22 May 2020

ARPEL participated in the IDB webinar on the role of the extractive sector in the economic recovery of the region after COVID-19

  • ARPEL joined the agenda of the webinar “The role of the extractive sector in the economic recovery of Latin America and the Caribbean after COVID-19,” which was organized by the Inter-American Development Bank (IDB) on May 18.

    The event was attended by Juan Carlos Echeverry, former Minister of Finance and President of Ecopetrol (Colombia); Armando Zamora, President of the National Hydrocarbons Agency (ANH); Felipe Kery, Director of the National Petroleum Agency of Brazil; Fernando Benalcazar, Vice Minister of Mines of Ecuador; Paola Bustamante, High Commissioner for Dialogue and Development of the Southern Mining Corridor of Peru; Diego Hernández, President of the National Mining Association of Chile; and Miguel Moyano, Upstream Director of ARPEL.

    Regarding the recommendations from the business sector of the industry for the economic revival, Moyano said the economies of several countries in the region depend largely on their oil and gas resources as a major source of income.

    He pointed out that, individually or through joint ventures, state-owned companies are responsible for more than 70 % of oil and gas production and 90 % of refining. “Even though there are some 15 state-owned oil companies in the region, there are more than 140 international, regional, independent and junior companies operating mainly in the exploration and production sector,” he said.

    Legal stability and contractual flexibility within the framework of the long-term energy policies already established was one of the recommendations mentioned by the Upstream Director of ARPEL.

    “All industry operations are regulated and based on long-term contracts, in many cases with very specific clauses. For this reason, companies' room for maneuver to take some action during the concession period of their operations may depend, to a large extent, on decisions to be made by governments in exceptional times like the one we live now,” he said. He added, “It is important for governments to maintain the legal stability with which the country managed to attract investors (now operators) by developing temporary regulations and being flexible in those contractual clauses that, while allowing safe operations (first and foremost), keep the win-win concept during and after this situation.”

    Another key recommendation was the preparation/modifications to address the urgency of restarting operations and maintaining the value chain.

    “The rapid recovery of the sector will contribute to the economic recovery of countries and its impact will be felt at the local, municipal and national levels as industry is present in many places where its role as an employer is very important.”

    According to data estimated by ARPEL, upstream and downstream operating companies in the region provide employment for one million direct and contract workers. In addition to this million, it is estimated that the sector contributes to the additional employment of three million workers in the economy of the region, thus adding four million of direct, indirect and induced jobs.

    “For these reasons, it is important for governments to analyze the options that would have the greatest impact on the rapid recovery of their economies based on the national specificities of the entire value chain of their oil, gas and biofuels sector,” he emphasized.

    ARPEL recently launched the document “Preparing the Latin American and Caribbean oil and gas industry for the "new normal". It describes what the governments in the region are doing to support the sector during the crisis and continue to develop their hydrocarbon resources. The report can be downloaded at the following link (English and Spanish): https://arpel.org/library/publication/521/

    Regarding long-term trends, Moyano noted that all forecasts coincide in the high growth in demand for natural gas versus oil as the main fuel for the energy transition to low-carbon economies.

    “In this seemingly ambiguous – albeit complementary – scenario of future decisions by the hydrocarbon industry, governments, by reviving the hydrocarbons sector (as an adjuvant of post-crisis economic growth), must consider their energy transitions policies,” he concluded.

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