April 20, 2022 - The 4th Annual Denney L. Wright International Energy Tax Conference and the Houston Business and Tax Law Journal’s 22nd Annual Symposium daylong conference addressed as a key topic the energy crisis caused by the war in Ukraine. The topic featured three global experts: University of Houston Law Center Professor Julian Cardenas Garcia who specializes in transnational petroleum law and arbitration; David Blackmon an independent energy analyst and a frequent contributor at Forbes, based in Mansfield, TX; and Paola Rodriguez Masiu, head of market intelligence, crude and refined products for Spanish petroleum company, CEPSA.
The talk was designed to give an American, Eurasian, and Latin American perspective to demonstrate how the war that Russia has waged against Ukraine is impacting the energy sector around the world. Masiu, based in Madrid, said you don’t need to be an energy expert to see the volatility in the market, but that it’s not all due to the war. “You already have a very tight oil market driven by uncertainties regarding the Iranian sanctions, more recently, also by Venezuelan sanctions,” said Masiu.
Meanwhile in the United States, explained David Blackmon, the Biden Administration is searching for solutions to the energy crisis. “It has highlighted…the diminution of U.S. energy security, over the past few years,” said Blackmon. “Both as a result of the COVID pandemic and…some of the policies we've seen in this current administration.” Blackmon was referring to the Biden Administration’s focus on green energy, but he added, “no one's going to Venezuela or Saudi Arabia asking for more wind and solar.”
Producing more gas in the United States, Blackmon explains, is possible. “There's hundreds of years of known natural gas supplies…underground and in shale.” The challenge is these projects take time and he says that “Europe is going to have to find a way to replace a lot of that natural gas supply from Russia before next winter” if the war continues.
Professor Cardenas analyzed the Latin American energy market highlighting how high gasoline prices are negatively affecting Caribbean nations which previous benefited from PetroCaribe’s subsidies, as part of Venezuela’s petrodiplomacy. “Venezuela is no longer in the capacity to assists these 13 nations with gas discounts under current prices.” He also emphasized that the new scenario is an opportunity to Latin-American oil-exporting nations to rethink their recent hydrocarbons regulations that have failed to attract new investments, particularly in “Mexico, Venezuela and Ecuador”. In fact, he explained, “many of the countries that we have in the region have significantly declined [sic] oil production, such as Mexico and for sure Venezuela.” Only Brazil, Guyana and more recently Colombia has succeeded in attracting new investors, but the output of these projects is still years ahead”, said Cardenas.
Looking at the impact the war in the Ukraine has had on the global energy sector, the biggest takeaway from the panelists was that it comes down to economics. Masiu doesn’t think Europe should make any major decisions. “A lot of these contracts that Europe have with Russia are long-term contracts on very low pricing, and prices right now are anything but low,” said Masiu. “So, entering into negotiations with other countries…puts Europe in a very bad position because you obviously won't be able to negotiate.”
The daylong conference and symposium had over 200 attendees and included 27 different panelists. Other topics included: Mexico’s Current Tax and Energy Investment Climate; IRC Sec. 45Q and Carbon Capture Investments in the Energy Industry; The Digitization of Oil and Gas & Accompanying Data Privacy Compliance Considerations for International Investments in China and Brazil; Damn the Torpedoes and Full Speed Ahead: Brazil’s Energy Sector Stays the Course Despite Many Obstacles; Changing Energy Business Models / Investments During Energy Transition; and Tax Incentives to Transition to Electric Vehicles and EV Fleets – Comparing Australia, Canada, Europe & USA. For a full list of speakers, click here. The event has run for the last four years, and this year was sponsored by Exxon Mobil, Baker Hostetler, Bracewell, Holland and Knight, KPMG, Skadden, and White and Case LLP.
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