Politics of the Oilfield
Mad Oilman has been up and running since Christmas (thanks to Mrs. Oilman). I had originally thought this would be focused at least 50% oilfield 50% everything else. Well obviously that has not happened. I think the main problem is that Mad Oilman has access to wonderful daily oilfield news services and he forgets that the majority of the world does not. If there is a counrty with exploitable oil or gas, I'm fairly aware on a daily basis of what is hapening in those countries. As it affects my bottom line. The most recent Syria embargo by the United States cost my group a bit over a million dollars. For equipment manufactured to specifications and ready to be loaded on a ship. Embargo is announced, equipment is now ours. We'll eventualluy canniblaize it as it is all new equipment, but that it still a big financial hit to take due only to world events.
Well Mad Oilman will attempt to write once a day on the machinations of the oil industry and it's intersection with world politics. And in this industry there are huge dollars involved.
Today's commentary involves the country of Bolivia. Bolivia has siginificant gas reserves. They have not been expoited to their full potential. This denies the Bolivian government a significant source of income, especialy export income.
There's a bit of a socialist revolt going on in Bolivia right now The President has attempted to resign but he has been denied. Chavez flu has spread from Venezuela to Bolivia.
The sypmptoms of Chavez flu are Populist prounouncements and promises. Those require loads of short term cash. Paying off the boys, as it were. Bolivia is taking this route:
Bolivian Congress to Review 76 E&P Contracts
Review, as to ignore contract law. Increase royalty rates. Increase taxes. Post facto. Needless to say, many of the contract holders are a bit upset about this. They built their own internal economic investment models based on Bolivian law at the time. And of course they included a risk factor. Their dollars are already sunk into capital projects in Bolivia (wells drilled, pipelines built, etc). Now they have been told "Sorry, restart, OK?"
Risk in Bolivia has just skyrocketed due to this decision. Many companies may abandon their contracts as they are no longer economically viable based on the new tax regiem. Investment dollars in new development have now evaporated as well. So for short term gain, Bolivia has effectively wiped itself off of the global E&P map. There are too many other opportunites elsewhere. Brazil will still be involved as they are an importer of Bolivian gas, but as a potetial global exporter, Bolivia has through economic ignorance removed itself from the global playing field. Tragic and sad.
Update!
The Bolivian story was linked to through Rigzone. Rigzone is an internet based daily oilfield newsletter. Due to generous corporate sponsorhip, this daily newsletter is free. If you are interested in the oilfield from an economic, corporate, financial, technical or government perspective this is a wondeful resource.
