Moderator: Greetings to everyone from the U.S. Department of State Media Hub of the Americas in Miami, Florida. I would like to welcome our participants who have dialed in the United States and across the region. This is an on-the-record briefing with Francis Fannon, Assistant Secretary of the Bureau of Energy Resources. Assistant Secretary Fannon will discuss his recent travel to Latin America to advance energy security and the importance of reliable energy partnerships in the Western Hemisphere.
We are pleased to offer simultaneous interpretation in Spanish for this briefing. I request everyone to keep that in mind and speak slowly. I’ll now turn it over to Assistant Secretary Fannon for his opening remarks.
Assistant Secretary Fannon: Yeah, thank you, Christina. Hello, everyone. Good afternoon. It’s great to be with you. As you may be aware, we work on the area where energy issues are really an extension of broader foreign policy matters. It was a really good trip. I just returned recently from visiting Brazil, Chile, and Ecuador on a variety of energy and resource-related issues, to advance energy resilience and energy security and also cooperation in the region.
One of the points here was really to see the impact that the COVID pandemic has had on the countries. The region, according to IMF, was projected to have kind of a flat or maybe marginal increase in growth pre-pandemic but now is projected to have close to a 9 percent contraction. This is creating a significant drag on economies around the world, of course – the COVID pandemic – but it has an acute impact on our own hemisphere.
But we believe that energy, given that it’s important to driving economies, to fueling progress and development, will be a critical component of recovery coming out of COVID, and that certainly was the message that I received and the intent of the governments with whom I met in the region.
During my trip we also – was keen to speak about creating a welcoming business investment climate, one that’s based on free market principles, transparency, and fair procurement practices. I was pleased to have partners in the same kind of ideas in all of the countries. It is especially important now when countries face significant economic challenges that they maintain those shared principles so that they can ensure that the type of investments that they do get are ones that respect values.
And while I was in – I also spoke to the Chilean Mining Conference EXPOMIN while I was in the region, where I had the opportunity to talk about the importance – the United States was a guest country at the event, and I was pleased to represent the United States there, where I spoke about the importance of minerals to the energy transition and the increased demand for renewables all around the world will create that exponential growth in demand for minerals, and to encourage countries to adopt the best practices so that those countries are – those countries would be – the market would give those countries a premium to select from.
In Brazil I met with the Ministry of Mines and Energy and discussed the Brazilian Government’s initiatives to create a competitive market for natural gas. The United States is supporting their work by sharing regulatory best practices at both the federal and the state levels. We anticipate that Brazil’s natural gas market reforms will create new opportunities for U.S. investment.
In my meetings with the government, we also discussed and jointly announced the establishment of a U.S.-Brazil Critical Minerals Working Group. This working group is – intends to advance bilateral technical cooperation, improve critical mineral security, and promote responsible mining and processing, and also increase U.S.-Brazil interconnectivity throughout the supply chain.
In the capital in Brasilia, I met with the Brazilian Miners Association to talk about responsible mining practices and ensure that those, again, responsible miners are – and processors are fully supported and recognized.
In conversations with Petrobas we discussed the company’s – how they’re responding to the current challenges and [inaudible] to transform itself and increasingly market-oriented, and they’re selling a variety of – divesting a variety of assets, from refining to mid-stream pipelines, and creating – which is also creating that space for a competitive natural gas market in Brazil.
In Ecuador, I met with the Ministry of Energy and Non-Renewable Natural Resources. We had a bilateral energy dialogue in July, and so this meeting in person built on that strong relationship that we had already built up to advance our shared objectives to strengthen the investment climate for energy infrastructure projects in Brazil.
I met with the national electricity company to discuss our – State Department and my bureau’s – continued technical support for Ecuador’s tendering process to attract investment in power projects, including in wind, solar, and natural gas.
Throughout the course, I always make it a point to meet with U.S. companies, and all of these countries, they say they want more U.S. investment, and so we talked about how to have more of it. I was pleased to meet with some real standout companies such as Virginia-based AES, who’s investing in both Brazil and in Chile. In fact, in Chile, AES has become the largest power producer in less than 20 years. They’re across the value chain and they’re expanding in Brazil, in particular in the renewables context.
North Carolina-based Albemarle is one of the world’s largest lithium producer, which is a critical mineral that goes into batteries, source technologies. They’re looking to expand. Alcoa is also – has really state-of-the-art, sustainable mining practices. We met with a variety of U.S. oil service firms in Ecuador as well and talked about ways that, in Minister – Ecuadoran Minister Ortiz’s description, they are in his plan to de-monopolize the energy sector from public control.
Overall, I am really pleased with the successes accomplished so far in Latin America through our work under ERGI, the Energy Resources Governance Initiative. And I was struck to the extent that there is such broad agreement among countries that we need to expand our cooperation on energy minerals in particular. Through ERGI, we have a framework to engage with countries to continually improve responsible mining, help them identify and close the gap between ambition and implementation, and attract investment.
We were pleased by the accomplishments on this trip and established frameworks for increased cooperation moving forward and look forward to continuing the work. With that, why don’t I pause for your questions. Thank you so much.
Moderator: Thank you. We will now begin the question-and-answer portion of today’s call. For those on the English line asking questions, please state your name and affiliation and limit yourself to one question related to the topic of today’s briefing. If you submitted your question in advance, I have incorporated them into the queue.
Our first question will go to Denis Chabrol, from News-Talk Radio Guyana: “What specific roles does the United States envisage Guyana and Suriname playing in the Caribbean energy security and oil diplomacy?”
Assistant Secretary Fannon: Yeah, thank you for the question. I did not travel to those countries on this trip, but I did travel to both countries, joined Secretary Pompeo recently to both countries, in really what was an historic trip, I believe the first time a sitting Secretary of State visited them.
We see that Suriname sees – looks next door at Guyana’s very significant production, which is growing and will grow significantly. I think they’re currently producing about 100,000 barrels per day and in a few years will be producing upwards of 750,000 barrels per day. This will be transformative.
The United States recognizes that and wants to be supportive. We have provided in the past support for Guyana, but when we were with the Secretary we made an announcement for additional support, and in particular to ensure that the oil production is done to meet the best environmental protections and safety standards to address any kind of sell issues should they ever occur. And so we announced some cooperation on that, and the government was pleased to receive that support.
In Suriname, we are looking to help them develop their sector as it’s still in a little bit earlier stage than Guyana. But we think that they are absolutely important, and we want to ensure that these resources are developed in a way that also provides inclusive growth for all. I think they are at the early stages and they have a great opportunity to chart a course that really does achieve those objectives. Thank you.
Moderator: The next question will go to Carla Angola, from EVTV.
Question: Good afternoon. Carla, Angola EVTV, Miami. My question is: Could you explain in detail the effect of the sanctions on PDVSA vis-à-vis the main oil company in Venezuela, since they were decided? How effective have they been in preventing the Maduro regime from continuing to use those profits to finance illicit activities?
And if it has been enough to prevent it from seeking to evade sanctions with known U.S. companies, if you can please put this in context with some figures? But I would also like you to explain to Venezuelans why these sanctions would not be the reason why they do not have access to gasoline, or why these sanctions are not the cause of the humanitarian crisis that they are experiencing. Thank you so much.
Assistant Secretary Fannon: Right, thank you. So I manage the energy sanctions with – in partnership with other entities such as Department of Treasury, as you’d expect. The target of the sanctions on oil was because Maduro, the illegitimate Maduro regime, has used oil revenues to fund his own kleptocracy and those of other malcontents in the region. We targeted the oil because of the malign activity he seems to be — we’ve been focusing on, and we’ve managed to take hundreds of thousands of barrels of oil off the market that he was using to advance his illegitimate needs.
You noted U.S. firms. And you’re right; the target was to ensure that Maduro is unable to continue to profit from that, and the extent to which any of the U.S. firms who have had historic relationships there. But unfortunately, Maduro’s, his behavior and that of his regime has helped to destroy which had been one of the shining examples of a state company, which was – had been PDVSA, but he has helped to run that company into the ground.
Our sanctions ensures that no – seeks to ensure that no company is able to profit off of the pain that Maduro is inflicting on his own people, and those sanctions are continuing all of the time. The cause of the plight of Venezuelans is Maduro. It’s not our sanctions. And we heard that loud and clear when I was with Secretary Pompeo and we visited a camp facility on the border with Brazil that was an intake facility of the Venezuelan refugees, who were looking just to provide a better life for them and for their families, but they had to leave Venezuela because of Maduro.
We are going to continue on the campaign. We are on the right side, and we certainly heard support for the position throughout the hemisphere. Thank you.
Moderator: Our next question comes from Anna Ramdass from Trinidad Express Newspaper. The question is: “Is Trafigura sanctioned by the U.S.? And what will be the risk if this company is involved in oil refining in Trinidad and Tobago?”
Assistant Secretary Fannon: I’m afraid I’m going to have to defer to the Department of Treasury in terms of identifying certain – which company is sanctioned and what’s not. There’s quite a list, and I don’t want to provide any misinformation.
Moderator: Our next question comes from Joel Maldonado from Publinews Guatemala. The question is: “What type of energy projects would you be promoting for development in Guatemala?”
Assistant Secretary Fannon: I don’t have the specifics. One, I will just point to something that I see is happening really globally, and that is the desire and the recognition that creating regional energy markets can help countries do two things. First, it can help attract investment, because where you might have a small country who may not be a particularly attractive investment option on its own, by creating a broader market through collaborating with neighbors it creates a more investable proposition for a best-in-class kind of investor.
And the second would be, in order to do that would require, as I described in the three countries that I just visited, an increasing orientation toward the market and having open, transparent procurement processes. Again, you’re creating that signal that you’re welcoming best-in-class types of investors. So that would be something that I would encourage, but that requires the government to be a partner in that and to create those enabling environments and conditions.
On my trip, I was pleased to see and help to advance this creation of more of a regional energy market. And we see signs of that, see signs of it in other parts of the world and see signs of it, in particular, in [inaudible] region, whether it’s increasing interest in doing that. And so we want to continue to promote those kind of efforts because we do believe that energy cooperation can have a broader halo effect into other dimensions, political dimensions as well. Thank you.
Moderator: We have time for one last question. The last question comes from Ariel Jara from Channel 19 Paraguay. The question is: “What will be the main action to be carried out before the end of the year in the energy sector in the region?”
Assistant Secretary Fannon: Oh, well, we have so much going on. I think one of the most exciting things is continued dialogue in two areas. First, the regionalization of energy markets I think is pretty exciting, because it allows for – it allows for countries to understand their own compared advantage relative to their neighbors and create that level of win-win partnerships. This is happening at an exciting time as countries want to integrate more renewables sources into their energy mixes. Not every country may have the same kind of potential. Brazil, for example, has incredible hydropower, but there is – they don’t have a lot of reservoirs and backup, and so they have to switch on and off.
Chile has great wind in one part of the country and solar in the other part of the country. Ecuador similarly has a variety of energy assets that they can bring to bear, but creating a market where they have trading relationships will create greater economic growth and also lower prices and increase resilience and reliability. So that’s one I think is a really exciting development that we’re continuing to advance, and we have considerable receptivity in the region.
Second is the recognition of the importance that minerals play toward achieving that energy transition. These countries are some of the leading minerals producers in the world. I mentioned Albemarle, for example. And they – and we have an organization that seeks to promote responsible mineral development and governance called the Energy Resources Governance Initiative. This allows a framework that allows countries on a government-to-government basis to understand what is best practice, how can they achieve their own development ambitions and contribute to the energy transition, but do it in a way that they fully benefit, where people benefit, their environment is secured, and that is in respect of human rights.
There’s considerable enthusiasm with renewables, but in order to have renewables deployed at scale will require an exponential growth in minerals. These countries want to be a part of the energy transition solution and be the preferred and responsible source for these critical energy minerals. I mentioned the bilateral dialogue that we had with Brazil. When I was with the Secretary in Colombia, we announced a similar cooperation to help Colombia develop its copper resource.
So this, I think, is an enormous growth area with considerable potential where the region is able to contribute not to just their own development and prosperity, but also to really empower the world to achieve the energy transition that many have been calling for, for some time. The issues – I mentioned at the outset, COVID’s impact on the economies. So, globally, COVID has reduced global investment in oil and gas by some 30 percent, but the same time period year on year we’ve seen an increase in renewable investment of 6 percent even in the face of COVID. So these countries have an incredible role to play both in terms of developing the resources for transition, but also to implement and integrate renewable sources into their own energy mixes.
Thank you so much for the time this afternoon. I appreciate it. Have a wonderful day.
Moderator: That concludes today’s call. I want to thank Assistant Secretary Fannon to joining us and thank all of our callers for participating. If you have any questions about today’s call, you may contact the Miami Media Hub at MiamiHub@State.Gov. Thank you and have a good day.