Quito´s reality check on Doha

Sometimes you just have to tell it like it is. That´s what Colombian energy minister María Lorena Gutiérrez has done in the run-up to a 17 April meeting of oil producers in Doha.

A global oil production freeze aspired by Venezuela, Russia, Saudi Arabia and Qatar is “happening naturally,” so Colombia is “looking for other measures to stabilize oil prices,” Gutiérrez noted after a meeting of Latin American oil producers in Quito last week.

Ecuador, Opec´s smallest member, summoned Latin America´s oil producers to coordinate a regional stance on the freeze proposal that will be discussed by more than a dozen producers in Doha. 

The heavyweight at the Ecuadorean gathering was Venezuelan energy minister Eulogio Del Pino. A major proponent of the freeze proposal, Caracas is lobbying the region´s non-Opec producers to come to Doha as well. Like Venezuela, the region´s oil producers have been clobbered by the price rout.

More than two decades after Venezuela´s ill-fated opening to foreign oil companies, Del Pino can be excused for trying to change the subject. Production across the region is flat or declining, so a freeze to January levels for much of the region would paradoxically imply an increase in output. None of the producers is in a position to do this. Nowhere is this more evident than in Mexico, which participated in the Quito meeting as an “observer”.

But it was Brazil that last month raised the issue that explains why Latin America´s sub-salt giant was not in Quito last week:

“Brazil is not a member of Opec, and therefore cannot participate in any decision on Opec production freezing. Under Brazilian law and by contracts, the Brazilian government cannot interfere with the production rate of the contracted companies, and cannot impose production freezes.”

As was the case in Venezuela many years ago, it would be self-defeating if not contractually problematic for governments of non-Opec countries to tell private-sector oil producers to cut production. Brazil would alienate its foreign partners already wary of the country´s political turmoil. Colombia would shoot itself in the foot too. And Mexico´s nascent upstream opening would turn into more of a closure.

What really spoke volumes in Quito was the presence of Bolivia. A gas producer and pipeline exporter, Bolivia had no meaningful place at the table except to, well, fill a place at the table.

Venezuela says up to 20 countries will participate in the Doha meeting. However many countries turn up, the contradictions exposed in Quito suggest that the market impact of Doha could be fleeting.

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