Latin American Juniors
Introduction Argentina: Oil Plus, Gas Plus? Or Minus?
Figure 1. Apache’s global oil and gas prices Figure 2. Argentine oil production (2004-2009) Figure 3. Argentine gas production (2004-2009)
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Figure 4. Colombian production recovery
Figure 5. Peru’s oil production recovery Figure 6. Fiscal regimescomparison
Brazil - potential bastion for oil juniors
Figure 7. Brazil’s oil and gas basins Figure 8. Brazil’s offshore discoveries (2000 –2010) Figure 9. Brazilian oil and gas players market share
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Figure 10. Oil and gas equity capital raised on the TSX and TSX Venture exchange (2002-2009) Figure 11. New oil and gas listings on the TSX and TSX Ventureexchange (2009)
Latin American Juniors
Peak oil will “peak” longer with junior and independent oil and gas companies. While the majors are worried about deep water, ultra heavy crude, expensive refineries, or fuel trading, juniors are busy exclusively with finding and extracting oil and gas in isolated places or in marginal/maturefields. And their presence can be really significant. For example, in the United States they are thought to produce 68% of oil and 85% of gas in the country, drilling nearly 90% of total wells. Figures for the region are not known, but juniors are the primary force behind Colombia and Peru’s recent success, they are propping up falling Argentine production, and have a growing potential in Brazil.Although the region itself did not feel the full brunt of the financial crisis, oil juniors were still affected due to the fact that they finance their operations in Toronto, Sydney, London, etc. In addition to financing problems, the fall in the oil price lit the candle at both ends, and many oil juniors were forced to sit on their acreage and/or cash and wait out the global recession. In a backdropof a recovery in liquidity and growth, what is the operating landscape for oil and gas juniors and independents in the region? In this edition of the Energy Intelligence Series report, regional oil juniors will be analyzed in Argentina, Colombia, Peru, and in Brazil to see if these wily companies have been able to reposition themselves in the region after the crisis.
Argentina: Oil Plus, GasPlus? Or Minus?
The long tradition of Argentine oil and gas production is in jeopardy. A short sighted government is limiting the industry with low price ceilings and high export taxes, essentially closing the domestic market off from competition and market forces. Producers are getting antsy; some juniors have left the country for greener pastures, while others wait out a future regulatoryenvironment by limiting production. The government knows that it is sinning by allowing the current situation to continue, but its main form of repentance has been the creation of band-aid schemes like Gas Plus and Oil Plus. These programs are essentially subsidies given to producers to make a “virtual reality” of market forces in the country by giving them higher prices. Argentine politicians havefound it more politically expedient to subsidy production rather than raise domestic prices, which are being used as levers of patronage and have been capped since November 2007. To achieve these higher prices, producers must present their production plans to the secretary of energy, and wait for approval, which is not quick, and the incentives have not succeeded in attracting new producers to thecountry. Companies essentially need to prove that the intended production is new production or that new exploration will add to dwindling reserves, and if approved they are given fiscal credits that can be either used against export taxes or sold to other producers. For all their inadequacies, Gas Plus and Oil Plus have helped producers already operating in Argentina. Apache is an example of an...