reais.

Eskenazi: Repsol Planning to Raise $3 Bn in YPF Share Sale

Spanish oil company Repsol YPF plans toraise as much as $3 billion by selling a 20percent stake in its Argentine unit, YPF,Bloomberg News reported Wednesday,citing YPF chief executive SebastiánEskenazi. In an interview with BloombergNews, Eskenazi said the Madrid-basedcompany could sell 15 percent of YPF inthe United States and 5 percent inArgentina in an offering early as July. YPFlater confirmed Eskenazi's statement, but

Repsol declined to comment, Dow Jonesreported. Eskenazi's family owns a 15.4percent stake in YPF through energy com-pany Grupo Petersen, while Repsol owns84 percent. Eskenazi said his holding com-pany could exercise its option to increaseits share in the company to 25 percent,Bloomberg News reported. Repsol is aim-ing to raise money to help fund its off-shore holdings in Brazil's Tupi field, buthas postponed an offering several times

of 6

ENERGY SECTOR BRIEFS

Copyright © 2010, Inter-American Dialogue

IInntteerr--AAmmeerriiccaann DDiiaalloogguuee’’ss LLaattiinn AAmmeerriiccaa EEnneerrggyy AAddvviissoorr MMaayy 1177--2211,, 22001100

Chilean Fuel Distributor CopecBuys Minority Stake in Terpel

Chilean fuel distributor Copec lastFriday gained a foothold in theColombian market by purchasing aminority stake in Bogotá-basedTerpel for $240 million, the firmsaid in a note to Chile's securitiesregulator. Copec bought a 47.2 per-cent share of private Colombianfirm Proenergia, which controlsTerpel's parent company, and plansto buy an additional 5 percent fromProenergia shareholders to gain fullcontrol of Terpel.

Guatemalans Protest 30 PercentElectricity Rate Hike

Protesters in Guatemala blockedhighways and demonstrated in thecapital on Wednesday in oppositionto a 30 percent increase in electricityrates that went into effect May 1,Agence-France Presse reported.While indigenous and rural groupsblockaded roads near the borderswith El Salvador and Mexico, policein Guatemala City used tear gas tobreak up a crowd in the city center,according to the report. The protest-ers have called for the nationaliza-tion of power distribution, which iscontrolled by Spanish companiesIberdrola and Unión Fenosa.

Brazil's Eletrobras Sees FivefoldProfit Increase in for Q1

Brazilian state utility holding com-pany Eletrobras said Monday itsfirst-quarter net profit increasedfivefold to 519.8 million Brazilianreais ($U.S. 287 million), up from101.3 million last year, due to cur-rency gains, Bloomberg Newsreported. The company reported a228 million-real gain in the firstquarter, compared to a 199 million-real loss the previous year. Salesfrom the Itaipu hydroelectric damare denominated in dollars.

Saba

File Photo: Petroperu.

Eskenazi said Repsol could sell

15 percent of YPF in the United

States and 5 percent in Argentina

in an offering early as July.

due to market conditions. Repsol CEOAntonio Brufau said April 29 the compa-ny wants to sell its stake in YPF "soonerrather than later."

Power Sector News

Spain's Iberdrola to Invest MoreThan $1 Bn in Brazil Through 2012

Spanish power company Iberdrola saidWednesday it will invest $1.13 billion overthe next two years in Brazil. Much of thecompany's focus will be on new powerplants—it expects to bring onstream anadditional 710 megawatts of hydro capac-ity by 2013 in Brazil—and investments inexpanding its electricity distributioninfrastructure, Iberdrola said in a pressrelease. The Spanish firm has been pres-ent in Brazil since 1997 through its 39percent stake in Neoenergia, along withlocal partners Banco do Brasil, with 12percent, and Previ, with 49 percent. Thecompany also operates in Brazil throughIberdrola Renovables, which has a 50megawatt wind farm in Rio do Fogo.Latin America has been a big part ofIberdrola's international expansion over

the past two decades, with a total of $11.2billion invested in the region. In all, LatinAmerica contributed 13 percent of thegroup's earnings before interest, taxes,depreciation and amortization and 24percent of net profit last year.

U.S. Firm and Spain's Gamesa Seal10-Year Deal for Mexico Wind Farms

Spain's Gamesa said Tuesday it signed a10-year exclusivity agreement with U.S.-based Cannon Power to supply all of thewind turbines installed at sites Cannon is

developing in Mexico's Baja Californiapeninsula. The U.S. company plans tospend as much as $1 billion and buy asmany as 500 turbines from Gamesa, theSan Diego Union-Tribune reported. Theagreement could eventually cover projectstotaling 1,000 MW of wind productionthat Cannon says are at various stages ofdevelopment. "We envision this as amajor crossborder project that can stimu-late the region's economy and provideenough clean energy for over 250,000households," Cannon executive GaryHardke said in a statement. The first windfarm, a 140 square-mile project calledAubanel, is expected to get off the groundin the next year and would include 70MW to 100 MW in phase one. The proj-ect would expand to 500 MW in capacitywithin the next three to four years.Aubanel is located near the town of LaRumorosa, approximately 60 miles east ofSan Diego and 15 miles south of the U.S.-Mexico border. Gamesa says it hasinstalled over 18,000 MW of wind turbinecapacity worldwide. San Diego-basedCannon Power Group says it has devel-oped more than 30 utility-scale windenergy projects in the United States,India, Switzerland, Spain, Italy, Turkey,Greece and Croatia.

Biofuels News

Jamaica Gets OAS Help for Biofuels Development

Jamaica's energy and mining minister

said Wednesday the launch of a new bio-fuels program in partnership with theOrganization of American States markeda "milestone" in securing the country'senergy future. "Today we have achievedanother milestone that will advance theoperationalization ofthe National EnergyPolicy 2009-2030 andcontribute to the longterm sustainability ofbiofuel developmentin Jamaica," Energyand Mining MinisterJames Robertson saidat the program'slaunch in Kingston,according to officialmedia. Under the ini-tiative, which is part of the U.S.-BrazilBilateral Memorandum of Understand-ing, the OAS is providing technical assis-tance to "establish a strong legal and reg-ulatory framework for a vibrant liquidbiofuels industry, facilitate the sharing ofperspectives among the respective stake-holders and advise on appropriate tech-nologies," the multilateral organizationsaid in a press release. No further detailswere given. Robertson said Jamaica hadalready taken some of the necessary stepsto bolster biofuels development, includ-ing the state's divestment from the sugarcane industry and sugar estates and thecurrent production of sugar-caneethanol. The island is currently home to a$10 million ethanol plant that producesexports to the United States usingBrazilian feedstock. Jamaica's 2009-2030

of 6Copyright © 2010, Inter-American Dialogue


Report: Ecuador, China Agree on Terms for $2 Billion Hydro Dam

Ecuador and China have reached a deal to finance a $2 billion hydroelectric plant inthe Andean country, Ecuadorean state media reported Thursday. Officials fromChina's export-import bank traveled to Ecuador last week to hammer out thespecifics of a new credit agreement, Chinese diplomat Gu Jiafeng told news agencyAndes. The state news service did not reveal the details of the deal. Negotiations overthe dam had been suspended after no agreement was reached before Ecuador's March15 deadline. Next week, Strategic Sectors Minister Jorge Glas and Finance MinisterPatricio Rivera will lead an Ecuadorean delegation to China to sign the final versionof the credit agreement, according to the report. The Coca Codo Sinclair hydroelec-tric dam would have a generating capacity of 1,500 megawatts and enable Ecuador tosave an estimated $2 million in energy imports per day. The Export-Import Bank ofChina would finance 85 percent of the project, while the remaining 15 percent wouldbe financed by the Ecuadorean government. The project's chief contractor is China'sSinohydro.

Rio do Fogo wind farm

File Photo: Iberdrola.

Robertson

Photo: JamaicanGovernment.

IInntteerr--AAmmeerriiccaann DDiiaalloogguuee’’ss LLaattiinn AAmmeerriiccaa EEnneerrggyy AAddvviissoorr


energy plan calls for the diversification ofenergy sources away from petroleumtoward a greater reliance on natural gasand, later, renewable energy, which issupposed make up 20 percent of its ener-gy mix by 2030. [Editor's note: See relat-ed Q&A on biofuels in the Caribbean inthe Jan. 19-23, 2009 issue of the EnergyAdvisor.]

Political News

Calderón Begins State Visit to U.S.With Criticism of Immigration Law

Mexican President Felipe Calderón begana two-day state visit to WashingtonWednesday by criticizing a controversialArizona law aimed at cracking down onillegal immigration. Among the provi-sions of the law, which Arizona approvedlast month, is a requirement that localpolice check the immigration documentsof anyone suspected of being in the coun-try illegally. Calderón on Tuesday said thelaw was discriminatory and that Mexicowould reject any attempt to "criminalize

migration," the Associated Press reported.Many immigrants, "despite their signifi-cant contribution to the economy and tothe society of the United States, still live inthe shadows, and occasionally, as inArizona, they even face discrimination,"Calderón said alongside U.S. PresidentBarack Obama at the White House.Obama also criticized the Arizona lawand said it showed the need for a federaloverhaul of immigration policy. "In theUnited States of America, no law-abidingperson—be they an American citizen, alegal immigrant, or a visitor or tourist

from Mexico—should ever be subject tosuspicion simply because of what theylook like," said Obama. Supporters of theArizona law argue it is needed to fightillegal immigration because the federalgovernment has not adequately addressedthe issue. Calderón and Obama also saidthey would work together to fight drugtraffickers, protect the environment andaid economic growth. In joint statement,

the two presidents said they would seek a"moratorium on [oil] exploitation activi-ties along the maritime boundary in theWestern Gap in the Gulf of Mexico" dueto the recent BP Deepwater Horizon oilspill. [Editor's note: See Q&A on page 1.]During a speech at the U.S. Chamber ofCommerce, Calderón said strengtheningthe economic partnership between theUnited States and Mexico is the best way

MMaayy 1177--2211,, 22001100

QA special report in theFinancial Times on May 6 high-lighted Brazil's huge infra-structure needs, especially as

the country prepares to host the WorldCup and the Olympics later this decade.Traditionally, the Brazilian developmentbank, known as BNDES, has played acentral role in infrastructure financing,with some critics charging that the pub-licly owned bank crowds out privatefinancing. Does Brazil's current infra-structure push leave enough room forboth public and private sources offinancing? What are the positives andnegatives of BNDES playing such alarge role in infrastructure finance?

ANorman Anderson, presidentand CEO of CG/LA Infrastruc-ture in Washington: "BNDES isone of the great institutional

successes in modern Brazil. Last year,BNDES disbursed nearly $25 billion intoBrazilian infrastructure projects—in ayear in which financing for projects hadcompletely dried up around the world,especially in Latin America. This isgreater than seven times the $3.4 billiondisbursed in 2003. This support for theBrazilian economy was critical, a hugeaccomplishment. Today, BNDES moreclosely resembles a national infrastruc-ture bank along the lines of the EuropeanInvestment Bank, or the NationalInfrastructure Bank proposed byPresident Obama—a strategic institu-tion, pushing the country forward. If weare moving toward a new model of pub-

lic leadership in infrastructure projectdevelopment, then BNDES is a goodmodel for other emerging markets.Where does infrastructure projectexpertise, financing, leadership andmanagement come from in the smallerLatin American countries? The issue ofcrowding out, and the issue of Brazil'senormous infrastructure needs are sepa-rate. Brazil currently lacks the institu-tional capacity to create the kind of proj-ect pipeline required for a large infra-structure build. Rebuilding this machin-ery—rebuilding, for example, capacity inthe Ministry of Planning—should beone of the key themes of the currentelection campaign. Without a strongpublic sector, private-sector risk is toohigh, financing costs go through the roofand projects don't get built on time andon budget. If Brazil is going to advancein terms of global competitiveness, thecountry needs to invest $90 billion peryear in infrastructure over the next 10years. To do that, Brazil requires a com-petent, capable, public sector, andBNDES is a great starting point. If Brazilcan reinject expertise into the public sec-tor, then there will be a crowding-inproblem, with everyone competing in asound environment to finance greatprojects."

The Advisor welcomes reactions to theQ&A above. Readers can write editorGene Kuleta at [email protected] comments.

Advisor Q&AIs BNDES Crowding Out Private Infrastructure Lending?Excerpted from the May 18 issue of the Dialogue's daily Advisor

(L-R) First Ladies Margarita Zavala ofMexico and Michelle Obama of the UnitedStates, Presidents Calderón and Obama

Photo: White House.

http://www.thedialogue.org/uploads/LAA/Daily/2010/LAA100518.pdf


for the two countries to compete withAsia and the European Union. Obamaalso hosted Calderón Wednesday night atthe White House at the second state din-ner of his presidency. The Mexican leaderaddressed a joint session of CongressThursday.

Haitian President Vows to Leave Office When Term Ends

Haitian President René Préval vowedTuesday to leave office next Feb. 7, the dayhis term expires, rebuking opponentswho argue he is using the country's dev-astating Jan. 12 earthquake to remain inpower, the Associated Press reported."This is the last May 18 I will spend withyou as president,"Préval told a crowd ofthousands in the sea-side town of Arcahaie,the AP reported. "I willgo and my heart will becalm." Préval earlierthis month issued adecree for him to tem-porarily remain inpower after his term isslated to end if thecountry's presidentialelection is not held later this year asscheduled. Electoral officials in Haiti aregrappling with the destruction of theirheadquarters, records and polling placesin the earthquake, which is feared to havekilled more than 230,000 people. Thedecree sparked protests in Port-au-Prince. After the quake, Haiti's govern-ment canceled a legislative election thathad been scheduled for last February.

Economic News

Venezuela's Chávez AccusesBrokerages of Committing 'Fraud'

Venezuelan authorities have arrested thedirectors of two brokerages, PositivaSociedad de Corretaje de Titulos deValores and Ban Valor Casa de Bolsa inan investigation into foreign currencyregulations, Bloomberg News reportedtoday. President Hugo Chávez onWednesday accused brokerages of com-

mitting fraud in the currency market andattempting to weaken Venezuela's curren-cy to 10 bolívars per dollar. During aspeech on state television, Chávez said hewill ask the United States to provideinformation on potential money launder-ing in the unofficial currency market afterVenezuela's finance minister, JorgeGiordani, said drug proceeds may beinvolved. Venezuela's governmentrestricted trading of dollar assets onTuesday. Brokerages were not able toprove the source of funds in currencytransactions and were allowing capitalflight, said Giordani. A representative ofthe U.S. government said the UnitedStates will work with Venezuela in investi-gating any potential illegal activity. "TheU.S. is always willing to cooperate withthe Venezuelan government on issues ofmutual concern," Robin Holzhauer, aspokeswoman at the U.S. Embassy inCaracas told Bloomberg News in an inter-view.

Peru's Economy Grows at Fastest Rate in 17 Months

Peru's economy, the sixth-largest inLatin America, grew at its fastest pace in17 months in March as domestic demandfueled the country's manufacturing andconstruction sectors, the government'sstatistics agency said Monday, BloombergNews reported. In March, gross domesticproduct increased 8.8 percent fromMarch 2009. In February, GDP grew 5.9percent year-on-year. Strengtheninginternal demand has led Peru's economyto rebound from the global economiccrisis. To counter inflation, Peru's centralbank on May 6 increased its benchmarkinterest rate a quarter point to 1.50 per-cent. Peru's manufacturing, constructionand retail sectors contributed 5.2 per-centage points of March's 8.8 percentgrowth. Construction and manufactur-ing each experienced their sharpestincreases since April 2008, with gains of24.1 percent and 15.1 percent respective-ly. In March, Finance Minister MercedesAráoz said private investment is likely togrow by 15 percent this year. The govern-ment expects 5.5 percent GDP growththis year and inflation of 2 to 2.5 percent,said Aráoz.


Iran Agrees to Nuclear Swap Dealin Talks With Brazil, Turkey

After talks with Brazil and Turkey,Iran agreed Monday to send abouthalf of its uranium to Turkey inreturn for processed nuclear fuelrods processed by Russia and Francefor use in medical research. Despitethe swap deal, the Obama adminis-tration announced Tuesday that theUnited States and major powersincluding China and Russia hadagreed to impose new U.N. sanc-tions on Iran over its nuclear pro-gram. [Editor's note: See relatedQ&A in the May 20 issue of thedaily Advisor.]

Central American, E.U. Leaders Agree to Trade Deal

Leaders from Central America andthe European Union agreed Tuesdayto a free-trade agreement, but theaccord may not be implementeduntil the end of this year at the ear-liest, The Wall Street Journal report-ed. The agreement was reached dur-ing a summit of European and LatinAmerican leaders in Madrid andcuts tariffs on imports from CentralAmerica. Both sides will eliminatenontariff barriers on industrialgoods and Central America will lifttariffs on European cars.

Dominican Ruling Party SweepsElection Amid Violence

The party of Dominican PresidentLeonel Fernández had a strongshowing in the May 16 legislativeand municipal elections, winning 31of 32 Senate seats amid isolatedincidents of violence that killed atleast two people, Agence France-Presse reported. Fernández'sDominican Liberation Party won 90municipalities compared to 59 forthe opposition DominicanRevolutionary Party.

POLITICAL & ECONOMIC BRIEFS

Préval

File Photo: HaitianGovernment.

http://www.thedialogue.org/uploads/LAA/Daily/2010/LAA100520.pdf



come from the current calamity. Puttingthe best face on a difficult situation, gov-ernment officials and industry represen-tatives alike sense that the gulf mishapholds enormous potential to providecritical lessons for ultra-deepwaterexploration and production safety andenvironmental stewardship. Othersnoted that for what is still a nascentindustry, the post mortem from theDeepwater Horizon accident should befully seized by the region's offshoreindustry. The dispatch of a team fromANP and Petrobras in order to monitorand gain firsthand insights was cited asone example."

AJohn Albuquerque Forman,president of J FormanConsultoria in Rio de Janeiroand former ANP director: "In

Brazil, offshore activities are regulated byfederal law and monitored by theMinistry of Environment throughIbama, the environmental protectionagency. The regulation in place calls forthe existence of facilities along the coastthat can react to any incident or accidentin less than 24 hours. Apparently, theaccident in the gulf was due to humanfailure and the facilities to respond werenot in place. Although it might soundstrange, the natural oil seeps that exist inthe gulf have contributed more oil to thesea; satellite images of the Cantarell fieldin Mexico show this phenomenon. Ofcourse there will be a lot of discussion onthe matter, as there are many NGOs andmedia outlets that want to interrupt alland any activities of the oil industry.Time will tell, as a good part of the oilspilled will naturally disperse and will bepart of the nourishment chain of marineorganisms. The problem exists whencurrents bring the oil onshore and dam-age the coast."

AGeorge Baker, publisher ofMexico Energy Intelligence:"The lessons that should bederived from the yet-uncon-

trolled oil spill at BP's Macondo Prospecthave importance for Mexico and Cuba asmuch as for the United States. All three

countries share the waters of the Gulf ofMexico, and all are affected by any dam-age to their shared marine environment.For Mexico, there are lessons to belearned from the Macondo calamity thatwere not derived from the blowout atPemex's exploratory well IXTOC-1,which released some 3.5 million barrelsof oil from June 1979 to March 1980.The first lesson for both countries is inrelation to government oversight of off-shore operations: Best practices are to befound in the United Kingdom, Norwayand Australia, not in the United States.Global public opinion is watching to seehow the United States responds to whatis, from all appearances, an offshore reg-ulatory system that, in regard to over-

sight, is deficient, not to say corrupt.Critics in the United States are faultingthe practice of self-certification: Insteadof verifying compliance by its owninspections, the government's MineralsManagement Service merely requestscompanies to certify that compliance hasoccurred. In Mexico, there has neverbeen an upstream regulator with a man-date to administer federal lands, collectroyalties and regulate practices of indus-trial safety. But one of the Macondo les-sons is that this model has inherentflaws. A political conundrum that hasbothered theorists for millennia is cap-tured in a single question: Who guardsthe guards? This question, recalibrated tothe oil industry, reads thus: Who over-sees the regulators?"

The Energy Advisor welcomes responsesto this Q&A. Readers can write editorGene Kuleta at [email protected] comments.

Featured Q&AContinued from page 1 Latin America Energy Advisor

is published weekly by the Inter-American Dialogue, Copyright © 2010

Erik BrandGeneral Manager, Publishing

[email protected]

Gene KuletaEditor

[email protected]

Matthew SchewelReporter, Assistant Editor

[email protected]

Inter-American Dialogue:

Michael Shifter, President

Peter Hakim, President Emeritus

Katherine Anderson, V.P., Finance & Administration

Genaro Arriagada, Senior Fellow

Joan Caivano, Director, Special Projects

Dan Erikson, Senior Associate, U.S. Policy

Paul Isbell, Visiting Senior Fellow

Claudio Loser, Senior Fellow

Nora Lustig, Senior Fellow

Manuel Orozco, Director, Remittances and Development Program

Tamara Ortega Goodspeed, Senior Associate, Education

Marifeli Pérez-Stable, Senior Fellow

Jeffrey Puryear, Vice President, Social Policy

Viron Vaky, Senior Fellow

Subscription Inquiries are welcomed at [email protected]

Latin America Energy Advisor is publishedweekly, with the exception of some major USholidays, by the Inter-American Dialogue1211 Connecticut Avenue, Suite 510Washington, DC 20036Phone: 202-822-9002 Fax: 202-822-9553

The opinions expressed by the members of the Boardof Advisors and by guest commentators do not neces-sarily represent those of the publisher. The analysis isthe sole view of each Advisor and does not necessarilyrepresent the views of their respective employers orfirms. The information in this report has beenobtained from reliable sources, but neither its accuracyand completeness, nor the opinions based thereon, areguaranteed. If you have any questions relating to thecontents of this publication, contact the editorialoffices of the Inter-American Dialogue. Contents ofthis report may not be reproduced, stored in a retrievalsystem, or transmitted without prior written permis-sion from the publisher.

“ Best practices are to be

found in the United Kingdom,

Norway and Australia, not in

the United States.”— George Baker

energy

Documents

Transcript of energy