With corruption scandals involving government-owned utilities in Mexico, and in other countries like Brazil and Venezuela, investor confidence may become solar’s highest hurdle.
Read my post here.
Last-minute shopping: The Moral Case for Fossil Fuels
It’s Christmas eve, you hate, hate, going to the mall, and you have readers on your list who don’t like fiction. I strongly recommend you buy them The Moral Case for Fossil Fuels on Kindle edition, which they can also read on line and in their tablets and cell phone apps.
Epstein created the Center for Industrial Progress (emphasis added),
Center for Industrial Progress (CIP) is a for-profit think-tank seeking to bring about a new industrial revolution. We believe that human beings have the untapped potential to radically improve our lives by using technology to improve the planet across a multitude of industries: mining, manufacturing, agriculture, chemistry, and energy. Every individual has the potential for a longer, happier, healthier, safer, more comfortable, more meaningful, more opportunity-filled life.
The keys to a new industrial revolution are a new industrial philosophy, a new industrial policy, and a new approach to communication.
The emphasis on using technology for an anti-pollution but pro-development approach to improve our lives is key to The Moral Case for Fossil Fuels.
Read my review at Da Tech Guy Blog.
Mexico: PRD lobbying Washington
Well, isn’t this precious?
Leaders of Mexico’s main leftist party trekked to Washington this week with a warning for U.S. power brokers—investors could lose their shirts if they put their money in the country’s energy industry.
Jesus Zambrano, leader of the Party of the Democratic Revolution, or PRD, the main party of Mexico’s splintered left, and other leftist politicians are in the middle of an unprecedented pilgrimage to Washington. They are meeting with U.S. officials, legislators and businessman to explain that a referendum being pushed by the PRD could undo a historic constitutional change passed late last year that opens the country’s oil and gas industries to private companies and foreign investors for the first time in 75 years.
Their message: Mexico’s energy reform is not a done deal. Until the fine print is dry, the country’s oil and gas fields are no place to bet a bundle.
Zambrano, a former communist guerrilla who has referred to D.C. as an enemy, didn’t get the turnout he expected last year when protesting the energy reforms.
Since it’s unlikely that the PRD would gather at least 1.6 million signatures, and get the Mexican Supreme Court to approve a referendum, they tried the next best thing: a junket to Washington, D.C.
BREAKING NEWS Ecuador: Chevron wins
WSJ: Judge: $9.5B Environmental Judgment Against Chevron ‘Obtained by Corrupt Means’
A federal judge ruled in favor of Chevron Corp. on Tuesday in a civil racketeering case, saying a record $9.5 billion environmental judgment in Ecuador against the oil giant was “obtained by corrupt means.”
U.S. District Judge Lewis Kaplan found that New York lawyer Steven Donziger and his litigation team engaged in coercion, bribery, money laundering and other criminal conduct in pursuit of the 2011 verdict.
Bloomberg: Chevron Wins U.S. Ruling Calling Ecuador Judgment Fraud
Related:
Will Legendary Law Firm Patton Boggs Be Swallowed or Evaporate? and How the Chevron Case Helped Wreck a Big Law Merger
Last month Locke Lord managing partner Jerry Clements told The Am Law Daily that the potential liabilities and “reputational aspects” of the Chevron matter were a key part of her firm’s due diligence efforts in evaluating a merger with Patton Boggs.
At Chevron’s blog: What You Won’t Learn on Ecuador’s Toxic Tour
Mexico: No more Pact
The leftist Partido de la Revolución Democrática (Party of the Democratic Revolution, or PRD) has pulled out of the Pact for Mexico, creating an acute crisis (link in Spanish), according to Mexican daily El País.
But how much of a crisis is it?
The Pact for Mexico, created in 2012 by then-new president Enrique Peña Nieto’s Partido Revolucionario Institucional (PRI), the PRD, and the Partido Acción Nacional (National Action Party, or PAN) ended 15 years of gridlock in the fractious congress,
allowing Mr. Peña’s administration to secure passage of wide-ranging bills on telecommunications, tax increases and education.
…
Congress is taking up the issue next week. But lawmakers from the PAN and the ruling Institutional Revolutionary Party, or PRI, are expected to rewrite the president’s bill to give private oil companies a bigger role in the state energy sector, including contracts that allow them to share oil production. The president’s August initiative called only for sharing the profits from the oil, but not the oil itself.“If they insist on an energy reform that privatizes Mexico’s oil income, the government is going to generate a situation of enormous social and political instability,” said PRD president Jesús Zambrano in an interview. “We’ll have a very hot Christmas, we’ll launch protests on all fronts.”
Together, the PAN and PRI have the two-thirds majority in Congress required to pass the proposed constitutional changes for the energy overhaul. And the president has already passed most of his major initiatives under the pact.
Mr. Peña Nieto regretted the PRD’s decision to leave the Pact for Mexico, but vowed to press on with reforms.
From the PRI’s point of view,
The ruling Institutional Revolutionary Party, or PRI, is hoping its energy reform will spur faster economic growth, and the departure of the Party of the Democratic Revolution (PRD) from the accord is likely to push the debate closer to a more business-friendly proposal backed by the center-right.
The Senate is expected to vote on the political overhaul as early as Tuesday, with a vote on the energy bill soon to follow.
Mexico: The failed auction, the oil reform, and US shale
Last week the WSJ wrote about Mexico’s Petro Flop
A failed auction shows the need to reform the Pemex monopoly.
What if you held an auction and there were no bidders for half of the assets? That’s what happened to Mexico’s state-owned oil monopoly—Pemex—last week when it opened the bidding for production at six exploration sites in the Chicontepec basin.
This is bad news for Mexico’s oil and gas industry, which suffers from declining production. Pemex crude output in 2012 was 2.5 million barrels a day, down from three million in 2007 and 3.4 million in 2003. Mexico needs private investors with the incentive to get oil out of the ground. President Enrique Peña Nieto couldn’t have asked for a better demonstration of the need for Pemex reform.
Pemex may think it scored big in the three blocks that were sold. The long-time monopoly was offering to pay “all the costs of production in the first ten years plus a fee-per-barrel to the [winning bidders], providing oil is produced in sufficient quantities to cover those costs,” according to Houston-based oil analyst George Baker. Pemex was ready to pay bidders $6-$7 per barrel. But the winning bids ranged from one cent to 98 cents a barrel, making Pemex officials look like geniuses—but only at first glance.
What if the companies bid so low because they aim to make their money by what they charge the Mexican monopoly for supplies, service and technology? In that case their profit depends only on producing enough oil to meet the costs as required by Pemex in the contract. They won’t focus on producing more because they will be paid very little for the effort. As Mr. Baker wrote in the Mexico Energy Intelligence newsletter, “There is little incentive for the contractor to increase production beyond the level at which profit margins are met through intra-firm commerce.”
Which is hardly surprising, considering that the PRI, which is now back in power, had been telling the Mexican people that oil is their birthright; now the Mexican Leftist Party Urges Energy Referendum
Move Likely Will Add Uncertainty to President’s Proposal to Let Private Firms Participate
The proposal by the Party of the Democratic Revolution, or PRD, comes as a reaction to an energy overhaul presented last week by Mr. Peña Nieto that seeks to increase private sector involvement in the state-run oil sector. Mr. Peña Nieto seeks to let private firms participate in the oil and gas sectors by sharing the risk and profit from exploration and production.
“The government’s initiative is a privatization, no doubt about it,” said Cuauhtémoc Cárdenas, the founder of the PRD and son of former President Lázaro Cárdenas, who nationalized the oil industry in 1938 by expropriating the private oil firms. Mr. Cárdenas said the government’s proposal opens the door to the selling of state-oil firm Petróleos Mexicanos, or Pemex.
…
Chances of Mr. Peña Nieto’s bill seem good in Congress. It is expected to have the support of the ruling Institutional Revolutionary Party, or PRI, and the right-wing National Action Party, or PAN, which between them can muster the two-thirds majority in both houses to change the Constitution. But the PRD, along with nationalist leader and former presidential candidate Andrés Manuel López Obrador, hope to stop the changes by mobilizing the Mexican people.The leftist opposition seems to have most Mexicans on its side. In a survey published in July by the lower house, 54% of Mexicans disagreed with the idea of opening the state-oil monopoly to private investment. Other surveys show even bigger numbers against the overhaul.
In all, while Peña Nieto has certainly worked on getting his party’s support, reform in Mexico, from the foreign investor’s point of view, remains a roll of the dice.
Pemex still needs revenues, though, so now Mexico’s Pemex Looks to Tap U.S. Shale
Rookie CEO Lozoya Seeks to Reverse Production Slump at State-Run Firm
Petroleos Mexicanos, Mexico’s state oil monopoly, will set up a new company to explore and produce shale gas and deep-water oil in the U.S. as part of an ambitious plan by its rookie CEO to turn around years of falling production.
The proposal, outlined by Chief Executive Emilio Lozoya in an interview, would push Pemex into complicated drilling techniques where it has no experience. It is a bold move abroad for the inward-looking company, which is the world’s fifth-largest crude producer but has never faced competition nor ventured far beyond its borders.
They’ll need a foreign partner,
especially in deep-water exploration and production where Pemex has no experience,
the CEO has no oil industry experience, and their unions are famous for featherbedding.
Any takers?
Mexico: Will the proposed energy reform be enough?
Mexico’s oil monopoly has been in place for nearly eight decades. With the proposed reform, will it be enough?
The WSJ is optimistic:
Mexico’s Energy Breakthrough
The country bids adios to 75 years of oil nationalism., even when
Mr. Peña Nieto’s proposal doesn’t go as far as it might to solve Mexico’s oil woes, and it certainly doesn’t privatize Pemex. It doesn’t even give investors ownership of a drop of Mexican oil.
Instead, the bill allows foreign and domestic investors to become partners with Pemex in exploration and production. Those partners would take their profits not in oil but in the cash equivalent of what they pump. Whether that’s enough of an incentive to entice a Chevron or a Shell will then depend on secondary legislation, particularly on contract terms and taxes. It would be a shame if Mr. Peña Nieto and his allies in Congress fail to follow through here, but at least their political incentive is to make the reform a success.
Juan Carlos Hidalgo at CATO is not as sanguine: Mexico’s Timid Energy Reform
Peña Nieto’s energy reform contemplates changing three articles of the constitution to allow private companies to pump oil, not through concessions as in most other Latin American countries, but via profit-sharing agreements. That is, the Mexican government will pay private companies for the oil they produce, but the companies won’t have outright ownership of the oil.
Unfortunately, the reform doesn’t contemplate allowing the sale of Pemex shares, as proposed by Mexico’s conservative opposition party PAN. Not allowing the sale of Pemex shares will significantly limit the chances of improvement in corporate governance of that white elephant. As The Economist points out, Pemex is plagued by mismanagement and political meddling. Energy reforms in Brazil in 1997 and Colombia in 2003-2006—which the Mexican government is pointing to as successful examples—involved not only allowing concessions for private companies, but also limited private ownership in Petrobrás and Ecopetrol, respectively. These moves have been credited with improving the corporate governance of these oil companies.
Hidalgo concludes (emphasis added),
Peña Nieto’s efforts to bring more private investment to Mexico’s oil industry should be commended. However, even if his energy reform is approved, Mexico will still have the most tightly state-run energy sector in the Americas (even more than Cuba and Venezuela). That, in itself, should indicate how much room for further reform will be needed.
Additionally, the question remains on whether future Mexican government administrations wouldn’t nationalize whatever the foreign companies have.
Puerto Rico: Wind farm fiasco
Last week Bill Clinton was in PR saying that PR could lead the entire Caribbean toward a green future.
But not quite yet.
The Santa Isabel wind farm was shut down for a month and a half due to equipment modifications Siemens Energy had to make following malfunctions in the B53 blades at wind farms in Iowa and California. The blades are 170 feet long and weigh 10 tons apiece. 36 out of 44 aerogenerators are now functional.
Pattern Energy, which owns the wind farm, loses $1.5 million each month it can not sell electricity to the local utility, Autoridad de Energía Eléctrica (AEE).
The project has disappointed expectations. In addition to the above equipment problems and monetary loss, it is located in an area that is not windy, and it is serving 10,000 fewer customers than the 63,000 originally projected.
UPDATE:
Linked by Dustbury. Thank you!
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