energy by Institute of the Americas

www.thedialogue.org

May 17-21, 2010

FEATURED Q&A BOARD OF ADVISORS Jeffrey Davidow President, Institute of the Americas

James R. Jones Co-chair, Manatt Jones Global Strategies LLC

Ramon Espinasa Consultant, Inter-American Development Bank

Jorge Kamine Counsel, Skadden, Arps, Slate, Meagher & Flom LLP

Luis Giusti Senior Adviser, Center for Strategic & International Studies

Larry Pascal Partner, Haynes and Boone

Everett Santos Jonathan C. Hamilton President, DALEC LLC Partner, White & Case LLP Kirk Haney CEO, SG Biofuels Raul Herrera Partner, Corporate and Securities Practice Arnold & Porter LLP

R. Kirk Sherr CEO, Arrakis Geodynamics Roger Stark Partner, Curtis, Mallet-Prevost, Colt & Mosle LLP Mark Thurber Partner, Andrews Kurth LLP

William Irwin Manager, International Government Affairs Roger Tissot Chevron Corporation Associate Consultant, Gas Energy Latin Paul Isbell America Director, Energy Program Max Yzaguirre Elcano Royal Institute Chief Executive Officer, The Yzaguirre Group

What Lessons Can Latin America Learn From the Gulf Oil Spill? In the wake of a massive oil spill in the Gulf of Mexico, Brazil's National Petroleum Agency (ANP) is requiring all oil companies operating in the South American country to review their emergency plans. In addition, the ANP and state oil company Petrobras sent specialists to monitor cleanup efforts underway in the gulf. Could an incident similar to gulf oil spill happen in Brazil or elsewhere in Latin America? Have oil companies and regulators like the ANP taken the necessary steps to prevent such an occurrence? How will the lessons of the BP spill impact offshore oil development in Brazil and other places in Latin America?

Jeremy Martin, director of the energy program at the Institute of the Americas: "As of yet, the gulf oil spill has not caused any major rethinking about offshore drilling among Latin American energy leaders. At last week's annual La Jolla Energy Conference, the incident in the gulf and its implications were prime discussion topics. Ongoing containment efforts and longerterm impacts were clearly on the mind of attendees. Most agreed that the ramifications are still unclear, though signs emerging in the United States point to increased oversight, higher insurance costs and perhaps a step back from opening new offshore plays. A speaker from Statoil spoke of the reverberations in Norway, where the

accident is causing that nation to take a closer look at new offshore plays. There was a general consensus that once a better sense of what occurred and what worked to solve the problem are available, there will be important lessons learned that can be applied across the region from the deep waters off Brazil to the Gulf of Mexico. Some noted that much like Brazil's offshore industry developed and implemented enhanced safety measures in the wake of the 2001 P-36 platform disaster in its waters, so will innovation and advances Continued on page 6

CEO: Petrobras May Postpone Share Sale if Markets Worsen CEO JosĂŠ Sergio Gabrielli said a $25 billion share offering to accompany a government recapitalization of Petrobras is currently on track for July or August, but that it could be postponed if equity markets worsen. See story on page 2. File Photo: Petrobras.

Inside This Issue FEATURED Q&A: What Lessons Can Latin America Learn From the Gulf Oil Spill? ..............1

Eskenazi: Repsol Planning to Raise $3 Bn in YPF Share Sale.............................2

U.S. Firm and Spain's Gamesa Seal 10-Year Deal for Mexico Wind Farms.................3

Peru Resumes Oil Concession Bidding Process After Scandal............................2

Report: Ecuador, China Agree on Terms for $2 Billion Hydro Dam ...........................3

Jamaica Gets OAS Help for Biofuels Development .....................................3

Petrobras May Postpone $25 Billion Share Sale if Markets Worsen: CEO...................2

Spain's Iberdrola to Invest More Than $1 Billion in Brazil Through 2012................3

Political and Economic News: Mexico, Haiti, Venezuela and more.................4-5

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Inter-American Dialogue’s Latin America Energy Advisor

ENERGY SECTOR BRIEFS Chilean Fuel Distributor Copec Buys Minority Stake in Terpel

Chilean fuel distributor Copec last Friday gained a foothold in the Colombian market by purchasing a minority stake in Bogotá-based Terpel for $240 million, the firm said in a note to Chile's securities regulator. Copec bought a 47.2 percent share of private Colombian firm Proenergia, which controls Terpel's parent company, and plans to buy an additional 5 percent from Proenergia shareholders to gain full control of Terpel. Guatemalans Protest 30 Percent Electricity Rate Hike

Protesters in Guatemala blocked highways and demonstrated in the capital on Wednesday in opposition to a 30 percent increase in electricity rates that went into effect May 1, Agence-France Presse reported. While indigenous and rural groups blockaded roads near the borders with El Salvador and Mexico, police in Guatemala City used tear gas to break up a crowd in the city center, according to the report. The protesters have called for the nationalization of power distribution, which is controlled by Spanish companies Iberdrola and Unión Fenosa. Brazil's Eletrobras Sees Fivefold Profit Increase in for Q1

Brazilian state utility holding company Eletrobras said Monday its first-quarter net profit increased fivefold to 519.8 million Brazilian reais ($U.S. 287 million), up from 101.3 million last year, due to currency gains, Bloomberg News reported. The company reported a 228 million-real gain in the first quarter, compared to a 199 millionreal loss the previous year. Sales from the Itaipu hydroelectric dam are denominated in dollars. Copyright © 2010, Inter-American Dialogue

Oil & Gas News Peru Resumes Oil Concession Bidding Process After Scandal Peru's government on Friday restarted a bidding process for 25 oil blocks nearly two years after bidding was suspended in the midst of a scandal over the awarding of contracts to a Norwegian company, EFE reported. "It's very important to resume the international auction after the difficult moments we endured," Daniel Saba, president of state-owned Petroperu, told the wire service." Twenty-four of the exploration blocks are in the MarañónUcayali river basins and the Madre de Dios region in the southwestern part of the country. The other block is in an area on the border of the northwestern regions of Lambayeque and Piura. The bidding process will end Oct. 14 when the government will award concessions. The bidding Saba process was suspended File Photo: Petroperu. last year after the release in 2008 of recorded telephone conversations in which officials allegedly discussed bribes to favor Norway's Discover Petroleum. The company has denied any wrongdoing. People with ties to the ruling APRA party were implicated in the scandal, which remains under investigation. The scandal led President Alan García's entire cabinet to resign. In related news, Houston-based BPZ Energy Resources said Friday it signed a contract with Petroperu to deliver 400,000 barrels from its Albacora field in northwest Peru. The company will deliver the crude to Petroperu's Talara refinery 100 miles south of Albacora and has already sent 28,500 barrels, according to a press release.

Petrobras May Postpone $25 Billion Share Sale if Markets Worsen: CEO Brazil's state-controlled oil company Petrobras could postpone a planned sale of $25 billion in shares if equity markets

May 17-21, 2010

worsen, CEO José Sergio Gabrielli said Wednesday. "If the crisis is as it is now, we can go on," Gabrielli said in an interview with Bloomberg Television. "If it goes deeper and spreads over more than it is now, then we have to consider." The share sale would be the Western Hemisphere's largest in at least a decade. The company has been planning to sell the shares in July or August. Petrobras last Friday said its first-quarter net profit increased 23 percent from last year to 7.7 billion reais ($U.S. 4.3 billion) on higher oil prices, increased exports, a domestic sales recovery and a stronger real. Earnings before interest, taxes, depreciation and amortization rose 12 percent to 15.8 billion reais. Oil and gas production rose 3 percent in the first quarter, during which Petrobras made investments of 17.8 billion reais.

Eskenazi: Repsol Planning to Raise $3 Bn in YPF Share Sale Spanish oil company Repsol YPF plans to raise as much as $3 billion by selling a 20 percent stake in its Argentine unit, YPF, Bloomberg News reported Wednesday, citing YPF chief executive Sebastián Eskenazi. In an interview with Bloomberg News, Eskenazi said the Madrid-based company could sell 15 percent of YPF in the United States and 5 percent in Argentina in an offering early as July. YPF later confirmed Eskenazi's statement, but

Eskenazi said Repsol could sell 15 percent of YPF in the United States and 5 percent in Argentina in an offering early as July. Repsol declined to comment, Dow Jones reported. Eskenazi's family owns a 15.4 percent stake in YPF through energy company Grupo Petersen, while Repsol owns 84 percent. Eskenazi said his holding company could exercise its option to increase its share in the company to 25 percent, Bloomberg News reported. Repsol is aiming to raise money to help fund its offshore holdings in Brazil's Tupi field, but has postponed an offering several times Page 2 of 6

Inter-American Dialogue’s Latin America Energy Advisor

due to market conditions. Repsol CEO Antonio Brufau said April 29 the company wants to sell its stake in YPF "sooner rather than later."

Power Sector News Spain's Iberdrola to Invest More Than $1 Bn in Brazil Through 2012 Spanish power company Iberdrola said Wednesday it will invest $1.13 billion over the next two years in Brazil. Much of the company's focus will be on new power plants—it expects to bring onstream an additional 710 megawatts of hydro capacity by 2013 in Brazil—and investments in expanding its electricity distribution infrastructure, Iberdrola said in a press release. The Spanish firm has been present in Brazil since 1997 through its 39 percent stake in Neoenergia, along with local partners Banco do Brasil, with 12 percent, and Previ, with 49 percent. The company also operates in Brazil through Iberdrola Renovables, which has a 50 megawatt wind farm in Rio do Fogo. Latin America has been a big part of Iberdrola's international expansion over

Rio do Fogo wind farm File Photo: Iberdrola.

the past two decades, with a total of $11.2 billion invested in the region. In all, Latin America contributed 13 percent of the group's earnings before interest, taxes, depreciation and amortization and 24 percent of net profit last year.

Report: Ecuador, China Agree on Terms for $2 Billion Hydro Dam Ecuador and China have reached a deal to finance a $2 billion hydroelectric plant in the Andean country, Ecuadorean state media reported Thursday. Officials from China's export-import bank traveled to Ecuador last week to hammer out the specifics of a new credit agreement, Chinese diplomat Gu Jiafeng told news agency Andes. The state news service did not reveal the details of the deal. Negotiations over the dam had been suspended after no agreement was reached before Ecuador's March 15 deadline. Next week, Strategic Sectors Minister Jorge Glas and Finance Minister Patricio Rivera will lead an Ecuadorean delegation to China to sign the final version of the credit agreement, according to the report. The Coca Codo Sinclair hydroelectric dam would have a generating capacity of 1,500 megawatts and enable Ecuador to save an estimated $2 million in energy imports per day. The Export-Import Bank of China would finance 85 percent of the project, while the remaining 15 percent would be financed by the Ecuadorean government. The project's chief contractor is China's Sinohydro. developing in Mexico's Baja California peninsula. The U.S. company plans to spend as much as $1 billion and buy as many as 500 turbines from Gamesa, the San Diego Union-Tribune reported. The agreement could eventually cover projects totaling 1,000 MW of wind production that Cannon says are at various stages of development. "We envision this as a major crossborder project that can stimulate the region's economy and provide enough clean energy for over 250,000 households," Cannon executive Gary Hardke said in a statement. The first wind farm, a 140 square-mile project called Aubanel, is expected to get off the ground in the next year and would include 70 MW to 100 MW in phase one. The project would expand to 500 MW in capacity within the next three to four years. Aubanel is located near the town of La Rumorosa, approximately 60 miles east of San Diego and 15 miles south of the U.S.Mexico border. Gamesa says it has installed over 18,000 MW of wind turbine capacity worldwide. San Diego-based Cannon Power Group says it has developed more than 30 utility-scale wind energy projects in the United States, India, Switzerland, Spain, Italy, Turkey, Greece and Croatia.

U.S. Firm and Spain's Gamesa Seal 10-Year Deal for Mexico Wind Farms

Biofuels News

Spain's Gamesa said Tuesday it signed a 10-year exclusivity agreement with U.S.based Cannon Power to supply all of the wind turbines installed at sites Cannon is

Jamaica Gets OAS Help for Biofuels Development

May 17-21, 2010

Jamaica's energy and mining minister

said Wednesday the launch of a new biofuels program in partnership with the Organization of American States marked a "milestone" in securing the country's energy future. "Today we have achieved another milestone that will advance the operationalization of the National Energy Policy 2009-2030 and contribute to the long term sustainability of biofuel development in Jamaica," Energy and Mining Minister James Robertson said at the program's Robertson launch in Kingston, Photo: Jamaican according to official Government. media. Under the initiative, which is part of the U.S.-Brazil Bilateral Memorandum of Understanding, the OAS is providing technical assistance to "establish a strong legal and regulatory framework for a vibrant liquid biofuels industry, facilitate the sharing of perspectives among the respective stakeholders and advise on appropriate technologies," the multilateral organization said in a press release. No further details were given. Robertson said Jamaica had already taken some of the necessary steps to bolster biofuels development, including the state's divestment from the sugar cane industry and sugar estates and the current production of sugar-cane ethanol. The island is currently home to a $10 million ethanol plant that produces exports to the United States using Brazilian feedstock. Jamaica's 2009-2030 Page 3 of 6

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energy plan calls for the diversification of energy sources away from petroleum toward a greater reliance on natural gas and, later, renewable energy, which is supposed make up 20 percent of its energy mix by 2030. [Editor's note: See related Q&A on biofuels in the Caribbean in the Jan. 19-23, 2009 issue of the Energy Advisor.]

Political News Calderón Begins State Visit to U.S. With Criticism of Immigration Law Mexican President Felipe Calderón began a two-day state visit to Washington Wednesday by criticizing a controversial Arizona law aimed at cracking down on illegal immigration. Among the provisions of the law, which Arizona approved last month, is a requirement that local police check the immigration documents of anyone suspected of being in the country illegally. Calderón on Tuesday said the law was discriminatory and that Mexico would reject any attempt to "criminalize

(L-R) First Ladies Margarita Zavala of Mexico and Michelle Obama of the United States, Presidents Calderón and Obama Photo: White House.

migration," the Associated Press reported. Many immigrants, "despite their significant contribution to the economy and to the society of the United States, still live in the shadows, and occasionally, as in Arizona, they even face discrimination," Calderón said alongside U.S. President Barack Obama at the White House. Obama also criticized the Arizona law and said it showed the need for a federal overhaul of immigration policy. "In the United States of America, no law-abiding person—be they an American citizen, a legal immigrant, or a visitor or tourist Copyright © 2010, Inter-American Dialogue

Advisor Q&A Is BNDES Crowding Out Private Infrastructure Lending? Excerpted from the May 18 issue of the Dialogue's daily Advisor A special report in the Financial Times on May 6 highlighted Brazil's huge infrastructure needs, especially as the country prepares to host the World Cup and the Olympics later this decade. Traditionally, the Brazilian development bank, known as BNDES, has played a central role in infrastructure financing, with some critics charging that the publicly owned bank crowds out private financing. Does Brazil's current infrastructure push leave enough room for both public and private sources of financing? What are the positives and negatives of BNDES playing such a large role in infrastructure finance?

Norman Anderson, president and CEO of CG/LA Infrastructure in Washington: "BNDES is one of the great institutional successes in modern Brazil. Last year, BNDES disbursed nearly $25 billion into Brazilian infrastructure projects—in a year in which financing for projects had completely dried up around the world, especially in Latin America. This is greater than seven times the $3.4 billion disbursed in 2003. This support for the Brazilian economy was critical, a huge accomplishment. Today, BNDES more closely resembles a national infrastructure bank along the lines of the European Investment Bank, or the National Infrastructure Bank proposed by President Obama—a strategic institution, pushing the country forward. If we are moving toward a new model of pub-

from Mexico—should ever be subject to suspicion simply because of what they look like," said Obama. Supporters of the Arizona law argue it is needed to fight illegal immigration because the federal government has not adequately addressed the issue. Calderón and Obama also said they would work together to fight drug traffickers, protect the environment and aid economic growth. In joint statement,

lic leadership in infrastructure project development, then BNDES is a good model for other emerging markets. Where does infrastructure project expertise, financing, leadership and management come from in the smaller Latin American countries? The issue of crowding out, and the issue of Brazil's enormous infrastructure needs are separate. Brazil currently lacks the institutional capacity to create the kind of project pipeline required for a large infrastructure build. Rebuilding this machinery—rebuilding, for example, capacity in the Ministry of Planning—should be one of the key themes of the current election campaign. Without a strong public sector, private-sector risk is too high, financing costs go through the roof and projects don't get built on time and on budget. If Brazil is going to advance in terms of global competitiveness, the country needs to invest $90 billion per year in infrastructure over the next 10 years. To do that, Brazil requires a competent, capable, public sector, and BNDES is a great starting point. If Brazil can reinject expertise into the public sector, then there will be a crowding-in problem, with everyone competing in a sound environment to finance great projects."

The Advisor welcomes reactions to the Q&A above. Readers can write editor Gene Kuleta at gkuleta@thedialogue.org with comments.

the two presidents said they would seek a "moratorium on [oil] exploitation activities along the maritime boundary in the Western Gap in the Gulf of Mexico" due to the recent BP Deepwater Horizon oil spill. [Editor's note: See Q&A on page 1.] During a speech at the U.S. Chamber of Commerce, Calderón said strengthening the economic partnership between the United States and Mexico is the best way Page 4 of 6

Inter-American Dialogue’s Latin America Energy Advisor

for the two countries to compete with Asia and the European Union. Obama also hosted Calderón Wednesday night at the White House at the second state dinner of his presidency. The Mexican leader addressed a joint session of Congress Thursday.

Haitian President Vows to Leave Office When Term Ends Haitian President René Préval vowed Tuesday to leave office next Feb. 7, the day his term expires, rebuking opponents who argue he is using the country's devastating Jan. 12 earthquake to remain in power, the Associated Press reported. "This is the last May 18 I will spend with you as president," Préval told a crowd of thousands in the seaside town of Arcahaie, the AP reported. "I will go and my heart will be calm." Préval earlier this month issued a decree for him to temporarily remain in Préval power after his term is File Photo: Haitian slated to end if the Government. country's presidential election is not held later this year as scheduled. Electoral officials in Haiti are grappling with the destruction of their headquarters, records and polling places in the earthquake, which is feared to have killed more than 230,000 people. The decree sparked protests in Port-auPrince. After the quake, Haiti's government canceled a legislative election that had been scheduled for last February.

Economic News Venezuela's Chávez Accuses Brokerages of Committing 'Fraud' Venezuelan authorities have arrested the directors of two brokerages, Positiva Sociedad de Corretaje de Titulos de Valores and Ban Valor Casa de Bolsa in an investigation into foreign currency regulations, Bloomberg News reported today. President Hugo Chávez on Wednesday accused brokerages of comCopyright © 2010, Inter-American Dialogue

mitting fraud in the currency market and attempting to weaken Venezuela's currency to 10 bolívars per dollar. During a speech on state television, Chávez said he will ask the United States to provide information on potential money laundering in the unofficial currency market after Venezuela's finance minister, Jorge Giordani, said drug proceeds may be involved. Venezuela's government restricted trading of dollar assets on Tuesday. Brokerages were not able to prove the source of funds in currency transactions and were allowing capital flight, said Giordani. A representative of the U.S. government said the United States will work with Venezuela in investigating any potential illegal activity. "The U.S. is always willing to cooperate with the Venezuelan government on issues of mutual concern," Robin Holzhauer, a spokeswoman at the U.S. Embassy in Caracas told Bloomberg News in an interview.

Peru's Economy Grows at Fastest Rate in 17 Months Peru's economy, the sixth-largest in Latin America, grew at its fastest pace in 17 months in March as domestic demand fueled the country's manufacturing and construction sectors, the government's statistics agency said Monday, Bloomberg News reported. In March, gross domestic product increased 8.8 percent from March 2009. In February, GDP grew 5.9 percent year-on-year. Strengthening internal demand has led Peru's economy to rebound from the global economic crisis. To counter inflation, Peru's central bank on May 6 increased its benchmark interest rate a quarter point to 1.50 percent. Peru's manufacturing, construction and retail sectors contributed 5.2 percentage points of March's 8.8 percent growth. Construction and manufacturing each experienced their sharpest increases since April 2008, with gains of 24.1 percent and 15.1 percent respectively. In March, Finance Minister Mercedes Aráoz said private investment is likely to grow by 15 percent this year. The government expects 5.5 percent GDP growth this year and inflation of 2 to 2.5 percent, said Aráoz.

May 17-21, 2010

POLITICAL & ECONOMIC BRIEFS Iran Agrees to Nuclear Swap Deal in Talks With Brazil, Turkey

After talks with Brazil and Turkey, Iran agreed Monday to send about half of its uranium to Turkey in return for processed nuclear fuel rods processed by Russia and France for use in medical research. Despite the swap deal, the Obama administration announced Tuesday that the United States and major powers including China and Russia had agreed to impose new U.N. sanctions on Iran over its nuclear program. [Editor's note: See related Q&A in the May 20 issue of the daily Advisor.] Central American, E.U. Leaders Agree to Trade Deal

Leaders from Central America and the European Union agreed Tuesday to a free-trade agreement, but the accord may not be implemented until the end of this year at the earliest, The Wall Street Journal reported. The agreement was reached during a summit of European and Latin American leaders in Madrid and cuts tariffs on imports from Central America. Both sides will eliminate nontariff barriers on industrial goods and Central America will lift tariffs on European cars. Dominican Ruling Party Sweeps Election Amid Violence

The party of Dominican President Leonel Fernández had a strong showing in the May 16 legislative and municipal elections, winning 31 of 32 Senate seats amid isolated incidents of violence that killed at least two people, Agence FrancePresse reported. Fernández's Dominican Liberation Party won 90 municipalities compared to 59 for the opposition Dominican Revolutionary Party.

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Inter-American Dialogue’s Latin America Energy Advisor Featured Q&A Continued from page 1 come from the current calamity. Putting the best face on a difficult situation, government officials and industry representatives alike sense that the gulf mishap holds enormous potential to provide critical lessons for ultra-deepwater exploration and production safety and environmental stewardship. Others noted that for what is still a nascent industry, the post mortem from the Deepwater Horizon accident should be fully seized by the region's offshore industry. The dispatch of a team from ANP and Petrobras in order to monitor and gain firsthand insights was cited as one example."

countries share the waters of the Gulf of Mexico, and all are affected by any damage to their shared marine environment. For Mexico, there are lessons to be learned from the Macondo calamity that were not derived from the blowout at Pemex's exploratory well IXTOC-1, which released some 3.5 million barrels of oil from June 1979 to March 1980. The first lesson for both countries is in relation to government oversight of offshore operations: Best practices are to be found in the United Kingdom, Norway and Australia, not in the United States. Global public opinion is watching to see how the United States responds to what is, from all appearances, an offshore regulatory system that, in regard to over-

Latin America Energy Advisor is published weekly by the Inter-American Dialogue, Copyright © 2010 Erik Brand General Manager, Publishing ebrand@thedialogue.org Gene Kuleta Editor gkuleta@thedialogue.org Matthew Schewel Reporter, Assistant Editor mschewel@thedialogue.org

Inter-American Dialogue: Michael Shifter, President Peter Hakim, President Emeritus Katherine Anderson, V.P., Finance & Administration

John Albuquerque Forman, president of J Forman Consultoria in Rio de Janeiro and former ANP director: "In Brazil, offshore activities are regulated by federal law and monitored by the Ministry of Environment through Ibama, the environmental protection agency. The regulation in place calls for the existence of facilities along the coast that can react to any incident or accident in less than 24 hours. Apparently, the accident in the gulf was due to human failure and the facilities to respond were not in place. Although it might sound strange, the natural oil seeps that exist in the gulf have contributed more oil to the sea; satellite images of the Cantarell field in Mexico show this phenomenon. Of course there will be a lot of discussion on the matter, as there are many NGOs and media outlets that want to interrupt all and any activities of the oil industry. Time will tell, as a good part of the oil spilled will naturally disperse and will be part of the nourishment chain of marine organisms. The problem exists when currents bring the oil onshore and damage the coast."

George Baker, publisher of Mexico Energy Intelligence: "The lessons that should be derived from the yet-uncontrolled oil spill at BP's Macondo Prospect have importance for Mexico and Cuba as much as for the United States. All three

Genaro Arriagada, Senior Fellow

“ Best practices are to be

found in the United Kingdom, Norway and Australia, not in the United States.

”

— George Baker

Joan Caivano, Director, Special Projects Dan Erikson, Senior Associate, U.S. Policy Paul Isbell, Visiting Senior Fellow Claudio Loser, Senior Fellow Nora Lustig, Senior Fellow Manuel Orozco, Director, Remittances and Development Program Tamara Ortega Goodspeed, Senior Associate, Education

sight, is deficient, not to say corrupt. Critics in the United States are faulting the practice of self-certification: Instead of verifying compliance by its own inspections, the government's Minerals Management Service merely requests companies to certify that compliance has occurred. In Mexico, there has never been an upstream regulator with a mandate to administer federal lands, collect royalties and regulate practices of industrial safety. But one of the Macondo lessons is that this model has inherent flaws. A political conundrum that has bothered theorists for millennia is captured in a single question: Who guards the guards? This question, recalibrated to the oil industry, reads thus: Who oversees the regulators?"

The Energy Advisor welcomes responses to this Q&A. Readers can write editor Gene Kuleta at gkuleta@thedialogue.org with comments.

Marifeli Pérez-Stable, Senior Fellow Jeffrey Puryear, Vice President, Social Policy Viron Vaky, Senior Fellow

Subscription Inquiries are welcomed at freetrial@thedialogue.org Latin America Energy Advisor is published weekly, with the exception of some major US holidays, by the Inter-American Dialogue 1211 Connecticut Avenue, Suite 510 Washington, DC 20036 Phone: 202-822-9002 Fax: 202-822-9553 The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily represent those of the publisher. The analysis is the sole view of each Advisor and does not necessarily represent the views of their respective employers or firms. The information in this report has been obtained from reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have any questions relating to the contents of this publication, contact the editorial offices of the Inter-American Dialogue. Contents of this report may not be reproduced, stored in a retrieval system, or transmitted without prior written permission from the publisher.

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