Latin Amer's Oil Prospects Good, But Challenging-Oil Executive

Tuesday, April 29, 2003 11:00 AM ET  

WASHINGTON, D.C. -(<a href=www.quicken.com>Quicken.com-Dow Jones)- The chairman of ChevronTexaco Corp. (CVX, news) said Tuesday the company is optimistic about future investment prospects in Latin America, but warned that key conditions must be addressed to enhance the possibility of further investments.

Speaking at a Council Of the Americas-sponsored conference at the U.S. State Department, David O'Reilly said that Latin America has 125 billion barrels of estimated oil reserves; and not only do new discoveries await, but also, thanks to technology, heavy oil can also be developed. But certain conditions must prevail before companies such as ChevronTexaco, which has $4 billion invested in the region, increase their investments.

Nationally and internationally recognized legal structures must be in place, economic structures must provide for a return on risk, and social structures must provide for the assurance of security to company employees and the broader society, O'Reilly said.

On specific countries, O'Reilly said, "if Argentina is to maintain investor confidence, it must not raise artificial barriers to trade and investments." It should rethink raising taxes on oil and other commodities exports, he said.

In Brazil, he said, local-contents requirements "must not endanger investments." He noted that ChevronTexaco's partners in many countries are local in any event and said that for one job created in the petroleum industry, an additional five jobs are generated in ancillary industries.

Turning to Venezuela, O'Reilly said that the new hydrocarbons law requiring the national oil company to take a 51% stake in new upstream oil projects denies the country access to new forms of financing.

Mexico's constitutional ban on foreign investment in the upstream industry severely limits Mexico's ability to offset declines in reserves, he said.

Given that the investments of the oil industry are long-term in nature and may take 20 to 30 years to mature, "we must have confidence in the long-term stability and growth in the region."

Free trade accords, O'Reilly noted, help to encourage investment and growth, which in turn raise the standard of living and lessen social inequality in countries. "That's why we support free trade agreements," as they accelerate economic reforms, he said.

-By Charles Roth, Dow Jones Newswires; 201-938-2226; charles.roth@dowjones.com

Dow Jones Newswires 04-29-03 1100ET