Miguel Galuccio, the CEO of Argentine majority state-owned energy firm YPF has envisioned the creation of a Group of 10 Latin American state-controlled oil and gas companies. Through the informal association in such an important regional sector as the energy one is, the companies – and the countries they are operated by – would boost synergies and play a heavier role in the global economy as well as in the world politics of energy. The spillover effects of malpractices and bad business models are as great as the benefits a G10 of state oil companies would suppose – though they (naturally) aren’t part of the conversation yet.
The alliance is still only a concept at the moment. However, it could quickly gain support in many of the South American countries as a way to boost their political and economical power in the shifting global reality. Galuccio first mentioned the idea last week in Bolivia in a hand-picked environment: the IV Oil and Gas congress organized by the Bolivian state oil company YPBF. “It’s an idea I want to talk over with the rest of my peers, creating a G10 capable of becoming a G12, of presidents of state-owned companies” said Galuccio. Some of the firms he has in mind, besides YPF and YPBF, are Mexico’s Pemex, Brazil’s Petrobras and PDVSA from Venezuela – as well as others such as Ecopetrol (Colombia), Petroamazonas (Ecuador), Petroperú (Perú), Enap (Chile) and Ancap (Uruguay).
The energy congress held many panels though the hot topics were the ones related to the central role of state enterprises, widespread in many industries in Latin America, and the need for an energy-integrative role in the region. Greater cooperation among the state energy companies would highlight the reality of the region and the world that Bolivia’s president Evo Morales laid down in his opening remarks (which couldn’t have served as a better introduction to YPF’s announcement): “control over energy resources, as opposed to military strength or economic wealth, is what lends political power to countries in both Latin America and around the world,” Morales said.
The viability of such a project remains unclear, with a big question mark appended to the amount of funding it would need to launch. The other big question is if Argentina’s YPF would spearhead it. The company has gone through some turbulence ever since it was seized buy the government in May 2012 – and production hasn’t been as high as expected – but things could be changing now. In the beginning of the month they announced that they see crude oil production increasing by 5% this year and natural gas output rising 18%, a day after reporting stronger-than-expected first-quarter results. It would make sense for Argentina to lead the pack since the country holds the world’s third-largest shale deposit, after China and the United States.
No specific plan was outlined about the G10 of Latin America state energy companies. For now, YPF’s Galuccio intends to propose his counterparts in the region the celebration of a forum in Argentina in 2015 to gather all state-owned companies in order to further his dream. The energy outlook for the Western Hemisphere would completely be redesigned if this plan is to move forward — though the road ahead is a very long one.