NAFTA review won’t jeopardize LatAm successes, forum told

The review and possible modification of the North American Free Trade Agreement that Donald J. Trump promised in his presidential campaign would not target US companies’ ventures in the region and in Latin America that are working well, a Trump transition team member said.

“Any commercial relationship that’s working is not going to be interrupted,” said MWR Strategies Pres. Mike McKenna, who previously worked at the US Departments of Energy and Transportation and now heads US President-elect Trump’s DOE transition team.

“They’re buying US oil products and natural gas. We’re selling it to them. It’s all beautiful,” McKenna said during a Dec. 13 discussion of how the incoming US administration’s policies might affect US oil and gas relationships in Latin American countries. The event was hosted by the Institute of the Americas in cooperation with the Inter-American Dialogue (IAD) and Sempra International.

McKenna said the incoming administration can be expected to start from a business point of view and promote policies that encourage the manufacturing and sales of products, including plastics and others down the oil and gas value chain. “Regulatory burdens will need to be reduced so companies can make money,” he said.

“The last administration was indifferent to oil and gas. It happily took credit for the industry’s successes, but hardly did anything to help it. The next one will be more enthusiastic,” McKenna said. Saying that only 16 LNG cargoes have left US ports so far, he stated, “There’s room to grow here.”

Areas of concern

Other speakers raised questions about how or whether Trump administration policymakers will build on US oil and gas companies’ relationships with Latin American and Caribbean governments that have been improving in recent years.

“There have been some NAFTA and trade announcements that have raised concerns, but it doesn’t look as if fundamental oil and gas relationships will change,” said Lisa Viscidi, director of IAD’s energy, climate change, and extractive industries. “Trade, immigration, and the new relationship with Cuba will be issues to watch.” Half of the US’s total oil product exports go to Latin America and should not be part of a NAFTA policy review, she stated.

Growth in countries with emerging economies has been less than expected despite the recent drop in crude oil prices, observed American Petroleum Institute Chief Economist Erica Bowman. “Several South America countries, notably Brazil and Venezuela, are in recession, while Argentina is in better shape,” she said.

Finding ways to reduce regulatory burdens on oil and gas production apparently is being discussed by members of the incoming administration, Bowman said. “But policies which increase demand—not just in the US, but also the developing world—will also matter,” she said.

“There are a lot of opportunities for US companies to invest in the region,” Viscidi said. “Mexico and Brazil are making major reforms. Cooperation with Central American and Caribbean countries will continue to be important. The US government’s role in facilitating access to capital and technology has made a big difference. But budgets could be cut.”

McKenna said the next administration will focus on many kinds of infrastructure deficiencies, including power transmission, oil and gas pipelines, and highways and bridges. “The keep-it-in-the-ground community basically has lost its exploration and production fight, so it’s focusing on stopping pipelines. The new administration will focus on getting them built,” he said.

Building on Mexico’s progress

Other speakers emphasized the importance of building on Mexico’s progress in reforming its oil and gas system and providing opportunities for companies from other countries. “We can’t separate energy and economic integration. One can’t occur without the other,” suggested Carlos De Regules, executive director of the country’s Agency for Safety, Energy, and the Environment (ASEA). “The paradigm should be competitiveness—making the most of the North American energy independence that already exists.”

Mexico’s part of the deepwater Gulf of Mexico has remained competitive despite lower crude oil prices, he told his audience. “It’s delivering business opportunities and access to affordable and reliable energy. We need to integrate economic value chains across borders. Regulations should enable the oil and gas business. Clear and long-term rules that don’t change allow for long-term investment,” De Regules said.

“We have 15 US-Mexico pipeline interconnections and 11 for electricity,” said Hector Castro, energy affairs minister at the Mexican Embassy in Washington. “By 2019, we’ll have five more gas interconnections and $60 million of investment in them. The intense US energy relationship provided many opportunities to work with the current administration. We expect it to grow with the next one.”

Sempra Energy Regional Vice-Pres. Mark Nelson said, “There’s been a huge amount of cooperation since [national oil company Petroleos Mexicanos] began to partner with other oil companies in developing resources. It’s become even more important when it comes to electricity.” The San Diego company’s first agreement in Mexico came during the 1980s when it developed geothermal resources to generate power to ship north to its customers, he said. “Now, we’re building infrastructure to serve Mexican citizens, which I think will make a difference if NAFTA reforms are discussed,” Nelson said.

De Regules said communities should become involved in planning pipeline projects earlier in the process along with geologic and profitability questions. McKenna was more direct. “Maintaining the rule of law is essential, but we’re going to keep running into resistance if we think what has worked in the past will work now,” he said. “The Standing Rock Sioux have a point. Their concerns apparently were ignored. If you want reduce opposition, you make them owners instead of victims.”

Contact Nick Snow at nicks@pennwell.com.

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