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State
Oil Companies with a Nationalist Boost |
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By Diego Cevallos*
Several
Latin American countries are reclaiming control of a precious natural
resource: hydrocarbons. How are state-run oil companies -- many
of them weak and politicized -- confronting the challenge?
MEXICO CITY - The wave of petroleum nationalism
across Latin America suggests crucial challenges for the state-run
oil companies. Some are weak and politicized and will require major
overhauls if they hope to successfully confront the new international
scenario.
Crude, the region's main energy input, is
sold today at prices that are four times the cost of extraction,
which has prompted several governments to retake control of this
valuable resource.
In recent weeks, Bolivia nationalized its petroleum and natural
gas industry, Ecuador changed the balance of the government's and
transnational corporations' petroleum royalties, and Venezuela announced
increases in the taxes charged to foreign oil companies.
The process is the reverse of what occurred in the 1990s, when
extracting and selling crude was much less profitable.
Although "the high oil prices make nationalization
more attractive... that does not necessarily translate into a better
performance of the state-run companies in the industry", energy
expert Mauro Guillén told Tierramérica.
Guillén, a researcher at the Wharton Business School of
the University of Pennsylvania, doubts that Bolivia's government-owned
oil company YPFB (Yacimientos Petrolíferos Fiscales Bolivianos)
will be able to operate successfully after nationalization, given
that "it lacks the technology and commercialization capacity."
According to Alvaro Ríos, executive secretary of the Latin
American Energy Organization (OLADE), YPFB "is now a very limited
company," but he expects the administration under Bolivia's
President Evo Morales will guide it towards modernization in order
to compete as an equal with the private corporations.
The worst that could happen is that it become politicized and that
the government "gives it particular advantages," said
Ríos in a Tierramérica interview.
But Manuel Morales, one of YPFB's principal advisers, assures that,
contrary to what many believe, nationalization "opens the possibility
for major investment," in national and foreign sectors alike,
because "secure and stable regulations" have been defined.
"Two or three years from now, YPFB is going to be strong and
competitive, and Bolivia will attract investments from companies
that want profitability but respect the decisions and the control
of the Bolivian state," Morales told Tierramérica.
YPFB was "dismantled" over the past few years, and until
recently its 600 employees carried out only administrative duties,
he said. "But we have taken shareholder control of the foreign
companies, and from that position we are going to operate, at least
for now, to make best use of technology and technical personnel
until our state enterprise is ready."
According to OLADE chief Ríos, the current wave of hydrocarbon
nationalism in the region should not ignore relations with the transnational
corporations. "No country wants to get rid of the private companies,
because that investment and technology is needed," he said.
Mexico's state oil company Pemex, which since 1938 has extremely
limited relations with foreign firms, is facing serious technological
deficits and financial debts that surpass the value of its shares.
Production of crude in this country, whose reserves are on the
decline and can now only ensure 13 more years of extraction, in
2005 reached 3.3 million barrels per day, slightly less than in
2004.
Although Mexico is now the Latin American country producing most
petroleum, observers believe its future is not so promising if the
divorce between Pemex and the foreign corporations continues.
Experts also say the financial scheme that obligates Pemex to hand
over 60 percent of its revenues to the state is unsustainable because
it impedes investment in oil development.
Quite a different situation is that of Petrobras, Brazil's state
oil giant, whose prestige is on the rise. Sixty-five percent of
its shares are in private hands, and 35 percent belong to the state.
But the latter is assured control of the enterprise by law.
Petrobras, unlike Pemex, is traded on the world's leading exchanges,
and holds agreements with several transnational firms.
Ríos believes the Brazilian approach is a good example for
state-run oil companies.
"The governments should guide their oil companies to be competitive
and to play under the same rules as the private companies, such
that they have the same fiscal regimes and are efficient and sustainable
in the long term," he said.
Another of the major players in the region is PDVSA, Venezuela's
state oil company. In the 1990s, Venezuela opened its energy sector
to transnational corporations, and now it applies taxes and other
regulations that channel a portion of the private sector's oil income
to the state.
Venezuela produces 3.2 to 3.3 million barrels of crude per day,
according to official figures, although the International Energy
Agency puts the country's total output at 2.7 million barrels daily.
Like all oil producing nations, in recent years this South American
country saw its revenues from crude skyrocket, which the government
of leftist President Hugo Chávez reinforced this month by
increasing the taxes paid by various private oil companies operating
in Venezuela.
But analysts warn that PDVSA neglects new investment in the industry,
which would explain why its oil output remains at practically the
same volume it did in the late 1990s.
Another country leaning towards oil nationalization is Ecuador,
where the resource represents 40 percent of exports, and finances
about the same percentage of the country's fiscal budget.
In April, regulations took effect in Ecuador that require 15 transnational
companies to hand over 50 percent of their income to the state,
not 20 percent like before.
Almost simultaneously, the board of directors of the state-run
Petroecuador sought aid from the government because its debts reach
170 million dollars, and if they aren't covered the public enterprise
will have to shut down operations.
Ríos says the Ecuadorian company, which has had five presidents
in the last five years, and other state-run enterprises in the region,
need deep structural reforms in order to be competitive.
"What is pushing them to be a little more nationalist are
the high prices of hydrocarbons. Now the governments feel emboldened
to change the rules of the game with the transnationals. But that
is not enough," warned the OLADE head.
In the 1990s, when the Latin American oil-producing countries --
along with the international finance agencies like the World Bank
and the International Monetary Fund -- encouraged foreign investment
in their oil sectors, a barrel of crude (159 liters) was selling
at an average of 20 dollars. Today the price hovers around 70 dollars
per barrel.
The private oil companies "should understand that there is
a new price scenario that could allow the governments to collect
more revenues and that when there is a boom period it is necessary
to share," said Ríos.
However, there is no reason to violate their rights. The recommendation
is to ensure them "a space where they can invest and generate
profits," he added.
Fernando González, president of Petroecuador, said his country
also hopes to charge the transnational oil companies for a portion
of the 2.3 billion dollars they made between 2001 and 2005 on high
petroleum prices.
Bolivia took the most radical route: it nationalized the hydrocarbon
industry, especially natural gas. The government will hold on to
82 percent of sales revenues, instead of the 18 percent the foreign
firms paid previously.
In the middle of tense negotiations with the oil companies, the
Morales government remains firm in its decision, which involved
the advice of Venezuela's Chávez. "It's a matter of
sovereignty," agree the two presidents.
* Diego Cevallos is an IPS correspondent.
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