HOUSTON, March 7 (Reuters) - Nationalizations, currency controls, contract changes, subsidies and political instability over the last 15 years have not prevented energy investors from showing renewed interest in Latin America.
With proven oil reserves of 340 billion barrels, the world's second-largest behind the Middle East, Latin America is trying to attract foreign capital for Colombia's onshore and offshore blocks as well as Argentina's large unconventional resources and Mexico's fast-track energy reforms.
"The appetite for Latin America is big," said Carlos Pau, chairman of the private Argentina-based firm Americas Petrogas, at the IHS CERAWeek energy conference.
Low geological risk, increasing regional demand for fuels and proximity to the Atlantic Basin, another consuming market, are among the arguments that companies make for investing.
Bigger international players, including Chevron Corp , Spain's Repsol SA, Italy's Eni SpA and Royal Dutch Shell PLC, have stayed in Latin America despite contractual risks, such as in Venezuela and Argentina.
But the companies showing the fastest growth in the region are mid-sized ones that reinvest profits locally instead of repatriating dividends, thereby avoiding limits on currency exchange in some countries.
"We take risks. We are working on the second phase of an agreement to buy Harvest (Harvest Natural Resources Inc ) assets in Venezuela. Why there? Because reserves are there," Steven Crowell, chief executive officer of Pluspetrol said at the conference.
The company has expanded within the region with exploration and production blocks in Peru, Colombia and Argentina. It is now actively tendering crudes and products on the open market.
Paolo Scaroni, the CEO of Eni, said on Wednesday that a crucial offshore gas project in Venezuela with Repsol and state-run PDVSA will start early production at the end of this year, while the company increases crude output at another billion-dollar development in the Orinoco belt, the country's largest reservoir.
But companies venturing into the region are now looking at Mexico, where the market is set to open 75 years after a nationalization. That could provide experienced firms and mid-sized ones a chance to build on their success in U.S. shale and offshore plays.
"Can I have my money back?" That is a frequent question among companies based outside Latin America after price and currency controls surged in recent years, and there is no easy answer.
Argentina and Venezuela have imposed long-term restrictions to deal with hard currency shortages, but both are also trying to relax them in a period of economic weakness.
Frequent legal changes and the imposition of windfall profit taxes in Venezuela, Colombia and Ecuador since crude prices climbed in 2008 have also contributed to investors' wariness.
With a lone bid at the minimum price, a consortium of Brazil's state-run Petrobras, Shell, France's Total , CNOOC and China National Petroleum Corporation in October won the rights to develop the offshore Libra field. The weak result was blamed on onerous local content requirements in a country with high taxes.
Low domestic prices also discourage foreign investment. Fuel subsidies account for 2.25 percent of the region's gross domestic product, according to the Latin American Energy Organization, or Olade.
At just pennies a gallon, Venezuela has the world's cheapest gasoline after 15 years of frozen prices. It also subsidizes imported gas from Colombia. Argentina is dealing with big gas and diesel subsidies while paying high prices for imports of liquefied natural gas.
"At this point, Venezuela would have to multiply the gasoline retail price by 25 to cover production costs," said Ramon Espinasa, lead Oil and Gas specialist of the Inter-American Development Bank.
Bolivia also has subsidies for the gas sold in its domestic market; Ecuador does the same for its fuels and almost the entire region subsidizes liquefied petroleum gas used for cooking fuel.
For their part, Mexico, Chile, Peru and Colombia are working to progressively remove subsidies, which would allow oil operators to recover investments faster and satisfy an incremental demand for all types of fuels.
To meet demand, the region quadrupled fuel imports from the United States in the last decade to 1.3 million barrels per day in 2013, according to the U.S. Energy Information Administration.
WHERE TO GO?
Clear rules in Peru, Colombia and Uruguay could attract energy investors with a low tolerance for risk, but to get their hands on big deposits companies must be willing to tolerate less favorable terms in Venezuela, Argentina, Brazil and Ecuador.
BP, Total and BG won blocks in 2012 to explore offshore Uruguay, while Chevron is expected to be the largest private investor in Argentina's biggest unconventional reservoir, Vaca Muerta, working along with state-run YPF .
Mexico, which has under-invested in exploration for years, is widely expected to become a key destination for foreign firms once its government implements an extensive energy reform package.
Emilio Lozoya, the CEO of Mexico's state-owned oil company Pemex, said at CERAWeek that Mexico will need $1 trillion to boost oil output to 3 million barrels per day by 2018, increase production of gas and petrochemicals and build new energy infrastructure.
"Pemex will be working hard to find the right partners. Conservatively, we can see results (of the reform) in a couple of years," he said.