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Issue 533 30September2014 Week 39

Freeing up fracking
Colombia wants to bolster its reserves by unlocking unconventionals,
which could see hydraulic fracturing begin in 2015 led by Ecopetrol and
ExxonMobil.
Rig request
Argentina needs more equipment to tap the Vaca Muerta shale play, with over
120 drilling rigs required to put 1,000 wells into production.
Crisis in Caracas
Venezuelas economy appears to be in a death spiral, which is not good news
for oil companies operating in the country.
Brain drain
Mexicos energy reform has led to a brain drain from state-run oil company
Pemex, as incoming international oil companies snap up local talent.
COMMENTARY 3
Colombia sets sights on shale 3
Oil companies feel the pinch as
Venezuelas economy disintegrates 4
INVESTMENT 5
Buyers line up for Petrobras Argentinas
Santa Cruz blocks 5
Ecuador to award contracts for 17 fields in
October 6
PERFORMANCE 7
Pan American Energy rebuilding
production from Cerro Dragon 7
Pemex suffers skills crisis 7
POLICY 8
Petrobras feels political pressure 8
Chile strikes Angolan import deal 8
Santos updates Colombian peace talks
progress 9
Colombia to ease licensing process 9
Peru to hold talks with protesters at Block
108 10
PROJECTS & COMPANIES 10
Argentina needs more rigs for shale
development 10
Petroamerica responds to Putumayo 7
challenge 11
Pemex builds closer ties with IOCs 11
NEWS IN BRIEF 12


NEWS THIS WEEK

LatAmOil 30 September 2014, Week 39 page 3
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Colombias unconventional oil and gas
industry could kick off in 2015 when
environmental permits for hydraulic
fracturing (fracking) are due to be
awarded. The sector has received a shot
in the arm from news that the
government has approved the use of
fracking.
Ecopetrols president Javier Gutierrez
said on September 23 that the state-run
company expected to receive
environmental permits to begin
exploratory fracking in the Middle
Magdalena Basin next year. The Coyote,
Prometeo and Iwana wells would be
targeted first, he said.
Ecopetrol won five unconventional
exploration licences in Colombias 2012
oil and gas bid round, two of which it
picked up in partnership with US shale
specialist ExxonMobil.
Although unconventional blocks were
offered in the 2012 licensing round,
fracking regulations were not formulated
until March this year. The next step is for
the National Environmental Licence
Authority to formalise the regulations,
without which exploration cannot begin.
Colombias Deputy Energy Minister,
Orlando Cabrales Segovia, said he was
confident this would occur relatively
quickly and that fracking would to be
under way at a number of sites by the
middle of next year. Cabrales noted that
22 unconventional blocks had been
assigned and six contracts signed and
forecast that in two years time there
could be up to 20 wells drilled using the
technique. Tapping unconventional
reserves is an imperative for the
Colombian authorities, with conventional
reserves dwindling. The countrys
conventional oil reserves currently stand
at around 2.5 billion barrels, which is
enough to sustain production for around
6.6 years at current extraction rates. After
regularly exceeding output of 1 million
barrels per day of crude in 2013, this year
overall Colombian production has fallen
below the psychologically important
million barrel mark, thus invigorating the
governments hunt for new reserves.
The authorities are expediting the
permitting process for fracking now
because they need to increase reserves,
and the income they receive from
royalties, in order to sustain their social
and infrastructure programmes, a source
in the governments planning department
told NewsBase. Conventional
production is falling and offshore or
unconventional discoveries are required
to provide revenues for the government.
Early estimates suggest fracking could
open up reserves of up to 31.7 trillion
cubic feet (898 billion cubic metres) of
gas, as well as increasing oil reserves.
This would be a major fillip for the
government, given that export sales of
Colombian crude, natural gas and
products totalled US$32.5 billion, up
almost tenfold from the US$3.38 billion
the treasury collected in 2003. Indeed
petroleum sales in 2013 accounted for
56% of all export dollars, up from 26%
in 2003.

Risks
Yet there are multiple obstacles that
could impede the rapid escalation of
shale oil and gas development in
Colombia. With environmental concerns
about fracking, the countrys already
convoluted permitting process for
conventional drilling could be even
lengthier for shale projects.
COMMENTARY
Colombia sets sights on shale
With requisite regulation in place, Colombia could see hydraulic fracturing begin in 2015
with Ecopetrol and ExxonMobil to the fore
By Charlotte Ryan
Exploratory fracking work is due to start in the Middle Magdalena Basin next year
The government expects 22 shale wells to have been drilled by 2016
Parex, ExxonMobil and GeoPark are to submit applications for environmental permits in the near future

LatAmOil 30 September 2014, Week 39 page 4
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Community action against the oil
industry is a growing problem for
operators and could be exacerbated by
the perceived environmental problems
associated with fracking.
Tied into this is the issue of security,
which must always be taken into
consideration in Colombia. The oil
industry remains a target for leftist
guerrillas and an attack on an
unconventional well could have a
devastating ecological impact given the
volume of chemicals that are used in the
fracking process.
Responding to questions about
environmental concerns, the government
source said: From that Ive heard,
experts say the real problems are the
noise, the dust thrown up by the lorries
and overuse of roads.
He added that it tended to be smaller
companies that had faced problems with
community protests in Colombia, which
means the government has imposed
financial requirements, meaning only
bigger companies can qualify for
unconventional exploration.

What next?
As noted by Cabrales, the government
expects 22 shale wells to have been
drilled by 2016. But the uptake of
unconventional licences in both Ronda
2012 and 2014 (five and one blocks
respectively) shows that interest remains
relatively low. Nonetheless, it is a
positive that Ecopetrol is leading the way
and its presence ought to reassure other
operators that are looking to take the
plunge. The presence of ExxonMobil is
also a fillip for the authorities.
For Colombia to enjoy a shale oil and
gas boom like that seen in the US, the
right regulation must be implemented
and the issue of community relations
prioritised. There has been a backlash
against fracking in many countries, and
Colombias specific explosive cocktail of
mobilised indigenous populations, a
distrust of multinationals and active
guerrilla groups would exacerbate this
reaction.
Such risks aside, international oil
companies (IOCs) like Parex,
ExxonMobil and GeoPark are likely to
submit applications for environmental
permits in the near future.
With lengthy delays in the Colombian
permitting process a perennial problem,
the middle of 2015 seems a feasible start
date for fracking, by which time the
countrys security situation should have
improved. (See: Santos updates
Colombian peace talks progress, page 9)
NewsBase is cautiously optimistic
about the governments goals, but
watertight regulation and a rapid
permitting process is essential. (See:
Colombian government pledges to
shorten licensing process, page 9)
Tapping unconventional reserves could
be the key to Colombia prolonging its oil
boom. Without fracking, the country may
already have seen its best days as an oil
producer.
Venezuelas deteriorating financial
situation and the threat of a bond default
is making it more expensive for oil
companies to operate in the country.
The black market exchange rate is
again touching 100 bolivars to the US
dollar, compared with the official rate of
6.3 bolivars to the dollar. The countrys
two other official exchange rates
SICAD I and SICAD II, which are both
set by opaque auctions are 12 and 49
bolivars to the dollar respectively.
The government said the introduction
of SICAD II in March would gradually
narrow the gap between the black market
and government rates. It did narrow
slightly after the new systems
introduction but has since widened.
Fears of a possible default and the
governments decision to reduce further
hard currency supplies to businesses and
individuals have boosted the black
market rate, as has Venezuelan President
Nicolas Maduros prevarication over
how to jumpstart the economy.
Next month Venezuela needs to pay
US$7.1 billion to service its debt on both
sovereign and PDVSA bonds. It remains
unclear whether Caracas will be able to
make all of the payments on time.
In light of the deteriorating situation,
Standard & Poors downgraded
Venezuelas debt to CCC+ from B-
earlier this month. The recession, high
inflation and growing pressures on
liquidity will continue to erode the
governments capacity to pay its external
obligations in the coming two years, the
ratings agency warned.
COMMENTARY
Oil companies feel the pinch as
Venezuelas economy disintegrates
Venezuelas economy appears to be in a death spiral, which is not good news for oil
companies operating in the country
By Peter Wilson
Standard & Poors has downgraded Venezuelas debt to CCC+ from B- as a default looms
The fiscal disaster has caused a cash crunch for PDVSA, impeding its ability to grow production
Oil companies could tie loans to PDVSA to project concessions but are wary of losing their shirts

LatAmOil 30 September 2014, Week 39 page 5
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
A by-product of the soaring black
market exchange rate is the growing debt
owed by state-run oil company PDVSA
to the countrys central bank. In order to
cover its operating expenses, PDVSA has
been forced to borrow heavily from the
bank. According to Central Bank
statistics, PDVSAs debt is currently
512.5 billion bolivars (US$81 billion at
the governments official forex rate of
6.3 bolivars to the dollar).
PDVSA borrowed 31 billion bolivars
(US$5 billion) from the bank between
June 27 and July 25, the last date that
figures were made available.
The cash crunch has led PDVSA to
freeze various essential projects. The
company has halted the construction of
upgraders needed to refine extra-heavy
crude oil, as well as new domestic
refineries.

Ghost in the machine
PDVSAs worsening cash flow can be
traced back to decisions taken by the late
President Hugo Chavez. He ordered the
national oil company (NOC) to turn over
all of its dollar revenue to the Central
Bank at the official exchange rate. This
means PDVSA has been selling all of its
dollars at the official rate of 6.3 bolivars
to the dollar, even though that rate is
hardly used as the countrys economy
has become dollarised at the black
market rate.
PDVSA has also been unable to grow
output, and owing to various
government-to-government loans
repayable in oil (chiefly with China), the
company is exporting fewer barrels for
dollars. The companys exports have also
been hit by exports to Cuba and the
members of Venezuelas Petrocaribe
initiative, which are heavily subsidised.
In order to maintain its operations,
PDVSA has turned to the Central Bank
to cover its expenses. But with falling
liquid currency reserves (which now
stand at about US$2 billion), the Central
Bank has had no choice but to print more
bolivars to advance funds to the state oil
company. This in turn has stoked
inflation, which is projected to end the
year at more than 70%, the highest in the
world.

What next?
The situation is an indictment of the
economic mismanagement that prevails
in Venezuela. Despite a decade of strong
oil prices, PDVSA continues to see its
production decline and relies on central
bank funding to pay its bills. With the
government then picking PDVSAs
pocket to fund its myriad social
programmes, a vicious circle has been
created that has brought the country to
the crisis it currently finds itself in.
Venezuela has in part been able to
cover its expenses thanks to multiple
billion dollar loans from China.
However, even Beijing is becoming more
reticent about extending credit as the
crisis in Caracas deepens.
PDVSAs international partners such
as Chevron, Repsol and CNPC also
seem reluctant to extend the company
more funds. These companies have lent
PDVSA more than US$12 billion in the
last few years, with the money ostensibly
being earmarked to boost output at
mature oilfields. It is unlikely that further
credits will be granted without
concessions, however.
PDVSAs foreign partners are
increasingly tying fresh loans to changes
in the rules governing oil joint ventures
operating in the country. Companies
want a bigger say in the running of their
joint ventures with PDVSA, as well as a
greater stake in the projects along with
reductions in taxes and royalties.
Freezing fresh credits is an important
negotiating tool for oil companies
seeking better terms. This is a small
glimmer of light for IOCs that are
hanging on in Venezuela.
Until the government takes definitive
steps to solve the problem i.e. a mega-
devaluation, a cutback in spending and
domestic subsidies including an increase
in the price of petrol the situation is
likely to continue.
NewsBase believes PDVSA will have
little choice but to slow down
development of most of its projects
owing to the lack of funds, as the fiscal
situation worsens. Increasing oil
production would normally alleviate such
pressure. But Maduro seems either
unwilling or unable to change the
countrys economic model, which has
condemned PDVSA to continued
delays.
Petrobras Argentina has received offers
from several local and international oil
companies (IOCs) for a series of blocks it
is selling in Santa Cruz Province.
The sale, which is being managed by
US bank Scotia Waterous, is for 20 areas
covering around 7,700 square km in the
Patagonian province in Argentina.
Output from the blocks totals around
20,000 barrels of oil equivalent per day,
with probable and proven reserves
standing at 44 million boe.
The blocks, which account for around
20% of Petrobras Argentina's production,
are valued at between US$200 million
and US$300 million. Licences for most
of the blocks expire in 2017.
COMMENTARY
INVESTMENT
Buyers line up for Petrobras
Argentinas Santa Cruz blocks
LatAmOil 30 September 2014, Week 39 page 6
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
The province subsequently plans to
award ten-year extensions, although
investment conditions acceptable to the
local government and the successful
bidder would have to be negotiated first.
Several companies have expressed
interest in the assets, although local
operator Compania General de
Combustibles (CGC), owned by
Argentine tycoon Eduardo Eurnekian, is
considered the frontrunner. CGC is
already Petrobras partner in several of
the blocks, with asset participation
ranging from 20% to 50%. Joint venture
contracts between the two companies
include a clause of first refusal, which
gives CGC the opportunity to match the
best deal Scotia Waterous receives for
the blocks.
Argentina's Tecpetrol, owned by Italo-
Argentine group Techint, has also
expressed interest, as has Roch, which is
owned by local businessman Ricardo
Chacra. He is expected to submit an offer
in partnership with an undisclosed
foreign investor. Pluspetrol, Argentina's
third largest upstream player, is also
reportedly interested.
State-run YPF is not anticipated to
make an offer, the company said, though
it may seek to negotiate entry into some
areas once the new owner is confirmed.
Brazils state-run Petrobras is in the
process of divesting international assets
worth US$9.9 billion to raise funds for
the estimated US$237 billion it will
spend on developing pre-salt oilfields off
the coast of Rio de Janeiro State.
Ecuadors state-run oil Petroamazonas
expects to award contracts in October for
enhanced oil recovery (EOR) work at 17
oilfields in the Amazon region. The
fields are split into six groups, said
Petroamazonas manager, Oswaldo
Madrid.
In February, Petroamazonas said it had
received 14 bids for EOR at the 17 fields
in the southeast of the country. Seven
companies placed bids, including
Halliburton, Argentinas YPF and a
consortium led by Schlumberger.
The government had originally invited
31 local and international oil companies
(IOCs) to submit offers in the tender.
Negotiations with the bidding companies
began in February.
Successful companies will be paid on a
lifting fee per barrel basis, said
Petroamazonas, but they will be expected
to provide financing for the EOR
techniques themselves.
Petroamazonas is the upstream
business of state-owned oil company
Petroecuador, which was formed from
assets acquired from Occidental
Petroleum in 2006. The firm wants to
boost foreign investment from companies
that have advanced technology and are
able to invest in high-risk projects in
Ecuador. Around 90% of Petroamazonas
fields are currently mature, with many of
them having already passed their peak
production potential.
The company is intending to adopt
EOR and secondary oil recovery methods
to boost oil production and push up
Ecuadors overall oil output. The country
is the smallest member of OPEC. It
produces around 540,000 barrels per day
of oil, of which Petroamazonas accounts
for approximately one third.
In January, Oil Minister Pedro
Merizalde said that Ecuador was hoping
to step up its crude production to 600,000
bpd within two years. The Andean
country then hopes to raise crude
production further to 700,000 bpd once
oil production begins at the Ishpingo-
Tiputini-Tambococha (ITT) block. The
Amazonian ITT block, which has
estimated reserves of around 900 million
barrels of oil, was given the green light
by the environment ministry at the end of
May.
Financing and environmental issues
make NewsBase Research less bullish
than Merizalde in its forecast for
Ecuadors oil production over the next
few years, however. The countrys
socialist government under President
Rafael Correa is volatile and the political
risk inherent in investing there has led to
the exodus of many IOCs. The fact that
only per barrel service fees are available
to foreign oil producers is also off-
putting for potential investors.
With this in mind, the countrys
production could fall to around 465,000
bpd by 2020. This number includes
25,000 bpd from the ITT fields, which
NBR does not expect to yield sufficient
volumes to offset rapid declines at
mature fields elsewhere.
A change in the rules regarding foreign
investment and per barrel lifting fees
could reverse the downward trend. But
such a change does not appear
imminent.
INVESTMENT
Ecuador to award contracts
for 17 fields in October
LatAmOil 30 September 2014, Week 39 page 7
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Pan American Energy, Argentinas
second largest oil producer, is investing
US$1.5 billion in its operations this year
as it looks to rebuild production from the
Cerro Dragon oilfield.
The company said the investment
would raise oil output from Cerro
Dragon to 94,000 barrels per day, 80% of
the volume that was produced in 2012,
prior to the destruction of facilities at the
field by striking workers.
The 2012 conflict saw unionised
workers who were agitating for wage
increases occupy Cerro Dragon for 179
days and destroy millions of dollars
worth of equipment. The action lowered
output to 81,000 bpd of oil in June 2012
from a high of 101,000 bpd in March of
the same year. This represented a drop of
27% in three months.
By the end of 2015 the company
expects to have spent US$4 billion on
reviving production, which it believes
could stand at 100,000 bpd of oil by the
close of the year. The firm has purchased
five new automated excavation units at a
cost of US$20 million each, which will
allow the development of an additional
250 new wells next year.
Cerro Dragon is in Chubut Province in
Argentine Patagonia, and covers an area
of 3,842 square kilometres. The site has
3,120 active wells, 622 injection wells
and 8,270 employees and contractors.
Production currently stands at around
92,000 bpd of oil and 8.47 million cubic
metres of gas per day, of which 5.9 mcm
is sold, with the remainder used to power
the site's operations.
Pan American, which has run Cerro
Dragon since 1997, is owned by the
Bridas, which comprises Argentinas
Bulgheroni Group, China's CNOOC and
UK-based BP.
Mexicos ongoing energy reform has led
to a brain drain from state-run oil
company Pemex. The companys head of
investor relations, Rolando Galindo, told
a conference last week that the fast pace
of the reform had led to a large
movement of qualified personnel [from
Permex] to other firms.
Mexicos exploration and production
(E&P) sector will be opened to foreign
and domestic private firms in 2015,
which has led to an exodus of staff from
Pemex as new entrants look to snap up
workers with an inside knowledge of the
local industry.
Galindo said the firm was losing at
least 3,000 staff each year, while Mexico
produces just 50 qualified petroleum
engineers per annum. The reform
package approved by Mexicos Congress
in August partially addressed the
problem by removing Pemex from the
civil service pay scale, where wages are
substantially lower than those paid by the
private sector.
However, it is hard to see how Pemex
can avert a skills crisis. Incoming
companies are able to offer its workers
substantially higher wages for the
foreseeable future. New entrants would
also be able to extend Mexican
employees the opportunities to work
abroad. Exacerbating the crisis is the fact
that Pemex will have to begin hiring
from overseas for the first time, which
will be an institutional shock for the
company. Although undoubtedly a short-
term challenge for Pemex, the shake-up
is likely to benefit the company in the
long run. The top-down culture at the
firm will eventually be replaced by a
more organic decision-making process,
aligning the firm with other more nimble
international operators.
Dissent tends to expose opportunities
that are not considered in authoritarian
environments. And a shake-up of
structure may also encourage a more
pragmatic business outlook by spurring a
move away from Pemexs typically
wishful thinking, which has coloured
much of its long-term production
estimates.
PERFORMANCE
Pan American Energy rebuilding
production from Cerro Dragon
Pemex suffers skills crisis
LatAmOil 30 September 2014, Week 39 page 8
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
The Brazilian underworld figure
involved in the Petrobras kickback
scandal has agreed to co-operate with
prosecutors. The news raises the prospect
of further details emerging about the link
between leading politicians and
corruption within the state-controlled oil
company.
Alberto Youssef, a leading player in
Brazils black market financial sector
which illegally moves billions of dollars
out of the country each year, agreed to
co-operate in a bid to reduce his likely
future sentence following his arrest on
money-laundering charges. He is accused
of helping move US$4 billion offshore,
including hundreds of millions from
Petrobras.
It follows a similar move by his co-
accused, former Petrobras refining
director Paulo Roberto Costa, who
named leading politicians and political
parties as the beneficiaries of a scheme
that saw Petrobras overbilled by
companies who then kicked back some
of the illegal profits to pro-government
factions in congress.
The scandal has been one of the major
controversies in Brazils bitter
presidential election campaign, with the
opposition accusing Brazilian President
Dilma Rousseff of allowing her political
allies to ransack the company in return
for their support in Congress. Costa owed
his prominent position in the company to
a party in Rousseffs coalition, which
was then named by him as a prime
beneficiary of the scheme.
Rousseff who was energy minister
and then chair of the Petrobras board
before finally becoming president of
Brazil claims she knew nothing about
the alleged illegalities within the
company.
Brazils political class has been left
nervous by the realisation that two
figures that police say are central to the
money-laundering scheme involving
Petrobras are now co-operating with
prosecutors. A congressional inquiry into
corruption at Petrobras has been denied
access to the information Costa has
provided as part of his plea bargain.
With evidence mounting that some of
the huge cost overruns afflicting
Petrobras, especially at the new Abreu e
Lima refinery being built near the city of
Recife, are the result of corruption,
Rousseff was forced into promising new
anti-corruption legislation last week
whilst continuing to deny any
wrongdoing.
Police and state auditors are now
investigating how the refinery, which
was originally budgeted at US$825
million, has escalated in cost to US$8.25
billion. Auditors have already identified
over-billing by companies working for
Petrobras.
As refining director Costa approved
dozens of requests by contractors to
readjust the cost of contracts upwards by
hundreds of millions of dollars. Police
financial forensic experts are now
seeking to track how some of that money
was then re-circulated to dozens of pro-
government officials.
Brazil and Colombia have lowered the
crude export prices they charge Chile by
1%. The move came after Chile struck a
trade deal with Angola to eliminate a 6%
tariff on oil imports from the African
country. Latin American countries are
exempt from the 6% tariff under regional
trade pacts.
The agreement between Santiago and
Luanda was signed in mid-August by
Chile's state-owned energy firm Enap
and its Angolan counterpart Sonangol.
The deal has strengthened Enap's
position with respect to how much it pays
its pre-existing suppliers for oil
shipments.
Chile is to import three shipments of
Angolan oil this year for a total cost of
US$300 million. The third cargo was due
to have arrived before the end of
September. The new agreement between
the hydrocarbon-rich African country
and Chile, which produces negligible
amounts of oil and gas, is forecast to
expand trade next year to a possible nine
shipments, equivalent to 9 million barrels
of crude, at an estimated cost of US$900
million. This increase would make
Angola Chile's largest oil provider
outside the Americas.
Chile currently purchases around
200,000 bpd of crude, with Brazilian and
Colombian imports accounting for 60%
of the total. However, sources close to
Enap said these two countries had now
agreed to reduce prices to their Southern
Cone neighbour by 1%, amounting to
yearly savings of around US$70 million
for Santiago. Enap reported oil purchases
worth US$6.9 billion in its 2013 end-of-
year financial report, with this figure
likely to grow in 2014.
Chile's other major suppliers are
Argentina, Ecuador, Mexico and
Venezuela, which still maintain a price
advantage owing to the lower cost of
freight and transportation, given their
proximity to the market.
The administration of Chilean
President Michelle Bachelet set out new
energy reforms earlier this year, which
included strengthening and improving
Enap's competitiveness by allowing the
company access to markets and crude
grades under the same conditions as its
main global competitors.
POLICY
Petrobras feels political pressure
Chile strikes Angolan import deal
LatAmOil 30 September 2014, Week 39 page 9
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
The oil and mining sectors would stand
to gain the most from a Colombian peace
agreement, government officials said last
week.
The comments were made after
Colombian President Juan Manuel
Santos spoke about advances in the
Colombian peace process at the United
Nations General Assembly in New York
on September 25. He said that the talks
with the Revolutionary Armed Forces of
Colombia (FARC), which began two
years ago, had already led to agreement
on three out of the five main negotiating
points. Santos said he expected progress
on the other two points to be made
soon.
The government believes a peace deal
would add 1-2% to the countrys GDP
and create a more stable atmosphere for
infrastructure and project development.
Colombia has seen an influx of foreign
oil and gas companies since the early
2000s, when ex-president Alvaro Uribe
introduced business-friendly reforms.
Last year nearly US$8 billion was
invested in oil and extraction in the
country, meaning crude oil accounted for
more than half of total exports and over
10% of GDP. Santos has previously
referred to the oil and gas sector as a
growth locomotive for Colombia.
Despite this, attacks on oil
infrastructure have been on the rise in
recent years, causing serious problems
for Colombian operators. Ecopetrol and
Pacific Rubiales, the two biggest
operators in the country, have both
blamed disappointing results this year on
pipeline attacks.
The industry has failed to meet its
production target of 1 million barrels per
day of oil this year and reserves have
dropped to 6.6 years. First-quarter
investment in the sector this year was at
its lowest level seen since 2010.
A peace agreement would make more
of the country accessible to exploration,
opening up many areas that are currently
controlled by rebels. It would also free
up more government funds to invest in
infrastructure and all being well, reduce
the number of attacks on pipelines. Most
such attacks are currently carried out by
the National Liberation Army (ELN), the
countrys second largest rebel group,
which is due to begin peace talks with
the government soon.
Colombian Environment Minister
Gabriel Vallejo has said the government
will shorten the time required to process
licences for the oil sector. Vallejo said
environmental standards would not be
compromised in the move, which would
also improve the efficiency of the
mining, energy and infrastructure sectors.
The objective is not to say yes to
everyone, but to say yes or no within a
certain time, so theres clarity,
communication and agility, Vallejo told
reporters.
The slow environmental permitting
process is frequently identified as a
negative by investors in Colombias oil
and gas sector.
Under the new system, authorities
would have a maximum of 70 days in
which to respond to a request for a
licence. Under the present structure,
companies have had to wait as long as 19
months, although there is a theoretical
maximum period of 90 days. The speedy
approval of licences is also dependent on
firms submitting completed
environmental impact studies, the
minister noted.
Vellejo explained the National
Authority for Environmental Licensing
would be restructured to facilitate the
new timing structure. In addition,
uncertainty over which body companies
must apply to would be clarified to avoid
the mistaken need to submit applications
to more than one agency.
The oil industry has blamed delays in
the issuing of licences for holding back
growth in Colombias oil production.
Colombias bureaucracy has struggled to
keep pace with the rapid growth of its oil
industry since the 1990s. This has partly
been to blame for a fall in output this
year. In August, Colombian crude
production was 983,000 barrels per day,
down from the 2013 average of 1.003
million bpd.
Vellejo also repeated the governments
approval of hydraulic fracturing, but
stressed the technology would only be
permitted if applications met high
environmental standards.
The president of Colombias state-
controlled Ecopetrol, Javier Genaro
Gutierrez, has said the company wants to
use fracking at the Coyote, Prometeo and
Iguana wells in the Middle Magdalena
region.
Lets not condemn it just to condemn
it. We want to do it well, said Gutierrez,
who explained his company planned to
apply for licences to use the technique in
the exploratory level. Theoretically,
Ecopetrol could win approval to start
fracking in 2015.
In its 2014 bidding round, Colombia
offered 19 unconventional contracts out
of a total of 97 offshore and onshore
blocks.
POLICY
Santos updates Colombian
peace talks progress
Colombia to ease licensing process
LatAmOil 30 September 2014, Week 39 page 10
Copyright 2014 NewsBase Ltd.
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All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Perus energy ministry and state agency
Perupetro are to hold talks with
environmental protesters at a site in the
Amazon where Argentinas Pluspetrol
intends to explore for gas.
The protesters are blocking roads in
the central jungle area where Pluspetrol
won bidding for Block 108 in 2005. The
Argentine firm was awarded an
environmental permit for the block,
which is located in the Ene Basin, last
year.
Its understandable that owing to the
political situation these arguments aim to
gain some notoriety, but we will in no
way accept these acts of violence, Juan
Ortiz, general hydrocarbon director at the
energy ministry, told reporters in Lima
last week. Block 108 is strategically
located near the Camisea gas fields, and
there are high expectations for finding
gas or oil, he added.
Pluspetrol is intending to conduct a
US$8 million seismic programme at the
block, Ortiz said.
The protests by indigenous groups are
connected to the regional and municipal
elections that are due to take place in the
region on October 5, he added.
Peru is aiming to double its crude oil
production over the next decade. Current
oil production is almost one quarter the
level it was in the early 1980s, standing
at around 68,000 barrels per day, down
from more than 200,000 bpd two decades
ago.

Offshore developments
In related news, Perupetro has awarded
US seismic company Spectrum a contract
for the reprocessing of its existing 2-D
seismic data that covers a 13,000-square
km offshore area. The data is to be
delivered in October and used to launch a
new international tender. Between six
and nine offshore blocks will be included
in the tender.
In December, Peru struggled to attract
enough oil companies to submit bids in
an auction of nine offshore hydrocarbon
concessions, owing to a lack of
geological information about the area.
Although 20 companies were initially
said to be interested, the auction was
eventually called off when Petroperu said
that only two companies were likely to
make bids.
Peru has proven reserves of around
579 million barrels, according to data
from the US Energy Information
Administration (EIA).
NewsBase Research is confident that a
combination of the countrys pro-
business investment policies and further
offshore exploration could turn around
Perus oil production. NBR expects the
countrys crude oil output to get back to
around 170,000 bpd by 2020, although
issues with red tape holding back
exploration and production must be
addressed for this target to be met.
Argentina will need to deploy more than
120 drilling rigs to put a further 1,000
wells into production in the Vaca Muerta
shale play in the southwest Neuquen
province.
Jorge Capitanich, chief of staff for
Argentine President Cristina Fernandez
de Kirchner, said the development of
Vaca Muerta would be a boon for the
countrys faltering economy.
When the development of
unconventional oil and gas in Vaca
Muerta reaches 1,000 productive wells,
Neuquens gross domestic product will
grow by between 75% and 100%, he
said in a televised press conference.
This will have an impact of 3% to 4%
growth in the countrys gross domestic
product.
A challenge is to deploy more rigs,
with 312 already in production and few
more available.
YPF, the state-run oil company and
most active operator in Vaca Muerta,
said it would have to import rigs to
continue its pace of development, with
already 260 wells in production. YPF has
said it wants to drill a total of 300 wells
this year. Of its productive wells, 39 are
in sweet spots that accounted for most of
its 25,000 barrels per day of oil
equivalent in production from the play in
the first half of this year.
In order to reach 1,000 productive
wells, the Argentine Oil and Gas Institute
(IAPG) said US$13 billion in investment
was required along with the deployment
of 124 additional drilling rigs.
The industry group added that with the
1,000 wells, the country would save up to
US$19 billion per year on energy imports
by boosting oil and gas output.
POLICY
Peru to hold talks with
protesters at Block 108
PROJECTS & COMPANIES
Argentina needs more
rigs for shale development
LatAmOil 30 September 2014, Week 39 page 11
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Argentina has been ramping up
imports, led by gas, diesel, fuel oil and
gasoline, as well as crude from this year,
to compensate for the
dwindling output of
maturing conventional
reserves in a country
that has been in
production for more
than 100 years.
With 1,000 shale
wells sunk, the country
would be able to halt
imports of LNG,
leading to annual
savings of US$6 billion.
Light crude supplies to refiners would
also be stepped up, allowing them to
ramp up processing capacity and in turn
reduce crude and fuel imports by up to
US$13 billion per year.
Capitanich said Vaca Muerta would
also be a boon for jobs. Some 7,500 jobs
arose out of Argentinas shale boom in
the first half of this year, he said, adding
that another 40,000-60,000 jobs would be
created as more wells were put into
production.
Vaca Muerta is the largest shale play in
Argentina. Estimates by the US Energy
Information Administration (EIA)
suggest it holds most of the countrys 27
billion barrels of shale oil resources and
802 trillion cubic feet (22.7 trillion cubic
metres) of shale gas.
Petroamerica responded to GeoGlobals
claim that it owned a stake in the
Putumayo 7 block in Colombia by saying
it was without merit.
Canada-based Petroamerica has a 50%
interest in the block after it struck a farm-
in agreement with PetroCaribbean
Resources in May. The stake was
originally sold to Suroco but became
Petroamericas property after it took over
the former company in July.
Petroamerica said it had recently
become aware of an allegation made by
GeoGlobal that it was entitled to a 10%
carried interest and an option for a
further 40% interest in the Putumayo 7
block. The Canadian company added that
after taking legal counsel, it had
dismissed GeoGlobals allegations.
GeoGlobal claims it was promised a
minimum 10% stake in the block by
PetroCaribbean, which was the original
owner of Putumayo-7. In 2010, it was
reported that GeoGlobal and
PetroCaribbean had entered into a
memorandum of understanding (MoU)
with regard to both the Putumayo 6 and
Putumayo 7 blocks. GeoGlobal alleges it
provided a guarantee of US$100 million
to the National Hydrocarbons Agency
(ANH) to support the bid. The company
is disputing the sale on the grounds that
the MoU provided for the entering into of
an operating agreement and/or joint
venture, which never happened.
PetroCaribbean attempted to terminate
all of GeoGlobals rights to the blocks in
May 2013. But GeoGlobal contested the
move and has threatened legal recourse if
the matter is handled without its consent
or participation.
Petroamericas response last week that
it had sought legal advice on the matter
could be construed as an attempt to put
pressure on GeoGlobal to drop its claim.
This would appear to be a wise course of
action for the company, given that
determining the legal status of MoUs can
be a tricky process.
GeoGlobal recently announced that
Key Capital had acquired 65% of its
stock. With new majority shareholders
on board, the company might be better
advised to focus on improving its
exploration figures and stock
performance rather than engaging in a
potentially costly legal battle with
Petroamerica.
BHP Billiton has signed a co-operation
agreement with state-run Pemex as it
looks to enter Mexicos deepwater
sector.
The Anglo-Australian mining giant
said last week the two companies would
share technical knowledge and
experience as a result of the agreement
and that this was intended to be the start
of mutually beneficial long-term
relationship. We obviously wouldnt
be here if we didnt think the relationship
would extend beyond the exchange of
technical data, BHPs petroleum
president, Tim Cutt, told reporters. We
are excited about the deepwater and the
extension of the Palaeogene play into the
Perdido play.
PROJECTS & COMPANIES
Petroamerica responds to
Putumayo 7 challenge
Pemex builds closer ties with IOCs
LatAmOil 30 September 2014, Week 39 page 12
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Melbourne-based BHP is already an
investor in the Perdido fold belt on the
US side of the Gulf of Mexico. The
company is also developing deepwater
assets in Trinidad and Tobago, where it
is in the process of conducting a large-
scale seismic survey.
We see considerable opportunity in
Mexico following the recent economic
reform. This is a long-term opportunity
for us, said Cutt.
New legislation has ended Pemexs 76-
year monopoly over Mexicos
exploration and production sector. The
government wants to attract outside
investment and know-how into Mexico
as it sets out to develop its offshore and
unconventional resources.
Pemex lacks the requisite capital and
experience to develop Mexicos oil
industry and reverse the trend of
declining output. Mexican crude oil
production fell from around 3.4 million
barrels per day in 2004 to 2.6 million bpd
in 2013. Deepwater development is a
core focus of the reform and NewsBase
Research (NBR) believes that increased
investment by international oil
companies (IOCs) could spur production
of 80,000 barrels per day from wells in
the Perdido play by 2017, with a ramp-up
to approximately 500,000 bpd from
Mexicos deepwater areas forecast by
2030.
The relatively bullish forecast is based
on the success of companies like Royal
Dutch Shell in the US part of the Perdido
belt, where it operates the Great White,
Tobago and Silvertip deepwater projects.
These projects have peak production
capacity of 100,000 bpd of oil and 6
million cubic metres per day of gas.
Starting in February 2015, Mexico will
auction the rights to 169 onshore and
offshore, new and mature blocks. The
government has set up a roadshow for
local private companies and IOCs to
participate in the bidding.
Prior to the start of the bid round,
Pemex has set out to develop
partnerships with leading IOCs. On
September 24, Indias ONGC Videsh Ltd
(OVL) also agreed a memorandum of
understanding (MOU) with Pemex to
discuss future co-operation and
collaboration. The company also recently
signed MoUs with Malaysias Petronas
and Argentinas YPF.
The following news items are sourced
from local and international news
sources. NewsBase is not responsible for
the contents of the stories and gives no
warranty for their factual accuracy.
POLICY
Chile enacts carbon
tax
Chile is the first country in South
America to pass regulation for taxing
carbon emissions after President
Michelle Bachelet enacted new
environmental legislation targeting the
country's main polluters. Coal- and other
fossil fuel-powered generators with
installed capacity equal to or larger than
50 megawatts will pay US$5 per tonne of
carbon released into the atmosphere. The
tax will come into play in 2018. The
policy is aimed at gradually reducing
Chile's carbon footprint to 20% of 2007
levels by 2020. Chile relies on mostly
imported fossil fuels for around 80% of
its energy needs and electricity
generators say the tax will raise energy
costs in the country.
REUTERS, September 28, 2014
COMPANIES
YPF, Pemex,
Petronas sign MoU
Miguel Galuccio, CEO of Argentina
national oil company YPF, signed a
memorandum of understanding with his
equivalents at Mexico's state-owned
operator Pemex and Petronas, the
Malaysian national energy company, in
order to share expertise, experience and
best practices, as well as evaluate
possible business opportunities between
the three companies, with a focus on
unconventionals. The agreement could
also look towards Pemex investing in
Argentina's vast Vaca Muerta shale
reserves as well as YPF participation in
Mexican unconventional exploitation.
Galuccio was a keynote speaker at the
World National Oil Companies Congress
Americas, held in Cancun.
IPROFESIONAL.COM,
September 26, 2014


OGX founder facing
new criminal
charges in Brazil
Federal prosecutors in Sao Paulo filed
new criminal charges against Brazilian
businessman Eike Batista accusing him
of financial crimes and for the first time
charged seven former executives of his
troubled oil company.
The charges, filed late Tuesday, were the
third set against Mr.
Batista in recent weeks. The most-recent
charges accuse him and the former
executives of inducing "thousands of
investors to error by announcing false
information" about the potential of
petroleum reserves in Mr. Batista's oil
company, formerly known as OGX.
Once the richest person in Brazil, Mr.
Batista had to sell assets and lost most of
his fortune after OGX failed to meet
targets. His wealth declined to less than
US$1 billion at the beginning of this year
from more than US$30 billion in 2012.
Mr. Batista recently said that his debts
exceed his assets by around US$1 billion.
OGX filed for bankruptcy protection last
year in Brazil.

PROJECTS & COMPANIES
NEWS IN BRIEF
LatAmOil 30 September 2014, Week 39 page 13
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents

OGX investors lost an estimated 14.4
billion Brazilian reais (US$5.97 billion)
between 2010 and 2013, according to the
federal prosecutor in Sao Paulo.
Prosecutors accused Mr. Batista and the
former executives of misrepresentation,
inducing investors to error and forming a
conspiracy.
If convicted, Mr. Batista could face
between four and 14 years in prison. The
other executives, if convicted, could face
up to 22 years in prison, according to
prosecutors.
DOW JONES, September 24,
2014
ELN apologises for
killing oil workers
The National Liberation Army (ELN),
Colombia's second-largest guerrilla
group, has apologised for the recent
killings of two contractors working for
state oil company Ecopetrol in Norte de
Santander province.
Jairo Aguilar and German Ariza were
repairing a segment of the Cano Limon-
Covenas oil pipeline on Sept. 17 when
they were shot by ELN guerrillas,
according to the Colombian military.
The pipeline, long a target for guerrilla
sabotage, has been attacked often in
recent months.
"It is not ELN's policy to harm working
people with its politico-military actions,"
the rebel group said. "We regret these
deaths resulting from personal mistakes
by the commander in charge of the
operation."
LATINO FOX NEWS, September
29, 2014
Petroamerica to miss
2014 guidance
expectations
Petroamerica Oil Corp, a Canadian oil
and gas company operating in Colombia,
has guidance on production for 2014.
Based on current projections for
production to the end of 2014,
Petroamerica expects to exit the year
with a production rate of more than 7,400
barrels oil equivalent per day (boepd) of
working interest production (before
royalties).
The total combined 2014 annual average
production for the Llanos and post-
closing Putumayo properties (after the
July 15, 2014 closing date of the Suroco
Energy Inc. transaction, annualized) is
expected to be 6,600 boepd of working
interest production (before royalties).
This guidance is below original 2014
expectations.
PETROAMERICA, September 25,
2014
Pemex warns about
a lack of human
resources
With the opening of the oil sector to
private investment, Mexicos state oil
company Pemex is suffering a loss of
skilled labour to new competitors, El
Universal newspaper reported. Rolando
Galindo, head of investor relations at
Pemex, said the scarcity of human
resources is a leading worry for the
company. New arrivals like Halliburton
and Schlumberger are cherry-picking
engineers from Pemex for their Spanish
and their knowledge of the national
energy sector. They are not easy to
replace, said Galindo. This is because the
number of retiring engineers runs at
1,000 to 3,000 per year while only 50
students are graduating per year with
degrees in oil engineering, he said.
EL UNIVERSAL, September 25,
2014
Pemex to diversify
into power
generation
Mexicos state oil company Pemex plans
to enter into the power generation
business over the next few years, the
Wall Street Journal newspaper reported.
Pemex CEO Emilio Lozoya said the
company will use natural gas and
cogeneration the use of the heat and
vapor from industrial processes to
generate power. This will allow the
company to go from using 6% of the
nations electricity supplies to generating
about 10%, Lozoya said at an oil
conference.
WALL STREET JOURNAL,
September 25, 2014
Ruling imminent in
PDVSA/ExxonMobil
tribunal
A World Bank arbitration tribunal will
rule in days that Venezuela must pay
between US$700 million and US$1.2
billion to ExxonMobil to compensate for
a 2007 nationalization, a newspaper said
on Thursday.
Pro-opposition Caracas daily El Nacional
cited a source at Venezuela's state oil
company PDVSA saying the
International Center for Settlement of
Investment Disputes (ICSID) would give
a judgment by Monday.
"Preliminary calculations indicate that
the total would be between US$700
million and US$1.2 billion," for the
takeover of Exxon Mobil's Cerro Negro
heavy oil project in the Orinoco region
by then President Hugo Chavez's
government, it said.
REUTERS, September 25, 2014
OIL
Local bonds could
help Vaca Muerta
development
Argentina's Securities and Exchange
Commission is analysing the possibility
of launching retail bonds, as well as other
financial instruments, with the aim of
capturing Argentine's foreign dollar
savings and redirecting them towards the
development of unconventional resources
in the Vaca Muerta shale play, said
Commission President Hector Helman.
Any such programme would look to
broaden the [Argentine] capital market
and give citizens investment alternatives,
and connect this with productive and
infrastructure sectors. Bank deposits,
capital market investments and
government securities in Argentina add
up to the equivalent of just over US$150
billion.
NEWS IN BRIEF
LatAmOil 30 September 2014, Week 39 page 14
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents

Argentina is currently locked out of
international debt markets due to an
ongoing legal battle with US holdout
bondholders and the government has
limited options for obtaining dollars.
DIARIO LA MAANA NEUQUEN,
Sept 29, 2014
Chubut orders
environmental
impact report on two
Tecpetrol wells
The Environment Subsecretary of
Argentina's Chubut province ordered a
temporary stop on the digging of two
wells by local operator Tecpetrol to
investigate claims the development is for
unconventional resources, which the
company denies. While Tecpetrol is
indeed authorised to dig for
unconventionals in the area, it must
stipulate to the public where and when it
will conduct hydraulic fracturing, which
may not have been the case with the two
wells in question. In a contract signed
August 2013, Tecpetrol stipulated it
would develop conventional wells.
Drilling would reach 4,000 metres, and
the company did not rule out using
hydraulic fracturing techniques if it
reached the D-129 unconventional
formation.
PATAGONICO NET, September
29, 2014
Argentina to order
second Nigerian
crude shipment
The government of Argentina will
purchase a shipment of Nigerian Bonny
Light crude, via the Energy Secretariat,
to make up for a 1.3% drop in output for
the Neuquen basin over the first seven
months of the year. This is only the
second cargo of oil to be imported this
year. Volume and delivery date are to be
determined, although it is expected to not
be later than the end of the year. The
operation will be partially subsidised so
that the cost of the imported crude does
not exceed local fuel prices, which
already increased 60% over the past 12
months, much more than the 40%
inflation rate. While Argentina continues
to produce oil in large volumes from its
San Jorge basin, the quality of the
product it lower and renders less in local
refineries.
LA NACION, September 23, 2014
Oil executives
cautiously optimistic
about Mexico
Executives from international oil
companies say they are looking forward
to the possibilities opened up by
Mexico's energy overhaul, but are
proceeding with caution until details of
the government's terms for private
drilling become clear.
"Time will tell," Charles Davidson, chief
executive of Noble Energy, told
hundreds of industry executives
concerning the Houston-based driller's
interest in Mexico's swath of the Gulf of
Mexico. "We're tiptoeing into it."
But Mr. Davidson and other executives,
who are in Cancun for two days of
conferences and meetings among
themselves and with Mexican officials,
said the opportunities spawned by the
end of the government's 76-year
monopoly on the petroleum and
electricity industries are too good to
ignore.
"The potential for Mexico is absolutely
clear," said Sami Iskander, chief
operating officer of BG Group which
operates world-wide and specialises in
deepwater projects. "The prize is huge."
Under energy laws signed last month,
Mexico will in February begin auctioning
rights to 169 onshore and offshore tracts,
with the process expected to be
completed by the end of 2015. Both new
and mature fields will be put up for bids.
"It's exciting and it's early days," said
Andy Hopwood, BP's chief operating
officer for upstream strategy and regions.
Mexican Energy Minister Pedro Joaqun
Coldwell said the aim is for Mexico's
crude oil production to rise by 500,000
barrels a day to 2.8 million barrels a day
by 2018. State oil company Pemex now
produces just over 2.3 million barrels a
day, down one million barrels from a
decade ago.
The best chance for Mexico to reach its
higher target within four years lies with
the redevelopment of mature inland and
shallow-water fields, said Ivan Cima and
Pablo Medina, midstream Latin America
analysts for Wood Mackenzie.
Sixty-two of the blocks being auctioned
next year are in the Chicontepec basin in
Veracruz state near the Gulf of Mexico,
where production has been stymied by
the difficult geology, they said. Eight
more are in the shale gas fields of
northern Mexico, near the Texas border,
where criminal gangs and scarce water
are concerns, and only one of the 26
wells drilled so far by Pemex produced
liquids, which are more valuable than dry
gas.
Beyond those risks, private companies
need to be sure of the fiscal rules they
will face, Mr. Cima said. "That's the last
step. If that comes together, you're going
to see a big rush south, from both majors
and the little guys. But the economics
need to make sense."
Mr. Iskander, whose London-based BG
Group explores and produces oil and gas
in offshore Brazil and across Latin
America, said the size of the blocks
being auctioned in the first round needs
to be larger. He and other executives also
urged the government and Pemex to
release seismic and other data they hold
about the blocks to be auctioned.
"The geology looks very good," Mr.
Davidson said in an interview with The
Wall Street Journal. "We're very eager to
go to the next phase, which will involve
reviewing some of the data over the
prospective areas, because that will
narrow the search."
WSJ, September 25, 2014
Oil price drop would
hit petro-states
Latin American petro-states face being
hardest hit by the recent 15 per cent drop
in price of oil to below US$100 (GBP61)
per barrel, according to a new report
released.

NEWS IN BRIEF
LatAmOil 30 September 2014, Week 39 page 15
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents

The report by research consultancy
Capital Economics said lower oil prices
could hit Latin American producers
worst because many relied on higher
prices to balance budgets.
The report added that higher debts levels
Brazil, Mexico and Venezuela meant
deficit financing might be difficult, and
could force spending cuts.
Particularly badly affected would be
Venezuela, the report suggested,
highlighting that it would need an oil
price above US$200 per barrel to balance
its books.
CITY AM, September 25, 2014
Mexico cuts
minimum crude
production target
Mexico has reduced to 2.4 million barrels
per day the minimum target that state-
owned Pemex must shoot for over the
next 20 years, El Universal newspaper
reported. That is 4% less than the
previous target of 2.5 million barrels for
the same period. The reduction is in
response to declining output as reserves
mature. Pemex produced 2.395 million
barrels per day between September 1 and
21, far less than a peak of about 3.5
million barrels per day a decade earlier.
EL UNIVERSAL, September 29,
2014
Mexican drug cartels
stealing billions from
oil industry
As Mexico prepares to develop rich shale
fields along the Gulf Coast, and attract
foreign investors, another challenge
awaits: taming the brutal drug cartels that
rule the region and are stealing billions of
dollars worth of oil from pipelines,
Associated Press newswire reported.
Figures released by state-owned Pemex
last week show the gangs are becoming
more prolific and sophisticated. So far
this year, thieves across Mexico have
drilled 2,481 illegal taps into state-owned
pipelines, up by more than one-third
from the same period of 2013. Pemex
estimates it has lost some 7.5 million
barrels worth US$1.15 billion, and
Pemex director Emilio Lozoya called the
trend "worrisome." Senator David
Penchyna, who heads the Senate Energy
Commission, said a reform of the energy
sector to bring in foreign investment
won't be viable if we aren't successful...
in solving the problem of crime and
impunity.
ASSOCIATED PRESS,
September 25, 2014
BHP Billiton sees
T&T potential
BHP Billiton President, Petroleum and
Potash Tim Cutt told investors at the
Barclays CEO Energy-Power
Conference, September 2014, the
country's largest deepwater acreage
holder sees "Tier-1 oil potential" in
Trinidad and Tobago.
He said: "We have an established
operational presence in Trinidad and
Tobago with our shallow water
Angostura asset. The deepwater is
largely untested and has Tier-1 oil
potential."
He told investors the company has
"acceptable fiscal terms" in Trinidad and
Tobago where "we have a material
early-mover deepwater position with an
average working interest of greater than
70%".
He said BHP Billiton "accessed four
additional exploration blocks in calendar
year 2014".
BREAKING NEWS T&T,
September 24, 2014
Goudron well
exceeds Lenis
expectations
Leni Gas & Oil (LGO) announced well
GY-667 at the Goudron Field in Trinidad
has undergone a series of initial
production after perforating a 44-foot
(13m) interval in the Lower Cruse
Sandstones resulting in a flow rate of 540
bpd.
The well is presently producing 40
degree API gravity water-free oil at a rate
of 142 bpd. Higher rates up to over 220
bpd have been successfully tested,
however, temporary field-wide
production constraints are in place.
Neil Ritson, LGO's chief executive,
commented: "The results from GY-667,
the company's first completion in the
Lower Cruse reservoir, have far
exceeded our initial estimates of 60 bpd.
STOCKMARKETWIRE,
September 29, 2014
PDVSA to reactivate
1,000 mature wells
The president of Venezuelas state-run
PDVSA said that a pilot project to
reactivate about 1,000 idle wells would
be carried out to increase output levels in
the west area of Venezuela.
In a communique, Eulogio Del Pino said:
Crude oil output is expected to grow by
60,000-70,000 barrels per day."
"We have a very high deferred
production due to the longevity (mature
oil fields) of those oil deposits and their
features; that is why we need to make a
great effort to reactivate those wells as
soon as possible," he added.
Currently, the output of the state-run oil
giant stands at around 2.9 million bpd.
EL UNIVERSAL, September 26,
2014
GAS
Petrobras finds gas
at Poco Verde 1 well
in Brazil's Sergie-
Alagoas Basin
Petrobras announced Wednesday that it
has identified the presence of gas while
drilling extension well 3-BRSA-1022-
SES (3-SES-181). The well is located in
the Discovery Evaluation Plan area of
Poco Verde in concession BM-SEAL-4
in Sergipe-Alagoas Basin ultra-deep
waters offshore Brazil.
The well, informally known as Poco
Verde 1, is situated 36 miles (58 km) off
the coast of Aracaju, at a water depth of
7,204 feet (2,196 metres).


NEWS IN BRIEF
LatAmOil 30 September 2014, Week 39 page 16
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents

Reservoirs containing good porosity
characteristics were detected, confirming
project expectations.
The Poco Verde accumulation is part of
the Sergipe-Alagoas Basin deep-water
development program.
Petrobras, BM-SEAL-4 operator with a
75% stake, in partnership with India-
based company ONGC holder of 25%,
will proceed with the activities outlined
for the area.
PETROBRAS, September 25,
2014
Central America
plans gas
developments
A plan by Central American
governments to boost economic growth
in the region foresees major spending,
according to a draft.
Plans include completion of natural gas
pipeline connecting the southern
Mexican port of Salina Cruz with the city
of Escuintla in southern Guatemala,
aimed at bringing gas to the Central
American nations for cleaner, less costly
power generation. The US$1.2 billion
pipeline was announced in January.
Investment for a regasification plant in
Central America that would convert
liquefied natural gas (LNG) into natural
gas for power generation. That aims to
cover potential demand in Guatemala, El
Salvador and Honduras.
REUTERS, September 24, 2014
Ecopetrol to request
fracking licences
Colombian state-controlled oil company
Ecopetrol said it will apply for the
environmental permits needed to employ
hydraulic fracturing, or "fracking," in its
exploration work.
Ecopetrol will request the licences at the
"exploratory level" and plans to begin
using that technique at the Coyote,
Prometeo and Iguana wells in the
Andean nation's Middle Magdalena
region, CEO Javier Gutierrez said.
In relation to fracking, Gutierrez said:
"Let's not condemn it just to condemn it.
We want to do it well.
Early this month, the Colombian
government gave the green light to
fracking as it seeks to unlock trapped
natural gas reserves.
LATINO FOX NEWS, September
24, 2014
Peru minister
predicts gas hub role
Peru has the fourth highest overall
proved reserves of natural gas in Latin
America, which places it above
neighbouring nations such as Bolivia,
Colombia and Brazil, the country's
Energy and Mines Ministry announced
Friday.
Peruvian Energy Minister Eleodoro
Mayorga noted that the estimated proven
natural gas reserves in Peru amount to
roughly 15 trillion cubic feet (Tcf) (42
Mcm), which are far larger reserves than
the above-mentioned countries.
"We have a very large potential to
discover, which allows us to believe that
in a few years Peru could become an
energy export hub", Mayorga said. The
basins of Madre de Dios and the Ene
River will be drilled this year.
ANDINA, September 26, 2014
SERVICES
Ship sails for
Petrobras, BG,
Repsol offshore
Brazil field
An oil production ship sailed from Rio de
Janeiro on route for a Brazilian offshore
oil field owned by Brazil's state-run
Petrobras, Britain's BG Group, and a
joint venture between Spain's Repsol SA
and China's Sinopec, Petrobras said on
Wednesday.
The ship, known as the Cidade de
Ilhabela, is expected to begin operations
by the end of the year in the Sapinhoa
offshore field in the BM-S-9 block south
of Rio. More than a year behind
schedule, Petroleo Brasileiro SA, as
Petrobras is formally known, is counting
on the vessel to help boost production
and revenue after five years of stagnating
output.
The floating production, storage and
offloading ship, or FPSO, is being leased
from the Netherlands's SBM Offshore
NV , and Brazil's Queiroz Galvao Oil
and Gas, Petrobras said in a statement.
The ship sails as the future of SBM in
Brazil is in doubt. The company, the
world's largest operator of FPSOs is
under investigation in several countries
after allegations from a former employee
emerged in February suggesting SBM
paid US$250 million in bribes, with
US$139 million of that paid in Brazil.
The company's right to bid for future
FPSO leasing contracts was suspended
until it can answer questions from
Petrobras, the Brazilian oil company said
last week. SBM said on Sept. 11 that it
expects to be able to bid for contracts
again after Brazilian elections in
October, and that a Petrobras
investigation found no wrongdoing.
The FPSO Cidade de Ilhabela has the a
capacity to produce 150,000 barrels of oil
and 6 million cubic meters of gas a day.
The Sapinhoa field in Brazil's BM-S-9
block is 45% owned by Petrobras, 30%
owned by BG, and 25% by Repsol-
Sinopec.
REUTERS, September 25, 2014
Petrobras awards
Skandi Santos
contract extension
AKOFS Offshore, a part of Akastor
ASA, has been notified of a five-year
contract extension from Petrobras to use
the Skandi Santos, a Subsea Equipment
Support Vessel in Brazil.
The extension, worth about 2.5 billion
Norwegian krone, will start March 1,
2015 in direct continuation of current
contract. The vessel is currently
operating under a five-year contract with
Petrobras that began March 1, 2010.
The Skandi Santos is designed to install
and retrieve subsea trees and modules,
including subsea structures and
manifolds at water depths of up to 2,300
metres.

NEWS IN BRIEF
LatAmOil 30 September 2014, Week 39 page 17
Copyright 2014 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents

The vessel will during the contract
extension period continue with its current
scope of work and also start installing
Petrobras' new generation of subsea trees
offshore Brazil.
The Skandi Santos and the installed
remotely operated vehicles are owned by
DOF Subsea and leased to AKOFS
Offshore, who owns and operates the
vessel's topside and subsea equipment.
AKASTOR ASA, September 29,
2014
Ocean Installer wins
Saipem SURF
contract offshore
Brazil
Ocean Installer has been awarded a
contract for SURF (subsea umbilicals,
risers ad flowlines) support work in
Brazil for Saipem; the contract which
will see the Normand Clipper in Brazil
for eight months is valued at circa US$50
million, with options to extend
The scope of work includes a wide range
of services including survey, TDP
monitoring, metrology, installation aid
deployment/recovery and pre-
commissioning
Ocean Installer will support Saipem with
their installation of multiple steel
catenary lazy wave risers, free standing
hybrid risers and export pipelines for the
Iracema and pre-salt projects in the
Santos Basin pre-salt area for Petrobras.
The scope of work includes a wide range
of services including survey, TDP
monitoring, metrology, installation aid
deployment/recovery and pre-
commissioning.
Ocean Installer will make use of the
efficient long-term chartered construction
support vessel (CSV) Normand Clipper,
which is well suited for both shallow and
deep water operations. The vessel has a
DP class 2 system, 250-tonne crane
capacity and 1,700 square-metres deck.
The Normand Clipper will be mobilising
in October in the Gulf of Mexico (GoM)
before transiting to Brazil to start the
work.
OIL & GAS TECHNOLOGY,
September 29, 2014
REFINING
Brazil auditor finds
irregularities in
Petrobras refinery
Brazil's federal auditing council TCU
said on Wednesday it found irregularities
in contracts for state-run oil company
Petrobras US$20 billion Abreu e Lima
refinery that is under construction in
Brazil's Northeast.
The refinery, one of the most expensive
ever built anywhere, is expected to start
operating by November.
REUTERS, September 24, 2014
Mexico halts oil
refinery project
Mexico has halted a project to build a
new refinery, citing insufficient funding
in the national budget, El Financiero
newspaper reported. The country has
spent 2.564 billion pesos (US$191
million) on feasibility and other studies
since the authorization of the project in
2009. Pemex, the state oil company, had
started to set the groundwork for building
the refinery in Tula, Hidalgo with plans
to start up operations in 2020. The
refinery was to have capacity to process
250,000 barrels per day.
EL FINANCIERO, September 24,
2014
FUEL
Enap reports spill
near Valparaiso
Chilean state-owned energy company
Enap reported an oil spill in Quintero bay
adjacent to its Aconcagua refinery. The
company says the incident occurred
when a tanker operated by Agental
accidentally ruptured a connection
between the vessel and the terminal,
causing the escape of oil into the sea.
Enap said it will begin an investigation to
determine the causes of the spill
alongside Agental and the Chilean
Maritime authorities. Following a visit,
the governor of Valparaiso province,
where the terminal is located, said the
situation was under control and all
effort would be made to prevent the spill
form reaching the coast.
LA TERCERA, September 24,
2014

NEWS IN BRIEF
LatAmOil 30 September 2014, Week 39 Back Page
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HEADLINES FROM A SELECTION OF NEWSBASE MONITORS THIS WEEK
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EurOil
Statoil and its partners have found gas in the Pingvin
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MEOG
A senior official at Irans NIOC has said that the countrys
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Petronas could cancel the Pacific NorthWest LNG project,
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NorthAmOil
Suncor Energy is sending its first shipment of Western
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Cabot Oil & Gas is buying Eagle Ford acreage for US$210
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