The pandemic has jeopardised the segment causing an unexpected surge and downfall in tonne-miles per day in 2020. Furthermore, the tonne-mile per day in the Scandinavia/Baltic to China Sea route surged 362m tonne-mile per day (tmpd) in 2019 to 843m tmpd.

Routes from South America to Asia also witnessed a surge last year to 757m tmpd and another route from west Africa to Asia witnessed a 441m tmpd surge. 

Poten & Partners told the media, “The collapse in European oil demand as a result of Covid-19 pushed record volumes of North Sea crude and fuel oil to Asia and the long distance of this voyage amplified the impact on tonne-mile demand. The increases from South America primarily originated in Brazil and Venezuela and were destined for Malaysia, Singapore and South Korea among others. Another growth area was Southeast Asia to the China Sea, which, combined with the earlier point seems to indicate that a significant portion of the crude moved from Brazil and Venezuela was transhipped to Southeast Asia and ultimately ended up in China.”

The reports indicated that the tonne-mile demand record only 11 percent slump in direct route from South America to the China Sea.

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The development is expected to be completed this year including the pending shareholder and regulatory approvals. Furthermore, the company’s profit surged 80 percent at the time of the development’s announcement. The net profit surged from ₱20.8 billion last year to ₱28.3 billion this year. However, there wasn’t a significant surge in postpaid mobile subscribers.

American Movil’s base of postpaid subscribers recorded 1.3 percent year-on-year growth in the core Mexican market, while the prepaid base grew 1.1 percent. The company added 1.2 million subscribers by 2020 end.

The company, told the media, “We added 6.8 million wireless subscribers in the quarter, double the number in the previous quarter, including 2.7 million mobile postpaid subscribers.”

American Movil has ramped up its stake from 16 percent to 20 percent in Dutch operator KPN. The company tried to take over KPN seven years ago, however, the Dutch government along with KPM’s board members didn’t allow them to carry out the development.

American Movil’s stake in the Dutch company during 2013 was 30 percent but has been gradually slumped over subsequent years.  The fresh interest in KPN could be the indication of the company’s low valuation towards the 2020 end.

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In 2015, Forbes recognised Chile as The best country for business in Latin America. The country has become a breeding ground for fintechs because it posseses a pool of highly qualified labour force coupled with a tax friendly regulation, backed by free trade agreements with more than 30 countries. 

The Chilean Government is spurring innovation through investments in startups and larger establishments that are seeking a market presence in Latin America. The report pointed out that 89 percent of startup founders in the country already have entrepreneurial experience — with 8 percent of startups being women founded. Most founders were aged between 26 to 30 when they first started their companies. 

Startup Chile — an initiative by the Chilean Government through CORFO, Chiles’s economic development agency, is a government supported startup accelerator and Chile’s signature entrepreneurship programme. It is arguably the most significant reason why the country is positioned as the entrepreneurial hub of Latin America. Startup Chile was founded in 2010 with a vision to transform the country’s entrepreneurial culture and to put Chile on the global map as the hub of innovation in Latin America.

The Wall Street Journal reported that three out of four startups fail despite raising capital. So, ultimately the value they bring up is not only the jobs they create, but also the skills that the entrepreneurs acquire in tackling the global market. The accelerator has time and again emphasised that its goal is to help startups to absorb higher benefits from the programme than just monetary assistance. Startups get $40,000 equity free in StartupChile’s seed program. Since its founding, it has accelerated more than 1,500 startups. These startups are exposed to mentorship and entrepreneurship training, in addition to opportunities in building a global network. 

Cabify, Vaijala, The Intern Group, CargoX, Keyword Tool, Doist, Data Campfire and Slidebean are some examples of how startups in Latin America have flourished on a global scale with the entrepreneurial guidance of Startup Chile. Many of these startups still continue to operate in Chile. 

As of 2016, Startup Chile’s cohort had collectively raised $30.5 million in Chile and more than $420 million abroad. These startups have been responsible for creating 5,162 jobs in the country and across the world as of that period. More than one-third of startups that go through Startup Chile establish an office in the country that ranks seventh on the global index for entrepreneurial activity.  

Startup Chile Executive Director Sebastián Díaz Mesa in an interview with International Finance explains the significance of the accelerator programme and how it has helped startups in the country progress in the last decade. Diaz Mesa is a former strategic communications practitioner, founder of startups, and an academic as well.

International Finance: How is Startup Chile fuelling Chile’s entrepreneurial ecosystem?
Sebastián Díaz Mesa : Startup Chile was born to solve a myriad of problems related to entrepreneurial skills that still persists in Chile. The country has invested the largest amount of money in entrepreneurship and innovation in the entire Latin American region. However, the new companies, SMEs, and startups were focusing on the Chilean market only.

So every time we have an economic crisis, for instance, it impacted these SMEs and startups — and all the money and effort put in was pretty much wasted in the event of a crisis. In order to avoid those circumstances we are trying to help entrepreneurs access other markets. This way, they can avoid the impact of those economic crises and establish sustainable companies in the country. 

Because Chile is so far away from everything there is a huge cultural impact on our entrepreneurs — and it reflects while they are trying to approach new markets like Europe or America. Eventually they start to believe that they are not capable of competing with foreigners.

Keeping that in mind, Startup Chile was established to prove to the Chilean ecosystem that it is possible to set up local businesses from Chile and to position the country as a startup hub for the entire region.  As far as the policy goes we are planning to attract new entrepreneurs organically because at some point Startup Chile is bound to disappear. 

Back in 2016, we served several Chilean and global companies which shows in our numbers. At the beginning of  Startup Chile there were no Chileans because they were unable to compete with foreigners — but that situation has now changed. Organically around 40 percent of Chileans in each generation are now prepared to compete with foreigners. So, in terms of entrepreneurial skills, Chileans are getting better with time. 

What kind of startups are Startup Chile targeting? Why?
There are three main requirements for startups to become an eligible prospect for Startup Chile. First of all, the startups have to be technology-based, because technology is the only component that will help them to swiftly expand into other markets. The scope for scalability is quite high. 

That said, industrial 4.0 revolution is a continual challenge in Chile. So the development of technology-based startups will help address this challenge while creating new technology-based industries in the country.

Secondly, startups should target a global market or problem because they require to access new markets and grow on a global scale.

Lastly, they need to understand how they will be using Chile as a platform to grow.  We know that Chile is located far away on the global map and hence our market is quite small. We are not asking the potential startups to establish their headquarters in the country but to somehow use Chile to scale globally. 

For example, they can set up their call centers or pay salaries in the country. The idea is up to them but they should have a strong reasoning for using Chile as their base. All in all, we require to capture value for the reasons we are accelerating. 

How progressive is Chile’s fintech support ecosystem from regulatory, investment, and talent standpoint?
I would say that in terms of talent Chile is becoming a fintech hub in the region. A study conducted by Ernst and Young mapped all the fintechs in the country. It seems that we have more than 130 fintechs in Chile right now, marking Chile as a global hub for fintechs in Latin America.
However, there is a regulation gap for fintechs not only in the country but in the region as a whole that needs to be addressed. 

What is the value proposition that Startup Chile offers for fintechs looking to launch in Chile?
Sebastián: We don’t have a specific focus on any industry and we can have as many fintechs as we can get. We are putting more effort in business development and not any technology in particular. So basically our aim is to help startups build connections with local market, global networks, and investors. Startup Chile has a huge corporate network. 

All the major corporations in the region come from Chile. So it’s a great opportunity for startups to connect and strike a deal with them. That’s the value proposition of Startup Chile across all industries. 

How is the government helping build Chile as an innovation hub that can support global businesses and global operations for fintechs? How far has Chile progressed on that front?
The Chilean Government’s involvement is huge. The state will step in when the private sector in Chile is unable to take care of  a gap in the economic activity. The Chilean Government has identified that innovation is a key factor relevant to the country. It has created a large number of programs to fill in the gap. With that, the number of venture firms, corporate venture firms, and startups are growing  organically. So the role of the Chilean Government is to close gaps when required in strategic markets. 

What is the future of payment startups in Chile and Latin America?
Sebastián: We don’t have many regulations. These are super easy markets to test on a pile of new products. It seems more companies are looking to bring innovative solutions to payments. The thing that we need to speed up is regulations because they are mostly framed for big banks and corporations compared to startups and entrepreneurship. On one hand, Latin America is focused on bringing fintechs and startups from all over the world but at the same time there is a struggle with regulations. 

What are Startup Chile’s plans to promote startup growth in the country, especially fintechs, in the next five years?
Sebastián: We strongly believe that every single industry, especially with what we have here in Chile they need to work on the products — and this is not just for the financial industry.

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The Petroleum Services Association of Canada (PSAC) in its Midyear Update to the 2019 Canadian Oilfield Services Activity Forecast for the second time reduced its forecast for the number of wells drilled to 5,300 across Canada this year. The figures suggest that there was a 20 percent decline or 1,300 wells lesser from the original forecast of 6,600 wells in November last year. PSAC has developed its updated forecast on the basis of an average natural gas price of C$1.65/mcf (AECO), crude oil price of US$57.00/barrel (WTI), and a US-Canada exchange rate at an average of $0.75. 

 The concerns of the industry are quite justified. On a provincial basis, PSAC is planning to drill 2,685 wells in Alberta, which is reduced from 3,532 wells in the original forecast. The estimated number of wells in Canada’s westernmost province British Columbia’s have also fallen to 375 from an earlier estimated count of 382.

For Saskatchewan, the revised count stands at 1,960 wells compared to 2,422 wells in the original forecast. In addition, Manitoba is expected to have 260 wells drilled, indicating a jump of 5 wells this year.  Also, Eastern Canada’s well count has been increased from 9 to 20 between forecast versions—suggesting a bright spot for boosted activity in the country.

That said, PSAC is also forecasting activity this year which is much more than plain drilling in an effort to include maintenance work and site closure.

In a recent report 2019 Crude Oil Forecast, Markets and Transportation published by the Canadian Association of Petroleum Producers (CAPP), Canada’s oil sector is being deprived of an important opportunity where it can benefit from the global commodity price and get a reasonable market value for Canadian resources. 

CAPP in the report estimated that the country’s crude oil production will continue to grow until 2025, however. The growth pace will be much slower than previously anticipated. It predicts the Canadian oil production to grow at a rate of  1.44 percent by 2035, which measures less than half of the industry’s estimate in its 2014 outlook. It was during that period when oil prices rose above $100 a barrel, renewing hope that new pipeline projects might be under way by 2019. 

However, the forecast has turned out to be very different from what Canada’s oil industry had anticipated five years ago. The country is still witnessing a significant pipeline infrastructure deficit and major setbacks in projects. For example, a few takeaway capacity projects were cancelled over these years coupled with persistent sector issues such as regulatory uncertainty and delay in Canada’s pipeline capacity as well as access to new markets. 

Last year, the country was put in a difficult spot where it had to sell off its oil at a significant discount. With that, Canadian producers were set back by nearly $20 billion in lost profits, observed Canadian public policy think tank the Fraser Institute. However, the Albertan government took the necessary measures such as imposing temporary caps on production to ease the loss. 

There is only a slim chance for Canada to achieve sector competitiveness as oil production is exceeding the pipeline capacity. Also, CAPP in its 2019 report said that the country’s scope for  taking advantage of the expected growth in global oil demand in emerging Asian markets is limited.

According to CAPP, Canada’s total oil production is expected to grow by 1.27 million barrels per day to 5.86 million barrels per day from now to 2025. Last year, the country’s oil production stood at 4.95 million barrels per day.  

This estimation is less than half the estimated figure that CAPP made in 2014, representing measly 1.44 percent annual increase in growth rate. CAPP in its 2019 forecast said, “This year’s constrained production outlook is due to inefficient and duplicative regulations, reduced investor and producer confidence, and uncertainty around additional transportation capacity.”  The noted constraints and uncertainties “are having and will continue to have negative impacts throughout Canada’s economy—from diminishing investment to loss of employment and reduced government tax and royalty revenues,” it said.

Also, Canada’s capital investments in oil and gas sector is predicted to decline to $27.6 billion this year compared to the 2014 forecast of $60.4 billion.

It seems that investor confidence in the country’s oil and gas sector is majorly affected. To make things worse, CAPP and industry experts said that there will be no new pipelines built in the country under the federal government’s Bill C-69.  

Between May and April this year, 3,000 workers in Alberta’s oil and gas sector lost or left their jobs. Alberta’s economy is experiencing a lull as oil and gas jobs drop, with a noticeable shift toward healthcare and education employment. 

Bill C-69 is stalling the review of major oil and gas projects in the country, including pipelines. However, the Trudeau government in its defence said that it only plans to take responsible initiatives to develop resources, while many believe that the outcome of such changes will prevent new projects from progressing in the sector. 

This in fact has encouraged several energy companies to seek opportunities outside Canada. CAPP in its 2019 report said that capital investments in Canada are expected to reach $39 billion this year, compared to $81 billion in 2014.  This significant difference in spending was evidently shown in markets where the Canadian oil and gas stocks stood at a 52-week low by mid-June.

For example, energy company Japan Canada Oil Sands (JCOS) has invested $2 billion in projects near McMurray. The company is looking to expand its existing projects. Its major owner is JAPEX with a 94 percent share. 

JCOS President Satoshi Abe said that the company has various options to explore considering that it is headquartered in Japan.

Forced discounting

Canada will be forced to sell oil at unreasonable discounts as persistent sector issues have crippled its chances to reach global energy markets. All in all, the sector challenges come back to the country’s pipeline issues, Abe said. 

The Senate passed two disputable natural resource bills on June 21, following which another bill was passed. The third bill in fact strengthened a ban on offshore oil drilling in the Canadian Arctic, curbing the possibility of future oil and gas development in the region. 

Bill C-48 which would legally put an embargo on oil tankers in northern British Columbia is expected to receive royal assent after it was accepted at third reading in the Senate.  That said, Bill C-69 also passed at third reading, and it would overhaul the environmental review process for major projects. 

Both bills are largely perceived as measures to provide balance and stability to the Liberal government’s decision to approve the Trans Mountain expansion pipeline, which is part of Prime Minister Justin Trudeau’s efforts to focus on environmental and economic development. 

Bill C-69, which most oil and gas lobby groups believe will stop the development of major new infrastructure projects in the country has been examined over several months. Significant export projects such as Trans Mountain, Keystone XL and Line 3 have faced defeat in recent years, which in turn has hurt investor confidence in the sector. Overall, experts believe that it has also affected the Canadian economy. 

Even Bill C-48 which puts a ban on oil tankers in northern British Columbia was also believed to stop developments in Canada’s oil and gas sector.

The federal Environment Minister rejected nearly 80 amendments designed to boost investor confidence mainly because the minister’s duty involves protecting Canadians from the oil and gas sector which is known to negatively affect the environment. However, these amendments if passed would have injected tens of billions of dollars into Canada’s economy. 

The reason investors are losing confidence in the sector is because energy companies are required to spend nearly $1 billion to get approval on a new pipeline, in addition to the line costs ranging between $6 billion and $15 billion. And with regulatory policies hostile to the sector’s development, there is very little scope for investor interest. 

Canada needs pipeline capacity and more efficient regulatory policies to scale up investment opportunities in the oil and gas sector. In this regard, major Canadian producer Suncor Energy’s President and CEO Mark Little said in comments directed to International Finance, “We believe that for investment to return to the province, we must find a path forward for Albertans to get fair value for all of the production in the province. And to that end, we’ll be working with the new Alberta government and the industry to achieve this goal of getting 100 percent of Alberta’s crude oil production to market so that we can receive a fair global price.” Until the federal government changes its stance there is probably no respite for the falling investor confidence in Canada’s oil and gas sector.

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