The third panel at Latin Lawyer′s Third Annual Oil & Gas Conference may have already won the prize for raising the most eyebrows, taking as its subject government efforts in Latin America to decarbonise energy supply and develop the biofuel, wind and hydropower industries.
Chairing the panel was Clifford Chance
partner Fabricio Longhin, who began the session by emphasising the "close
relationship" between renewables and oil & gas. "There are many
ways to look at this relationship," he noted. "One argument is that
developing renewable technologies is the right thing to do and should try to
replace oil & gas. The other and more practical view would look at how
renewable technologies can be better planned and encouraged by
governments."
Offering a good example of the strides that can be made through effective
government policy and regulation was Machado, Meyer, Sendacz e Opice
Advogados partner José Virgílio Lopes Enei, who focused his talk
on Brazil′s efforts to develop its biofuels industries. "When you talk
about biofuels you have to talk about ethanol," he said, referring to the
27 billion litres of the fuel Brazil produces every year, representing a 95 per
cent share of the country′s total biofuels market. "Most of the recent
increases in ethanol production have come from the domestic market, but there
is huge potential for exports," he explained. "The problem is that
Brazil′s main markets - despite a trend in those countries for cleaner fuels
and increased regulations - still have a lot of restrictions on importing
biofuels. In the US for example the tariff barriers on ethanol may have been
overcome, but because local corn ethanol continues to be heavily subsidised it
remains hard to enter the markets". He adds that within Brazil′s other
markets, such as the EU and Japan, a combination of strict certification
requirements as well as concerns of becoming solely dependent on Brazil for
biofuels, has also restricted export opportunities to those markets. "It
seems counterintuitive, but Brazil would benefit from the creation of other
producers of ethanol worldwide as it would spread the risk of the buyer
countries," he added.
Offering the view from over the border was prietocarrizosa partner
Sandra Manrique, who began her presentation by describing steps taken by
Colombia to help the country generate 75 per cent of its energy requirements
from large hydroplants (with more currently under construction). While she said
that Colombia′s vulnerability to destructive El Niño weather events make it
unlikely that they will ever be able to completely remove their reliance on
liquid fuels in energy generation, she added that the government should nevertheless
seek to change its energy matrix by increasing the use of renewable
technologies, as well as by increasing capacity within the system.
"Colombia has great potential in geothermal energy because we have lots of
volcanoes," she explains. "The problem is we have strict
environmental laws, so it is important that we change these environmental
regulations." Among these changes, Manrique argues that the government
should also develop regulatory and tax incentives to encourage companies to
enter markets with high start-up costs. In the short-term, however, she
believes it will be events just over the border in Venezuela that will have the
most immediate impact. "The discovery of the La Perla gas fields is
significant because Colombia needs gas for its thermal plants," she notes.
"At the moment Colombia exports to Venezuela, but this new discovery could
have a dramatic impact on Colombia′s energy market."
Should Colombia decide to develop its renewable energy industries, Rebaza, Alcázar & De Las Casas
Abogados Financieros partner Juan José Cárdenas says the country
could look to Peru, which is expecting a raft of wind, solar and hydro projects
to come online by 2014. For Cardenas, key to getting the projects off the
ground was a new legal regime enacted in 2008 aimed specifically at encouraging
wind, geothermal biomass and mini hydro plants. "Among other things, the
regime established that the government executes agreements with the winners [of
the bidding rounds] and set a premium over the energy tariff to incentivise the
projects," he said. When asked what measures Peru was taking to correct
the "mishmash" between the tariff set by the government and the
falling cost of solar panels determined by the market, Cardenas said that the
new price would no doubt be taken into account during the next bidding round,
although in the short term he believed that there were "no plans to alter
the price" as it is "important to have certainty" when
developing a new market.
The session ended on a positive note, with Jose Virgilio Lopes Enei
describing the incentives offered in Brazil to develop wind power industry.
"The favourable terms offered by the government allowed the industry to
get started, but since then manufacturers of wind technologies such as turbines
have entered Brazil and helped them become more and more efficient," he
explained. "Today wind energy prices are competitive with traditional
sources of energy, even with hydro, and are sometimes even cheaper."
(Latin Lawyer 25.05.2012)
(Notícia na Íntegra)