
The Energy Collective Group
This group brings together the best thinkers on energy and climate. Join us for smart, insightful posts and conversations about where the energy industry is and where it is going.
Post
2023 outlook for energy in Latin America
This item is part of the 2023 Predictions and Anticipated Trends for the Power Industry - January/February, click here for more
Amid a contentious battle between US and Canada on one side, and Mexico in the other, for the treatment of foreign companies in the power industry in Mexico, the table is set for a rocky 2023 for companies operating in the country as government regulatory agencies stall in approving permits for both the power and the oil & gas industries.
These companies will need to look out for two major events this year: the eventual constitution of the arbitrage panel under USMCA and its resolution; and the electoral battle to have a definition of the presidential candidates for the 2024 election. After these events unfold, we will have a clear scenario for what is to come for the energy sector in Mexico.
Your access to Member Features is limited.
Another country that will likely have a change of direction is Argentina. An election this coming October will define a new President and a new set of representatives, under yet another episode of high inflation and impending devaluation. Vaca Muerta has been steadily increasing production, but still the country’s shale oil and natural gas production remains untapped.
Argentineans without subsidy will suffer increases up to 120% in natural gas prices in their homes, and the flow of money to contain new increases will dry up. This will likely cause a further tightening of currency control and impose more limitations to the energy sector, severely limiting the number of projects in either Vaca Muerta or other fields (shale or not).
In Colombia, with Gustavo Petro as the first leftist president in the country’s history, 2023 will see adjustments to the strategy of Ecopetrol and analysts expect a drop of 30% in investment, led by a lower budget for E&P from the SOE.
President Petro has publicly said that the transition to green energy “should have defined dates” and since the first days of his administration stopped issuing new E&P permits. It is a challenge for a country in which oil exports represent roughly 12% of GDP, but the rhetoric is one that may spread in Latin America this year for political gains.
On the other hand, Brazil and Venezuela, in spite of their heads of state and their geopolitical standings (Maduro and the recently appointed Lula da Silva), are expected to continue incentivizing E&P activities as well as production.
Venezuela in particular, has now aligned to the global energy strategy led by the US to counter the effects of Russia’s denial to supply Europe through Nord Stream I and the sabotage of Nord Stream II.
In terms of green energy, 2023 is expected to be a good year for renewable projects in countries like Costa Rica, Chile, Paraguay, Ecuador, Colombia and Brazil. Argentina and specially Mexico, with all their potential, remain absent in creating the conditions for these projects, being two opposite cases. Argentina wants these projects, but they don’t presently have the economic conditions to do it in a feasible way; Mexico already has the economic conditions, but the government is simply not interested.
As governments in Latin America are still fighting the effects of high inflation and also suffering from political unrest (as is happening in Ecuador, Peru, Argentina and Brazil), energy projects will remain as a second-tier priority, and companies operating in this region should focus on value and consolidation more than growth and expansion.
Discussions
No discussions yet. Start a discussion below.
Get Published - Build a Following
The Energy Central Power Industry Network® is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.
If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.
Sign in to Participate