Energy investors ponder Colombia, Trinidad and Venezuela

Mar 11, 2009 01:00 AM

by Pietro D. Pitts

While hydrocarbon-rich Venezuela continues to offer energy investors interested in the northern region of South America the most bang-for-the-bucks, two nearby countries are trying to differentiate themselves from their neighbour, for a number of reasons.
Even though Venezuela can boast of 181.87 tcf of natural gas and 87.0 bn barrels of crude oil, Colombia and Trinidad and Tobago are far less fortunate. While Trinidad and Tobago has 16.95 tcf and 0.8 bn barrels, Colombia has just 4.41 tcf and 1.5 bn barrels.

Combined, the countries have relatively little to offer when compared to just Venezuela's proven reserves.
However, Colombia and Trinidad and Tobago offer what Venezuela cannot on the flip side of the investment coin. That is economic stability, openness to investment and attractive investment conditions, although the near-term scenario will be blurred somewhat due to the worldwide financial crisis.

Investment flows: Colombia, Trinidad or Venezuela?
Colombia may not be that attractive for bulge-bracket majors since the country's hydrocarbon potential is more alluring to juniors, but offers reserve and production growth potential that could be big for a small player. Although Colombia has opened its doors to multinationals, more still needs to be done in terms of ending the country's long-running multi-faceted civil war with the guerrillas (i.e. the FARC, among others).
Kidnappings have declined drastically in recent years, something that shows the government is working to resolve some of the main issues that for years deterred investors.

Trinidad and Tobago has long been overlooked as a potential investment option since many argue its natural gas industry is mature, saturated with companies and offers little upside potential. That may or not be the case. However, later this year the twin-island nation will unveil a new fiscal regime aimed at attracting further energy investments and finding more reserves (a couple of bid rounds are expected this year as well).
Still, the future of Trinidad and Tobago's hydrocarbon industry may lay in its ability to sell its energy and energy-related "expertise and services" to the world. First and foremost, Trinidad and Tobago needs to resolve issues that relate to crime and insecurity, which could deter potential investors.

While multinationals re-evaluate the potential in Colombia and Trinidad and Tobago, many may be turned off by across the board uncertainty (financial, economic and politically as well as issues related to crime and insecurity) in Venezuela, but attracted to the country's enormous resource base. For what its worth, a 10 % interest in Venezuela goes a lot further than even a 50 % interest in other regions (above countries included).
Venezuela was once an attractive investment option for almost any company; however, that scenario has changed in recent years as President Hugo Chavez Frias continues to nationalize industries across all sectors. As a result, companies with short pocketsmay want to stand back.

Pietro Donatello Pitts, is the Editor-in-Chief of Latin Petroleum, Inc. and its 100 % owned Venezuelan subsidiary, Editores Latin Petroleum, C.A. Prior thereto, he was the Associate Vice President of Equity Research at the investment banking firm, Morgan Keegan & Company and prior thereto an Equity Energy Analyst with Jefferies & Company, both in the United States; Market Analyst at Banco Mercantil del Norte (Banorte) in Mexico City, Mexico; and Market Analyst at Casa de Bolsa Banco Santiago in Caracas, Venezuela.

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