{"id":50034571,"date":"2020-04-02T16:40:30","date_gmt":"2020-04-02T15:40:30","guid":{"rendered":"https:\/\/stage.dialogochino.net\/?p=34571"},"modified":"2023-03-13T22:50:08","modified_gmt":"2023-03-13T22:50:08","slug":"34571-plans-to-boost-economies-with-oil-crash-along-with-prices","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/energy\/34571-plans-to-boost-economies-with-oil-crash-along-with-prices\/","title":{"rendered":"Plans to boost economies with oil crash along with prices"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">In 2019, the new presidents of Mexico and Argentina announced plans to lift their struggling economies: ambitious oil projects that would boost state revenues.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For Mexico, it centred on state-owned oil company Petr\u00f3leos Mexicanos (Pemex) and the controversial Dos Bocas refinery. In Argentina, Vaca Muerta, one of the world\u2019s largest deposits of shale oil and gas, was touted as the saviour of the country&#8217;s economy.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><div class='block--pullout-stat block--pullout-stat--float cd-shortcode--factbox'>\n                <p class='block--pullout-stat__title'>60%<\/p>\n                <div class='block--pullout-stat__content'>\n                    <br \/>\nthe fall in oil prices since January<br \/>\n\n                <\/div>\n            <\/div><\/span><\/p>\n<p><span style=\"font-weight: 400;\">Then came the <a href=\"http:\/\/stage.dialogochino.net\/en\/extractive-industries\/34547-coronavirus-takes-toll-on-latin-american-economies\/\">Covid-19 pandemic<\/a> and with it, a severe price crash in the crude oil market. Oil prices have plummeted 60% since January to below US$30 a barrel \u2014 an 18-year low. It started with a crisis in demand as the Chinese economy slowed. But the slump is mainly the consequence of a price war between Russia and Saudi Arabia that will likely flood the international market with oil, making investment in the sector much less attractive.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The investment crash will not only impact Mexico and Argentina, but other oil-producing nations in Latin America region, such as Venezuela, Brazil, Colombia and Ecuador.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Edmar de Almeida, an economics professor who studies the energy sector at the Federal University of Rio de Janeiro, said the demand and price crises will likely hit investment in oil projects, as companies try to preserve their cash.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cThis means reducing investment in exploration and postponing projects. I don\u2019t see oil as a driver for boosting the economy now,\u201d he said.<\/span><\/p>\n<h2>Oil: crashing prices and hopes<\/h2>\n<p><span style=\"font-weight: 400;\">Mexican president Andr\u00e9s Manuel L\u00f3pez Obrador was so <\/span><a href=\"http:\/\/stage.dialogochino.net\/en\/climate-energy\/28804-amlos-return-to-oil\/\"><span style=\"font-weight: 400;\">eager<\/span><\/a><span style=\"font-weight: 400;\"> to use oil to lift the economy that one of his first measures as president was to change Pemex&#8217;s motto. Now <\/span><a href=\"https:\/\/www.am.com.mx\/opinion\/Por-el-rescate-de-la-soberania-nacional-20200128-0010.html\"><span style=\"font-weight: 400;\">it reads<\/span><\/a><span style=\"font-weight: 400;\">: \u201cFor the recovery of sovereignty\u201d above its Mexican eagle logo.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Questions over Pemex\u2019s ability to drive Mexico\u2019s economy were already mounting as it struggled to pay off debts of over <\/span><a href=\"https:\/\/www.reuters.com\/article\/us-mexico-pemex-debt\/the-numbers-dont-add-up-at-mexicos-pemex-as-oil-prices-crash-idUSKBN21A2P3\"><span style=\"font-weight: 400;\">US$105 billion<\/span><\/a><span style=\"font-weight: 400;\">, according to <\/span><i><span style=\"font-weight: 400;\">Reuters<\/span><\/i><span style=\"font-weight: 400;\">. Some revenues were saved through a massive sale of its production through future contracts, shielding it from the slump.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The future of the US$8 billion Dos Bocas refinery L\u00f3pez Obrador promised also looks uncertain. In January, Chinese ambassador Zhu Qingqiao announced that two Chinese banks would invest <\/span><a href=\"https:\/\/www.houstonchronicle.com\/business\/energy\/article\/China-invests-600-million-into-Mexico-s-Dos-14972999.php\"><span style=\"font-weight: 400;\">$600 million<\/span><\/a><span style=\"font-weight: 400;\"> in the project, but withdrew after the Mexican government denied the deal as it sought to maintain what it called <\/span><a href=\"https:\/\/factual.afp.com\/la-embajada-china-en-mexico-aclaro-que-el-pais-no-invirtio-en-la-refineria-de-dos-bocas\"><span style=\"font-weight: 400;\">sovereignty<\/span><\/a><span style=\"font-weight: 400;\"> over the project.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The refinery would be a massive investment for a struggling company to make, especially by itself. But the Mexican government still backs it.\u00a0<\/span><\/p>\n<blockquote><p><span style=\"font-weight: 400;\">Vaca Muerta is now like a patient with a fever<\/span><\/p><\/blockquote>\n<p><span style=\"font-weight: 400;\">\u201cAt a time when oil prices are so low, such as today, the most convenient and the best business is to refine,&#8221; claimed <\/span><a href=\"https:\/\/www.bnamericas.com\/en\/news\/mexico-doubles-down-on-dos-bocas-staying-statist\"><span style=\"font-weight: 400;\">Mexico<\/span><\/a><span style=\"font-weight: 400;\">\u2019s Energy minister Roc\u00edo Nahle in a recent interview with <em>El Financiero TV<\/em>.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Meanwhile, in Argentina, many have come to terms with the fact the government\u2019s plans to further develop Vaca Muerta, in the southern Patagonian province on Neuquen, will probably have to wait longer than expected \u2014 crushing news for a government in need of more funds as it deals with a <a href=\"http:\/\/stage.dialogochino.net\/en\/climate-energy\/30864-argentina-crisis-challenges-china-loan-repayments\/\">debt restructuring<\/a> process.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cArgentina was putting most of its future hopes on Vaca Muerta and now that\u2019s under discussion,\u201d Jorge Lape\u00f1a, a former energy secretary, said.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As it stands, Vaca Muerta plays a major role in the domestic market, supplying 3% of the country&#8217;s gas and 19% of its oil. Nevertheless, only 5% of reserves are exploited. For it to be profitable, the price of a barrel of Brent crude must be above US$40, way above current levels.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Sustaining Vaca Muerta\u2019s planned growth in production means developing about 300 unconventional hydrocarbon wells per year, requiring investment of between US$5 billion and $7 billion annually, according to a report by business consultancy Abeceb.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cVaca Muerta is now like a patient with a fever, we have to follow the evolution of international markets. If prices remain low, investments will be delayed and production will drop,\u201d said Gerardo Rabinovich, vice president of the General Mosconi Energy Institute.\u00a0\u00a0<\/span><\/p>\n<h2>No customers<\/h2>\n<p><span style=\"font-weight: 400;\">Investments are not the only concern in Latin America, as many countries depend on oil revenue to pay the bills. China is one of the main clients for crude produced in the region.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Almeida says Brazil has a strong internal market that could help state-owned energy company Petrobras weather the crisis.<\/span><span style=\"font-weight: 400;\">\u00a0But the company announced it was cutting investments from US$12 billion to $8.5 billion due to the crisis, and slowing production, especially in shallow waters. Almeida says the cuts shouldn\u2019t affect long term investments, as these are planned to run for several years.<\/span><\/p>\n<div class='block--pullout-stat block--pullout-stat--float cd-shortcode--factbox'>\n                <p class='block--pullout-stat__title'>Did you know...?<\/p>\n                <div class='block--pullout-stat__content'>\n                    <br \/>\nColombian oil exports to China doubled between 2017 and 2018<br \/>\n\n                <\/div>\n            <\/div>\n<p><span style=\"font-weight: 400;\">But the scenario is especially stark in Colombia, where oil represents almost 80% of exports to China. The country doubled sales to China between 2017 and 2018. However, in February, as it struggled to address the Covid-19 crisis, China <\/span><a href=\"https:\/\/www.eltiempo.com\/economia\/sectores\/los-efectos-del-coronavirus-para-la-economia-colombiana-466802\"><span style=\"font-weight: 400;\">slammed<\/span><\/a><span style=\"font-weight: 400;\"> on the breaks on purchases of Colombian oil.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Colombia\u2019s president Iv\u00e1n Duque knew the country\u2019s dependence on oil exports would become a problem. In August, he <\/span><a href=\"http:\/\/stage.dialogochino.net\/es\/comercio-y-inversiones-es\/29540-el-presidente-colombiano-va-a-china-buscando-vender-mas-que-petroleo\/\"><span style=\"font-weight: 400;\">pledged<\/span><\/a><span style=\"font-weight: 400;\"> to diversify Colombia\u2019s exports to China during a state visit to Beijing. Nothing has changed so far.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cWe have to prepare for an expensive dollar, lower revenue from exports and, further ahead, lower tax revenue because of oil,\u201d said <\/span><a href=\"https:\/\/twitter.com\/MauricioCard\/status\/1236700218630037513\"><span style=\"font-weight: 400;\">former minister<\/span><\/a><span style=\"font-weight: 400;\"> Mauricio C\u00e1rdenas, adding that the country needed to boost domestic consumption of the oil it wouldn\u2019t sell to other countries.<\/span><\/p>\n<h2>A bump for renewables?<\/h2>\n<p><span style=\"font-weight: 400;\">As lower oil prices become the new normal, many are wondering what that means for investment in renewable energy. Some say lower oil prices mean renewables are less competitive, while others argue that the slump actually means investors will grow less interested in crude and venture to other energy projects.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Andr\u00e9 Ferreira, the director of the Brazilian Energy and Environment Institute (Iema), said it\u2019s premature to make predictions about the outcomes of the crisis for renewables.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It\u2019s a window of opportunity to talk about urban mobility<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But, as pollution levels fall, and people watch the skies turn blue in Latin America\u2019s biggest cities, Ferreira does see a window of opportunity for electric vehicles and prioritising public transport.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cI don\u2019t see how, in the long run, this will be a push for renewables,\u201d he said, but added; \u201cit\u2019s a window of opportunity to talk about urban mobility.\u201d<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In 2019, the new presidents of Mexico and Argentina announced plans to lift their struggling economies: ambitious oil projects that would boost state revenues.\u00a0 For Mexico, it centred on state-owned oil company Petr\u00f3leos Mexicanos (Pemex) and the controversial Dos Bocas refinery. In Argentina, Vaca Muerta, one of the world\u2019s largest deposits of shale oil and [&hellip;]<\/p>\n","protected":false},"author":50000004,"featured_media":50034573,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[757],"tags":[20000838,547,50029971],"hashtags":[],"country":[50000020,50000021,50000025,50002594,50002597,50002604],"class_list":["post-50034571","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-energy","tag-covid-19","tag-fossil-fuels","tag-oil","country-argentina","country-brazil","country-colombia","country-ecuador","country-mexico","country-venezuela"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.0 (Yoast SEO v26.0) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Plans to boost economies with oil crash along with prices | Dialogue Earth<\/title>\n<meta name=\"description\" content=\"In Mexico and Argentina, skepticism over big oil projects increases as prices crash as some wonder if it\u2019s time to talk about renewables\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/dialogue.earth\/en\/energy\/34571-plans-to-boost-economies-with-oil-crash-along-with-prices\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Plans to boost economies with oil crash along with prices\" \/>\n<meta property=\"og:description\" content=\"In Mexico and Argentina, skepticism over big oil projects increases. Meanwhile, some wonder if it\u2019s time to talk about renewables\" \/>\n<meta property=\"og:url\" content=\"https:\/\/dialogue.earth\/en\/energy\/34571-plans-to-boost-economies-with-oil-crash-along-with-prices\/\" \/>\n<meta property=\"og:site_name\" content=\"Dialogue Earth\" \/>\n<meta property=\"article:published_time\" content=\"2020-04-02T15:40:30+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-03-13T22:50:08+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/dialogue.earth\/content\/uploads\/2020\/03\/AMLO-oil-prices-Mexico--scaled.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2000\" \/>\n\t<meta property=\"og:image:height\" content=\"1443\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Robert Soutar\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:description\" content=\"In Mexico and Argentina, skepticism over big oil projects increases. 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The Mexican Government presented the Business Plan of Petroleos Mexicanos (Pemex), that through a reduction of up to 11% of the tax burden and a multi-million dollar investment seeks to refloat the state oil company, suffering from debt and a fall in production and refining. 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