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Nationalisation need not be disruptive, say representatives

Latin America's resource nationalisation need not be disruptive for private oil companies, a panel of international representatives concluded at Canada’s Global Petroleum Show in Calgary

According to Leandro Alves, energy division chief for the Inter-American Development Bank, the bank, which provides financing and technical assistance to 48 member states, believes “evolutionary change, not revolutionary change” is the best formula to provide adequate levels of public ownership and private participation in the energy sector.

“We are less concerned with who has ownership, whether it’s public, private or mixed,” he said.

The comments come as a number of developing economies grapple with striking the appropriate balance between control of resources and encouraging investment. On 16 April, Argentina nationalised YPF, then part-owned by Spain’s Repsol. The move prompted a downgrade of Argentina’s debt.

Resource nationalism has always had a role to play in the energy sector. Whether through direct state control or a requirement for local participation in projects. However, striking the right balance can be difficult, as Latin America’s experience shows. Whereas some countries – Bolivia, for example – have asserted greater state control over the resource sector; others, such as Mexico, are trying to find ways to loosen restrictions on foreign oil producers.

Mexico’s hydrocarbons law forbids foreign producers from operating in the country. Reforms to end Pemex’s 70-year monopoly on production were upheld by the Mexican Supreme Court in 2010 and last summer the company issued the first contracts for private companies to operate mature oil fields.

Pemex’s sub-director for business development, Sergio Guaso, said the reforms allow foreign majors to enter the country’s energy sector, without requiring a complete legislative overhaul. 

Pemex is keen to reverse years of production declines, but lacks sufficient investment to do it alone. Production peaked at 3.7m barrels a day (b/d) in 2004 and has fallen below 2.6m b/d in 2011, according to company data.

More than cash, Pemex wants access to technology that would allow it to proceed with deep-water drilling and unconventional development. Although the reforms did not go as far as some would have liked, Guaso argued they will create capital efficiencies that would allow Pemex to move ahead without diluting its exclusive ownership of Mexico’s oil and gas. “We need to find that right mix... find the right formula,” he added.

Carlos Villegas, executive vice-president of YPFB, Bolivia’s state-owned oil company, told the conference  his country’s 2006 nationalisation has been a success. Of the 16 foreign companies active in the country before nationalisation, 13 have remained, and, as a result, “have become key stakeholders in the development”, he said through a translator. “We nationalised the hydrocarbons so that now the state is the one who controls the policies.”

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