Analysis: Latin American energy in 2007

MIAMI, Dec. 31 (UPI) -- Venezuela's decision to assume majority control of its lucrative oil and gas industry dominated headlines in Latin American energy news in 2007, with leftist President Hugo Chavez taking a hard-line stance against companies unwilling to agree to new terms.

The highly coveted Orinoco oil field -- Venezuela's most bountiful -- was at the center of much dispute for most of the year.

Several big-name foreign oil firms in Venezuela agreed in April to turn over majority control of their operations in the oil-rich Orinoco River to the country's state-owned petroleum company ahead of the May 1 deadline set by the Chavez administration.

BP PLC, Chevron, Total SA of France and Norway's Statoil ASA all agreed to give Petroleos de Venezuela SA a controlling hand in the projects at Orinoco as mandated in February by Chavez.

Orinoco is considered to be the most lucrative oil reserve in the country, currently pumping some 600,000 barrels per day.

Chavez raised international concern in late February when he first announced the Orinoco takeover bid.

"Venezuela's privatization of oil has come to an end," Chavez said at the time, raising concerns among foreign oil interests in the country as well as Washington. By decree, PDVSA assumed at least a 60-percent controlling share in all projects.

Some analysts and Chavez critics warn that the takeover by PDVSA could be more than the state-run energy firm is ready to handle. Though Chavez has spent billions of dollars on social projects and discount oil for friends and foes alike, not nearly enough of the Venezuelan oil wealth has been reinvested in new equipment, personnel or training, leaving the state firm woefully unprepared to handle the rigors of the reserve's heavy crude.

On the economic front, some warn Venezuela isn't financially equipped to pay the market share it promised to acquire the percentage of Orinoco projects the government covets. Others expressed concern the heavy hand of bureaucracy will devastate the industry.

For the most part, foreign firms in Venezuela have operated there with little government interference. Venezuela has renegotiated some oil contracts in the last few years, though with soaring global oil prices, both sides appeared content with maintaining the status quo as long as they both earned billions in petrodollars.

"For years, oil companies acted like the Chavez aim at taking over the oil sector didn't exist," said PFC Energy analyst Roger Tissot. "But now that conditions are in his favor, Chavez can move full-speed ahead."

Meanwhile, Brazil made huge strides in 2007 in augmenting its own energy sector with the discovery of a massive offshore oil field.

Brazil's state-run oil company Petrobras has made a major discovery of an offshore oil field projected to yield between 5 billion and 8 billion barrels.

Petrobras officials said the discovery in the Tupi oil field could launch Brazil into the Top 10 oil producers in the world, O Globo reported Friday.

The oil field's potential yield would provide Brazil with the world's eighth-largest oil and gas reserves, Petrobras President Sergio Gabrielli said Thursday.

News of the discovery prompted Petrobras shares to jump more than $24 on the New York Stock Exchange to $116.77, a 52-week high.

The find follows last year's announcement that Brazil has become a net exporter of oil after decades of dependency on other countries. However, Brazil still imports light crude for use domestically.

Elated by the discovery, President Luiz Inacio Lula da Silva quipped, "God must be Brazilian."

Brazil's oil fortune appeared to improve even further with the discovery of another field nearby Tupi that some experts predict could be even larger.

Petrobras also noted earlier this year it was in the final stage of construction and installation of its $900 million P-54 platform, one of the world's largest, with a production capacity of 180,000 bpd and capable of compressing 6 million cubic meters of natural gas per day.

Elsewhere in Latin America, Bolivian President Evo Morales surprised many when he said his government was considering selling natural gas to Chile.

The decision is surprising after more than a century of tension between the two countries stemming from Bolivia losing its coast to Chile in a 19th century war.

Tensions run deep. In 2003 the mention of selling gas to Chile was reason enough to force President Gonzalo Sanchez de Lozada from office and inspire widespread violence that left dozens dead. Morales, a leftist and Bolivia's first indigenous leader in modern times, apparently felt no such fear. Having nationalized the country's gas sector last year, he now apparently feels confident enough to suggest filling Bolivian state coffers with Chilean pesos.

Political differences and age-old grudges like the Bolivia-Chile feud are keeping both nations and Latin America from fulfilling their energy potential, read a report from the Council of the Americas.

However, overcoming differences and historical gripes is not impossible, council officials said in an interview with United Press International.

"They (differences) can be overcome, but it's going to take a strong and focused effort to do so," Eric Farnsworth, vice president of the Council of Americas, told UPI.