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U.S. May Seek Latin American
Oil, Gas At Trade Summit
NEW YORK (Dow Jones) -- An issue close to
President George W. Bush's heart will be on the
agenda as he meets with western leaders at a
trade summit in Quebec City over the next few
days: energy.
Bush will likely ask how the U.S. can get more oil and natural
gas to ease its supply crunch as he meets on expanding North
American free trade agreements.
Latin America is likely to hold important answers.
"The president has spoken out on that... about increasing
supplies and transportation of energy within the hemisphere,"
said White House spokesman Shawn McCormack.
Latin American governments are seeking significant
investments for new oil and natural gas projects in Brazil, Mexico
and Venezuela, according to Sondra Scott, a Cambridge Energy
Research Associates analyst in Mexico City.
"We have aggressive outlook for Latin America over the next
two years," Scott said.
Latin America's oil production capacity will rise to 11.24 million
barrels a day from current 10.8 million b/d by 2002, according to
Scott. Brazil and Venezuela will see the biggest increases, with
Ecuador and Mexico following.
The countries are especially interested in finding investors to
develop exploration and production, said Julio Herrera, executive
secretary of the Latin American Energy Organization, a Quito
group that brings together energy ministers from the region.
In particular, they want new markets for their natural gas,
Herrara said.
Neighbors Can't Fill Bill Alone
Bush has said the U.S. can get help in meeting its energy
needs from its closest neighbors.
Canada and Mexico now export a combined 3.1 million b/d of oil
and natural gas to the U.S. Both are developing new gas and oil
resources, too.
Why not just increase the volume of energy imports from these
two countries, which already have a free trade agreement with
the U.S.?
For one, the U.S.'s economic slowdown is likely to stifle
investment in Mexican energy projects, according to analysts.
Mexico currently produces about 3.5 million barrels a day of
crude, of which 1.5 mb/d are exported mostly to the U.S. The
country also imports 2 to 3 bfc/d of gas from the U.S.
Petroleos de Mexicanos, or Pemex, Mexico's state-owned oil
company, is set to increase its natural gas output to eight billion
cubic feet a day from 4.6 bcf/d in three years, but it could take
10 years for Pemex be able to produce enough for exports,
according to some analysts.
"There's no chance we can get it from Mexico in spite of what
Bush says," said Michael Economides, an engineering professor at
the University of Houston who tracks the oil market. "It's like
begging from beggars."
As for Canada, it will take some time before new projects yield
more energy for the U.S.
The country already supplies the U.S. with 1.6 mb/d of oil and
products. More oil could be tapped from the Tar Sands of
Alberta, which has reserves of about 300 mb/d - more than Saudi
Arabia.
But most of that crude is heavy, and exploiting it would require
massive investment.
"Canada won't give more (oil) because there's not much to be
found," said Ian Doigen, a Calgary-based analyst who consults
for the Canadian Petroleum Institute. "We are having a hard time
keeping up with production of natural gas. There's no new
meaningful increase and so the U.S. is now looking at Alaska
North Slope for new supplies."
Canada sells between 60 per cent and 70 per cent of its
natural gas to the U.S. Production will continue out of the
Western Sedimentary Basin, with new gas from Northeastern
British Columbia and the lower Northwest Territories exported to
the U.S. this year.
Offshore Nova Scotia is the next biggest basin under
development, with current production off Sable Island of 500
million cubic feet per day, and an estimated 50 trillion cubic feet
of reserves.
PanCanadian's Deep Panuke project off the Scotian shelf is
expected to start commercial production in two years, but
pipeline issues still must be resolved.
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