The Oil Council’s Latin American Assembly to spotlight sector opportunities

International oil and gas industry network The Oil Council will stage its Latin American Assembly on January 25-26 in Bogotá, Colombia. Over 300 industry delegates will attend the meet—Latin America’s only oil and gas conference to focus purely on business—and as headlines continue to draw attention to the great discoveries, challenging markets and multinationals flocking to the region, the assembly is on course to provide a much-needed platform for discourse between thought-leaders and decision-makers.

“The fact is, it is a good time to see what’s on offer in Latin America’s energy market,” says Drake Lawhead, The Oil Council’s head of content and member magazine editor.

“Whether times are good or bad, there is always a discussion to be had.”

Grabbing a few minutes to go Ed-to-Ed (sorry), IRJ editor Nuala Gallagher asked Drake about why now is a pivotal time for global investors to pay close attention to opportunities within this burgeoning growth sector.

Nuala Gallagher (“NG”): Thanks for stopping by, Drake. Perhaps you can begin by telling me a bit about the scheduled session Accessing Local and International Capital Markets. What are the topics up for discussion and who will be doing the talking? It goes without saying that this is a buzz subject commanding plenty of attention globally, but is it going to be a positive conversation in this context?

Drake Lawhead (“DL”): The panel is about the availability of capital in 2012 for E&P [exploration and production] activities—where is it coming from, where is it going, what is the appetite for lending and borrowing, etc. Although it’s true that 2011 saw share values eroded nearly across the board for oil and gas companies, the industry as a whole is fairly resilient in its ability to raise capital.

Perhaps because E&P has always been a risky investment activity, energy investors are not necessarily as reluctant to re-enter the market after a rough period as investors in other industries. That doesn’t make it immune to the European and wider economic crisis that might unfold in 2012, but a lot of people do expect capital to loosen up in the first half of 2012 as a lot of companies who perhaps shelved fundraising plans at the end of 2011 look to test the market.

The bottom line is that for an E&P company with good management, a strong story and drillbit success, there is always capital available—and there are plenty of those companies to be found operating in South America, which is why we consider the region to be so exciting.

NG: On day two you’re going to be looking at the frontier opportunities coming to the fore and I was interested to see that you note Belize, Guatemala and Nicaragua as potential hotspots for Central American discussion. I understand you have a particular interest in the offshore Guyana play as well. How do you expect those conversations to shape up? How far do you think we can look beyond the pre-salt and are these regions industry radar-ready?

DL: Tullow’s Zaedyus discovery proved to an extent the thesis of an offshore West Africa analogue existing in the Guyanas. It’s an idea that’s been around long enough (investors are familiar with the plethora of power point slides showing the ‘unzipping’ of Africa and South America), but 2011 was an important year for it. There are certainly a lot of big companies holding cards in the area— ExxonMobil, Shell, Total, and Repsol to name a few—but there are also independent, highly prospective and leveraged companies like CGX Energy who are hunting elephants, and who will be speaking at the Assembly. It’s an expensive frontier from a well-cost and development point of view, but the potential is there for a Jubilee-sized discovery.

I don’t think anyone has referred to Central America as a potentially major new oil province, but for the right company, there might be value to unlock. Pacific Rubiales, who are a sponsor of the Assembly, is a savvy company with a track record of finding value and who have acreage in Guatemala, for example. It’s not on every investor’s radar right now and maybe it never will be, but it is intriguing and worthy of discussion.

NG: In your Managing Risk and Navigating Regulation session, you’ll be looking at the implications behind the possible opening up Venezuela’s sector to multinationals; a particularly newsworthy subject as past Orinoco participants continue to dominate newsflow. Looking specifically at the E&P level investment impact such a development might have, what do you expect in terms of attendee perspective during this conversation?

DL: Something that isn’t always appreciated is the extent to which Venezuela’s resource nationalism and high barriers to foreign participation in its hydrocarbon sector is responsible for the Colombian story in the last five years, and the evolving Peruvian story. Venezuela could have the greatest amount of oil reserves of any country in the world, which dwarfes the reserves of Colombia and Perú, but the opportunities for foreign investment are few and far between. On the other hand, as a result of investment-friendly policies and Ecopetrol’s adoption of a Statoil-style business model, Colombia has proven to be a highly rewarding and productive business opportunity in the last few years. Perú has good geology, but the market is still watching closely to see what kind of policies it will implement and that’s one of the things we will discuss at the Assembly— Dr Aurelio Ochoa, Perúpetro’s President will be addressing that subject.

Between the Venezuelan and Colombian models are many different paths that a country might go down, and each has to figure out what is in its best interests according to its own economic and political imperatives and constraints. That’s what the panel will address; where is Perú heading? What happens after Chavez in Venezuela? How will Pemex and Petrobras negotiate future contracts with foreign companies? What kind of political and regulatory risk faces companies considering jumping into a Latin American operation? It’s a lot to bite off in a panel discussion but we offer a high-level flow of ideas rather than a workshop or seminar, so we’ll do our best!

NG: There are a number of keynote speakers that caught my eye, not least Javier Gutiérrez Pemberthy, President of Ecopetrol, and Ali Moshiri, President of Chevron Africa & Latin America E&P. Perhaps you can talk about who else is set to appear and what they plan to address. I wonder, will there be some crossover between the leading speakers and the conversational sessions scheduled?

DL: We are fortunate to have good speakers appearing on the agenda, but they are not any more impressive than the delegates, all of whom are senior. There around four CEOs on a panel, but there are 50 CEOs in the audience, which reflects the nature of the Assembly as a forum of equals rather than a seminar—think Davos. That’s why you won’t see any corporate power-point presentations. The panel discussions are frank, lively, and interactive so the audience can put the questions right to the speakers. That’s how you get the most out of the incredible line up of speakers on the agenda.

As for the makeup, it’s a good mixture of IOCs like Chevron, Total, Repsol, ExxonMobil, Occidental, and similar, NOCs like Ecopetrol, Perúpetro and Statoil, and independents such as Pacific Rubiales, Gran Tierra and Pluspetrol down to some of the emerging Argentine Shale players and frontier explorers. Many of the companies don’t operate in the region at all, but they have their eye on it.

That’s on the operational side, but the banking and investment community is also there. Primarily, we are talking about the business of oil and gas and the investment landscape. For example, Temasek, one of the biggest investors in the world, is sending a delegation lead by their Head of Energy Investment; prominent investors like U.S. Global Funds’ Frank Holmes will be sharing their insights also.

NG: We’ve seen a lot of market volatility and a lot of variable analytical forecasts on global economic growth throughout 2011, spilling into the first few days of this year. Simultaneously, the recently released UN World Economic Situation and Prospects report states that Brazil (along with China and India) is set to coax our global economy forward at around 5.4 per cent average growth in 2012 and 5.8 per cent in 2013. All things considered, why is it a good time for oil and gas investors to attend the assembly?

DL: Whether times are good or bad, there is always a discussion to be had. The Assembly is not promoting particular companies, or even trying to persuade anyone to invest in Latin America. We are not sponsored by any bank or government so our motives are very different. We believe that even when the capital markets are relatively thin, you have to build your pipeline, relationships, and knowledge base so that when the markets recover you are prepared. That’s precisely what the Assembly offers: High-level networking and thought-leadership from industry leaders.

Having said that, it isn’t hard to see that there are superb opportunities for E&P firms across South America and there is always capital available for good companies with a good story to tell. Nothing is going to replace oil and gas as an energy source any time soon, so the demand fundamentals are strong enough to keep the credit lines open to the industry. The fact is, it is a good time to see what’s on offer in Latin America’s energy market.

NG: Lastly, what are your predictions ahead of proceedings? What are the big questions your members are asking and the answers we might expect to see from the decision-makers. Perhaps more importantly, how will the Assembly facilitate discussion of the more contentious news items doing the rounds today?

DL: The only prediction I am comfortable with making is that the discussions will be fascinating. I’m not concerned about outcomes and decisions—I’m only concerned with the quality of the discussions and debates that go into them. As a member-lead organisation, we are not as interested in our own opinions as we are in hearing about what our members, partners, and the wider market are saying. Assemblies like this are part of our global portfolio of events and they are a foremost source of thought leadership and high-level discussion in the industry.

Of course, there are some key issues that I know people will be looking for clarity on. Namely, how favourable are the terms of the new Colombian bidding round? Will Colombia see a wave of consolidation? How will Perúpetro handle foreign participation in its hydrocarbon sector? Who benefits from Argentina’s gigantic shale reserves and will the Government incentivise it adequately enough for developers? What is the investment appetite across these plays and what can we expect from the local and international capital markets in 2012? How are IOC/NOC relationships evolving on the continent? What are Asian NOCs hunting for and how big is the appetite?

I’m personally looking forward to hearing from the industry about these unresolved questions, whether that’s on a panel discussion, a keynote speech, or in the countless discussions that take place between our 300 delegates during the lunches, coffee breaks and cocktail receptions. As you know yourself from covering these events, it’s the sidelines where a lot of the action takes place!

For more information about The Oil Council’s Latin American Assembly please visit:
http://www.oilcouncil.com/event/latam