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Maritime Risk

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40 Maritime Professional 1Q 2011 belt. The (proposed) new contracts con- tain no provision for arbitrating the dis- putes. The 272 billion barrels of heavy crude oil that is thought to be contained in the oil sands of the Orinoco basin are an attractive proposition to multination- als and state oil firms alike.

Presumably, this is why the big boys are still at the table. Petróleos de Venezuela (PDVSA), the state oil company, has however postponed bidding for seven blocks in the Orinoco on three separate occasions. Local officials believe the region will ultimately yield 1 million barrels per day of synthetic oil.

FOLLOWING CLOSE BEHIND:

BOLIVARIAN CIRCLES

Regional political uncertainty is by no means confined to Venezuela, but the aggressive discourse used by Hugo

Chavez towards western powers only aggravates the perceived risk factor felt by international investors and oil com- panies alike. And, there is no reason to believe that the situation there will improve any time soon. Reportedly, at least two U.S. firms are also in jeopardy of having their fleet of oil rigs national- ized in a dispute over pending payments by the OPEC member's state controlled oil company PDVSA. Venezuelan Oil

Minister Rafael Ramirez said in June that the 11 idle rigs were being nation- alized to bring them back into produc- tion.

Ecuador poses similar problems for potential international investors.

President Rafael Correa recently warned private oil companies to sign new service-based contracts. Those that do not must leave the country.

Promising to enact changes to

Ecuador's hydrocarbon laws that would allow the government to nationalize oil fields if a private operator doesn't com- ply with local laws, the latest strife con- tinues an ongoing animosity with for- eign oil companies operating in

Ecuador.

Also underscoring Latin America’s apparent turn to the left, Bolivia has also been tinkering with its energy pol- icy. In 2009, Bolivian President Evo

Morales moved to nationalize his nation’s oil and gas reserves, ordering the military to occupy Bolivia’s gas fields and giving foreign investors a six- month deadline to comply with demands or leave. The directive sparked still more tension in the region and abroad, particularly for stakeholders from Brazil, Spain, and Argentina.

BRAZIL BECKONS

Conspicuously absent from what has come to be known simply as the

Bolivarian Group (Venezuela, Ecuador and Bolivia), Brazil´s more reasonable political climate promises an attractive investment opportunity for maritime and oil and gas operators. Although the previous administration and the demo- cratically elected version coming in near future both have leftist leanings,

Brazil by all outward appearances, also promises political and economic stabil- ity. Rejecting aggressive confrontation,

Brazil instead pursues a policy of nego- tiations which respect standard business practices. This includes the vitally important tenet of honoring current oil & gas contracts.

The rosy local business climate also comes with caveats. Recent alterations to the oil and gas production rules have changed from concession to a participa- tion-based scheme and placing national oil operator Petrobras as the sole opera- tor of the new pre-salt blocks. The next bidding round, which is to take place sometime in 2011, stipulates that

Petrobras will have a minimum 30% participation in new pre-salt plays and

EMERGING MARKETS

Why Incorporate a Brazilan

Shipping Co.? • Simple process and expedited incorporation. • No restriction to foreign shareholders and directors. • ANTAQ authorization requirements are easy to be met if investors/owners intend to pursue medium/long term business (equity/Brazilian flag vessel). • First priority to the resources of the

Merchant Marine Fund (attractive con- ditions up to 20 years repayment and good interest conditions). • Exclusive rights to own Brazilian Flag vessels and to charter in foreign ves- sels. • Use of the Brazilian tonnage to double its capacity and bring foreign vessels during construction (half after deliv- ery). • Local content requirement. • Brazil as an emerging economy with great potential in the shipping busi- ness (merchant vessels engaged in coastal navigation and international trade and in the offshore shipping due to the positive prospects for the pre- salt activities and long term charters linked to building program). (Source: Law Offices Carl Kincaid/Mendes

Vianna Advogados Associados)

Maritime Logistics Professional

Maritime Logistics Professional magazine is published six times annually.