2007 Think Corner

Comment by Dr. Gurfinkel on the recently completed natural gas pipeline from Colombia to its eastern neighbor.
Published in the Inter-American Dialogue’s Latin America Energy Advisor - October 22-26, 2007

In recent years, Colombia has adjusted its institutional and commercial frameworks to make them more attractive for new investments in the hydrocarbon sector. This positive development has allowed Colombia to avert an energy crisis and increase production from its modest hydrocarbon resources. This situation contrasts with Colombia's eastern neighbor's significant hydrocarbon endowment but whose uncertain fiscal regime and unattractive pricing formulas have led to insufficient supply of natural gas used for power generation and pressure maintenance in oil reservoirs. The former has led to frequent power outages and the latter to irreversible damage to oil producing reservoirs. 

The completed pipeline attempts to bring natural gas production from Colombia to its eastern neighbor, who financed the project. When announcing the pipeline, the investment was stipulated to be slightly more than $210 million. As the project progressed, the cost was updated to $330 million. Not surprisingly, final costs were disclosed to be more than $467 million, more than a 100% cost overrun. Notwithstanding the higher cost, the project still makes sense.

To conclude, the promise of the future reversal of gas flow is also uncertain; natural gas for the pipeline will likely only originate in Colombia for the foreseeable future. It is unfortunate that only a small portion of the vast natural gas resources of the "Gran Colombia" will be produced and eventually reach consumers.

Canada and Alberta Natural Resource Development Issues
Papers and presentations of the University of Alberta MBA Students - February 2007

In February 2007, CEE hosted a group of the University of Albert MBA students, specializing in Natural Resource and Energy, to Texas. The students visited with the CEE, and met with energy companies and law firms, visited the Railroad Commission of Texas and The University of Texas at Austin. As part of the visit, students prepared and presented their research papers on various issues of natural resource development in Canada, and particularly in Alberta. Papers and presentations slides are available for download below.

  • Canadian Petroleum Growth and Development
    Kaleem Shakir, Mohammed Riaz and Jacob Oommachan
    [paper] [presentation]
  • Alberta Royalty Structure: Overview and Challenges for the Future
    Jeff Shaughnessy, Jay Lines, Craig Simpson, Brad Wooley
    [paper] [presentation]
  • Mackenzie Valley Pipeline
    Nicole Hamm, Wilson Howe, Blair Jarvis, JohnPaul Portelli
    [paper] [presentation]
  • Water Use & Policy Challenges in Alberta Within the Context of Energy Development and Environmental Regulation
    Ernest Reason, Lingxiao Yang, Lisa Carey, Mengfei Zhao, Sorin Catalin Ciulei
    [paper] [presentation]
  • Nuclear Energy in the Oilsands: Part of the Solution, or the Problem?
    Jim Butler, Jason Hanzel, Greg Dearden, Aaron Rogers
    [paper] [presentation]
  • Canadian Renewable Energy Policy and the Evolution of Renewables in the Canadian Electricity Industry
    Sukhraj Batoo, Ginni Sangha, Gurpreet Purhar, Samir Rashid
    [paper] [presentation]
  • Project Management: Challenges & Lessons Learned
    Joseph Amalraj, Christine Hernani, Kelly Ladouceur, Aparna Verma
    [paper] [presentation]

Comment by Dr. Gurfinkel on the South American gas pipeline network project
Published in the Inter-American Dialogue’s Latin America Energy Advisor - January 31, 2007

Brazil is adding competing components to its portfolio of natural gas supplies: continued imports from Bolivia , expanded domestic production, future LNG import capability, and now a pipeline from Venezuela . The main issue will be the pricing mechanism for the pipeline imports, which in the absence of alternative markets is complex and usually the result of direct negotiations between the parties ( e.g. , Bolivia and Petrobras) ... From the perspective of Venezuela, the development of the resources associated with the Gran Mariscal Sucre project, destined only for domestic consumption, had proven impossible. The project is not attractive to prospective partners if LNG exports or other markets are not incorporated. However, the partnership to develop the resource between PDVSA and Petrobras, with each company owning its share of production, allows for the development of the resource for partial domestic consumption (in Venezuela 's interest) and 'cheap' natural gas that could fill the pipeline (in Brazil 's interest). Opting for a pipeline outlet is deemed to be better than not developing the resource, but definitely far from the best option. I believe that only Phase 1 could move forward, given that it makes sense for Brazil , it mostly uses existing rights of way, and the financial obstacle is surmountable. Extending the pipeline south is doubtful, since it further destroys economic value to Venezuela , and at $27.5 billion the financial hurdle is too great!