Home / NEWS / Crisis Hits Oil Industry and Energy Transition Alike

Crisis Hits Oil Industry and Energy Transition Alike

Mexico's state-run oil giant Pemex faces a difficult outlook due to the fall in international oil prices and the crisis resulting from the coronavirus pandemic, which threatens its production and finances, in a situation analysed during the 29th La Jolla Energy Conference, organised online by the Institute of the Americas. CREDIT: Emilio Godoy/IPS
Mexico’s state-run oil big Pemex faces a tough outlook as a result of fall in worldwide oil costs and the disaster ensuing from the coronavirus pandemic, which threatens its manufacturing and funds, in a scenario analysed through the 29th La Jolla Vitality Convention, organised on-line by the Institute of the Americas. CREDIT: Emilio Godoy/IPS
  • by Emilio Godoy (mexico metropolis)
  • Friday, Might 22, 2020
  • Inter Press Service

These questions have been mentioned on the 29th La Jolla Vitality Convention, organised by the Institute of the Americas. It was held on-line Might 18-22, somewhat than bringing collectively greater than 50 audio system on the institute’s headquarters within the coastal district of San Diego, within the U.S. state of California, within the midst of the COVID-19 pandemic.

Alfonso Blanco of Uruguay, govt secretary of the Latin American Energy Organisation (OLADE), stated throughout a session on world traits and the regional power business that the adjustments seen through the pandemic will unfold after the disaster and can be long-lasting.

“There can be structural transformations and we’re satisfied that the majority shopper behaviors will change after the pandemic. Demand will fluctuate resulting from adjustments in the primary areas of transportation and different power areas. The consequences on fossil gas consumption can be sturdy and there can be a better affect on renewable energies,” he stated.

OLADE, a 27-member regional intergovernmental organisation for power coordination, estimates that electrical energy demand has fallen by 29 p.c in Bolivia in comparison with 2019, on account of the extreme acute respiratory syndrome coronavirus 2 (SARS-CoV-2), which causes COVID-19, and by 26 p.c in Argentina, 22 p.c in Brazil and 11 p.c in Chile.

Likewise, ultimate power demand plummeted 14 p.c in Brazil in comparison with 2019, 11 p.c in each the Andean and Southern Cone areas, 9 p.c in Mexico, seven p.c in Central America and 5 p.c within the Caribbean.

As nations went into lockdown to curb the unfold of COVID-19, electrical energy consumption by companies and factories declined, as a result of suspension of actions.

Leonardo Sempertegui, authorized advisor to the Organisation of Petroleum Exporting Nations (OPEC), stated the pandemic could also be a wake-up name for nations lagging behind within the power transition.

“This can be the brand new regular. The construction and governance of the power structure to deal with the following part are altering dramatically. Vitality poverty and the power transition can’t be solved no matter who controls a useful resource; these challenges can’t wait,” he stated in the identical session.

In Latin America, nations like Argentina, Bolivia, the Dominican Republic, Ecuador, Honduras and Uruguay have made progress within the power transition since 2015, whereas Brazil has slid backwards and nations like Mexico are caught in the identical place, in accordance with the World Financial Discussion board’s Energy Transition Index, launched Might 13.

Because the area heads into the fourth month of the pandemic, nations are assessing their electrical energy markets, which have been shaken by the disaster.

Nations like Argentina, Chile, Colombia and Peru have resorted to long-term electrical energy auctions, which have generated low costs for renewables, whereas Mexico suspended such schemes in 2019.

In Argentina, as Andrés Chambouleyron, a non-resident fellow on the Institute of the Americas, defined, industrial consumption fell by 50 p.c and electrical energy distributors haven’t been in a position to receive ample revenues to cowl fastened prices or electrical energy purchases.

The federal government has thus offered financing to Cammesa – the electrical energy wholesale market administration firm – to pay the mills, since it’s certain by contracts to purchase the power.

“There can be a everlasting change in electrical energy consumption in Argentina. Now we have cheaper gasoline than earlier than; the fashions say that you must use extra gasoline as a result of it’s cheaper than different sources. We can’t see a lot change in Argentina’s power combine, and that might lengthen to all of Latin America,” stated Chambouleyron, who warned of breach of and renegotiation of contracts for power purchases.

Whereas renewables are already competing in value with standard sources, low oil and gasoline costs undermine their enlargement, a predicament that various power sources have been going through lately.

As well as, the rise in the price of worldwide credit score and the fluctuations of the greenback in opposition to native currencies might make era dearer.

In one other session on the outlook for state-owned oil corporations, Marta Jara, former president of Uruguay’s public oil firm ANCAP, stated the present disaster may speed up the transition, however known as it a “main problem”.

“The temptation is to be opportunistic and neglect the roadmap of the power transition. We should put money into sustainable power programs, decarbonise transport. You will need to safe funding and create jobs. I hope the disaster opens the door to be extra revolutionary,” she stated.

Viable or not?

The plunge in fossil gas costs is damaging the funds of the area’s oil producing nations, reminiscent of Argentina, Bolivia, Brazil, Colombia, Ecuador, Mexico, Peru and Venezuela, and state corporations within the sector are going through issues with regard to planning and operations.

Nevertheless it advantages internet importers, just like the nations of Central America or Chile, whose oil payments have shrunk, whereas for shoppers in each oil producing and importing nations the price of electrical energy may go down.

“Probably the most aggressive would be the nations with decrease oil extraction prices. Some initiatives won’t be economically viable. We are going to see better financial issues than in 2019,” predicted Lisa Viscidi, director of the Vitality, Local weather Change and Extractive Industries Programme on the non-governmental Inter-American Dialogue, throughout a panel on the scenario in a number of Caribbean nations.

The pandemic and an increase in Saudi manufacturing introduced on Mar. 10 led to a collapse in oil costs and the resultant danger of bankruptcies within the business. State-owned oil corporations have fared higher than others up to now within the disaster.

In one other session on the outlook for state-owned oil corporations, John Padilla, managing director of the personal consulting agency IPD Latin America, said that “it is going to take time to get out of this example, with results for the area, and the necessity for excellent effectivity.

“Most nations have been exporters, effectivity would be the key. What has not been achieved is to domesticate home and regional markets, state enterprises will not be going to play the identical function as they at all times have,” he stated.

Public corporations reminiscent of Brazil’s Petrobras and Colombia’s Ecopetrol entered the disaster in a greater place than Mexico’s Pemex, Venezuela’s PDVSA and Argentina’s YPF, in accordance with consultants.

“These are tough occasions, even for the most effective ready. We are able to hope that if the nation and its firm are in bother, if governments want cash, they will get extra out of the businesses,” stated Francisco Monaldi, interim director of the Baker Institute for Public Coverage’s Latin America Initiative on the personal Rice College within the U.S. state of Texas.

In his view, “Mexico is in higher fiscal circumstances, it shouldn’t be an issue. However Pemex can drag Mexico down. If the federal government would not change course, it may grow to be a significant issue,” he stated for instance.

Though Pemex will improve its funding in 2020, the oil firm reported losses of 20 billion within the first quarter of this yr. Because of the disaster, Petrobras restricted its funding to three.5 billion and its each day manufacturing to 200,000 barrels, and postponed the sale of eight refineries.

For Lucas Aristizábal, a senior director in Fitch Rankings’ Latin American corporates group, some state-owned oil corporations are viable and others will not be.

“In 2021, the monetary contribution of oil can be decrease for governments. If they need the businesses to play a key function, they may put extra strain on their monetary construction. The present scenario illustrates the economics of those firms,” he stated through the discussion board.

Pemex and YPF have been already dropping cash per barrel in 2019, whereas Petrobras has extra balanced manufacturing prices.

On the oil horizon, and within the midst of the COVID-19 disaster, Guyana has grow to be the rising star, though there may be nonetheless political uncertainty, as the results of the Mar. 2 presidential elections continues to be unclear.

“It is exhausting to foretell what is going to occur. There’s a danger of U.S. sanctions that might not have an effect on funding within the sector, however would pose a political danger to the nation,” stated Thomas Singh, within the Division of Economics on the public College of Guyana.

The nation expects to extract 600,000 barrels per day by 2024 and soak up revenues of 5 billion , with reserves exceeding 5 billion barrels.

© Inter Press Service (2020) — All Rights ReservedOriginal source: Inter Press Service

The place subsequent?

About admin

Check Also

Put Climate at the Heart of COVID-19 Economic Recovery Plans

Opinion by Pablo Vieira Samper (washington dc) Monday, June 29, 2020 Inter Press Service WASHINGTON …

Leave a Reply

Your email address will not be published. Required fields are marked *