Global Energy Review

Latin America and the Caribbean: Oil’s Contrasting Fortunes

A Report by Dr Paul McDonald
Consulting Editor, Oil and Energy Trends

Contents

List of Tables

Introduction

On the face of it Latin America and the Caribbean are well-endowed with oil reserves, especially if Venezuela’s reserves of heavy oil are taken into consideration; but the region is beset with political and economic problems, which in several cases are holding up the development of the oil industry.

The situation is nevertheless not uniformly bad. Some oil-producing countries appear to have a promising future, notably Brazil with its large offshore reserves, and Colombia, which has recently had a number of successes in its campaign to rid the country of armed groups that threaten the stability of both the oil industry and the government. Argentina, Ecuador, Mexico, Peru and Venezuela, on the other hand, all have political problems that are holding back the development of their oil industries.

In some cases–notably Venezuela–political problems have arisen out of a rivalry with the United States of America, stemming from a desire to reduce the economic and political role of the US throughout Latin America. In the Venezuelan case, this has led to a policy of nationalizing American oil operations and reducing exports of oil to the US. Several other countries have policies that favour their own national oil companies at the expense of US and other foreign firms. In some cases, this resource nationalism appears to be inhibiting oil developments.
The countries covered in this survey are:

The Region’s Reserves

Latin America and the Caribbean have proven reserves of 123.4 bn barrels: equivalent to 10% of the world total, and sufficient for 33 years’ production at existing rates (see Table 1). The unfortunate news for US importers is that 71% of these reserves are concentrated in Venezuela, which also has the highest reserves:production ratio anywhere in the region, at 91:1 (see Table 2)

Table 1
Latin America/Caribbean: Oil Profile, 2007

Reserves

Total

123.4 bn bbl

Reserves:Production

33.4:1

Share of World Total

10.0%

Oil Balance

(mn bpd)

Production

10.1

Consumption

8.0

Net Trade

2.1

Totals rounded
Source: BP Statistical Review of World Energy, 2008
Country data

At first sight, the region’s proven reserves look impressive, but two important producers have worryingly low totals from the point of view of future levels of output. Mexico–the largest producer in the region–has reserves of only 12.2 bn barrels: equivalent to fewer than 10 years’ production at last year’s level. Colombia–the fifth-largest producer–has fewer than eight years remaining.

In recent years, Mexico has been reporting a decline in its reserves as exploration there fails to replace what is being extracted. Twenty years ago, Mexican reserves were reported as being 48.6 bn barrels, giving it a reserves:production ratio of 48:1. By 1995, they had risen to 50.8 bn barrels, but thereafter they began to decline. Part of the reason has been the re-stating of the country’s proven reserves using stricter criteria; but the main reason has been the inability of the state oil company, Pemex, to find enough oil.

Mexico’s upstream oil industry is state-owned, which makes Pemex reliant on the government for its investment budget. The government, on the other hand, has diverted increasing proportions of the country’s oil revenues in order to fund programmes designed to relieve poverty in Mexico. Pemex is also the victim of Mexico’s geology: most of the new onshore and shallow offshore fields have been small in size. The most prospective areas are in deep offshore waters, which are also the most expensive to develop.

Despite the fall in reserve levels, Mexico’s production has been steady in recent years. The same is not true of Colombia, where output has fallen by 277,000 bpd, or 33.1%, since 1999. In that year its reserves were 1.1 bn barrels higher than their present level, at 2.6 bn barrels. Since then, Colombia has suffered from a combination of old, declining fields and domestic unrest, leaving it with reserves of only 1.5 bn barrels, despite a liberal upstream regime that encourages private participation, in contrast to many of its neighbours.

Reserves exaggerated?

Venezuela claims an impressive 87.0 bn barrels of proven reserves, as of 1st January, 2008. This figure comes on top of a rise of 7 bn barrels, or nearly 9% compared with a year earlier. Since 2001, Caracas has reported a 13% net increase in reserve levels, amounting to more than 10 bn barrels. This amounts to a gross addition of over 17 bn barrels, since Venezuela produced some 7.2 bn barrels between 2001 and the beginning of 2008. It is difficult to discern the source of all this extra oil.

Venezuela’s oil reserves are subject to the politics of OPEC, which govern to a considerable extent the size of each member-country’s production quota. There is always competition to maximize these even amongst countries that are physically unable to produce at the levels they have been assigned. Venezuela has a crude oil production quota of 2.47 mn bpd, which is about the physical limit it can produce.

Quota inflation began in OPEC in 1985, when Kuwait unilaterally increased its reserves by 41% to 90 bn barrels. Other countries followed suit. Venezuela joined the competition in 1988, when it raised its reserve levels by 124%, to 56 bn barrels. The current figure of 87 bn barrels needs to be seen in the light of all this.

Venezuela’s reserves give it a reserves:production ratio of 91:1, which almost certainly overstates the case. A few small producers have ratios above 20:1, but the only really significant producer with a ratio of this size is Ecuador, with an output of 520,000 bpd. Brazil–the region’s third-largest producer, with 1.8 mn bpd–has a reasonable 19 years’ production at existing levels. The next-largest country, Argentina, comes in at 10:1 (see Table 2).

Table 2
Latin America/Caribbean: Proven Oil Reserves, 2008

Country

Reserves *

Years remaining †

(bn bbl)

Argentina

2.6

10.2

Brazil

12.6

18.9

Colombia

1.5

7.4

Ecuador

4.3

22.5

Mexico

12.2

9.6

Peru

1.1

26.4

Trinidad & Tobago

0.8

14.1

Venezuela

87.0

91.3

Others

1.3

25.2

Total

123.4

33.4

* Including NGL
† based on 2007’s production
Totals rounded
Source: BP Statistical Review of World Energy, 2008

Production Problems

Most Latin American producers are finding it difficult to increase their production. Over the past decade, only Brazil and Ecuador have managed any significant increase. Brazil’s output has gone up by 965,000 bpd, or 111%, since 1997, whilst Ecuador’s has risen by 123,000 bpd, or 31%.
Mexico’s has stayed more or less unchanged, just above 3.4 mn bpd. It has, however, been falling since 2004, when it was 3.8 mn bpd. Peru has kept its output around 120,000 bpd; Trinidad & Tobago’s total has shown a slight rise to 150,000 bpd in 2007. Venezuela, on the other hand, has experienced a fall of just over 700,000 bpd, or 21%. Declines have also occurred in Argentina–179,000 bpd, or 20%, since 1997–and Colombia, where the decrease has been of the order of 100,000 bpd, or 16%.

For importers of Latin American crude the countries causing the main concern must be Venezuela, Mexico and Colombia since these are three of the largest net exporters (see Table 5). In 1998, Venezuela’s exports were 3 mn bpd. By 2007, they had fallen to 2 mn bpd. Over the same period, Mexican exports fell by a much smaller amount–from 1.7 mn bpd to 1.5 mn bpd–whilst those of Colombia went down from 0.5 to 0.3 mn bpd.

Table 3
Latin America/Caribbean: Oil Production, 2007

Country

Production*

(th bpd)

Argentina

698

Brazil

1,833

Colombia

561

Ecuador†

520

Mexico

3,477

Peru

114

Trinidad & Tobago

154

Venezuela†

2,613

Others

141

Total

10,110

* Including NGL
† OPEC member
Totals rounded
Source: BP Statistical Review of World Energy, 2008

Rising Consumption

Against the background of stagnant production for Latin America and the Caribbean as a whole, there has been a sharp rise in consumption, leaving only six net exporters (see Table 5). The largest consumer is Brazil–with 2.2 mn bpd–closely followed by Mexico, with just over 2.0 mn bpd (see Table 4).

Over the last decade, oil demand has gone up by 1.4 mn bpd from 6.6 mn bpd to 8.0 mn bpd: a rise of over a fifth, representing an annual rate of 2%. Last year, though, the increase was nearly 5%. The annual rate has been speeded-up in some countries by a shortfall in gas supplies. This has been particularly the case in Chile, Argentina and Brazil, which have been forced to use more middle distillate and fuel oil as a result. In 2007, Chile recorded a year-on-year increase in oil demand of 30%. In Argentina the rise was 12% and in Brazil it was 6%.

This trend may well continue, though future annual increases are unlikely to be of the high order seen in 2007. Gas supplies nevertheless remain a difficulty. The problem centres on Bolivia, which is Latin America’s most important exporter. Gas-producing regions in Bolivia have been hit by strikes and other forms of unrest directed against the central government, which is accused of appropriating gas revenues for its own use. Bolivia supplies gas to Brazil and Argentina, whilst Argentina in turn exports to Chile and Brazil.

OET ARCHIVE: ‘Latin American Supplies threatened’, Gas&Power, Jun08.

Table 4
Latin America/Caribbean: Oil Consumption, 2007

Country

Consumption

(th bpd)

Argentina

492

Brazil

2,192

Chile

342

Colombia

228

Ecuador

181

Mexico

2,024

Peru

145

Trinidad & Tobago

50

Venezuela

596

Others

1,267

Total

7,967

Totals rounded
Source: BP Statistical Review of World Energy, 2008
Country data

The most significant increase in domestic consumption from the point of view of net exports may well occur in Mexico. Mexico is the main Latin American supplier to the US (see Table 6), which accounts for nearly all of its exports. In 2007, Mexico accounted for just over 14% of US crude oil imports. In volume terms, Mexican crude exports to the US have remained stable around 1.4 mn bpd since 2001, but US imports have risen by 0.9 mn bpd over the same period.

Mexican oil demand is being driven by gasoline. Consumption is expected to rise by nearly 55% by 2015. This could help to bring Mexico’s total consumption to 2.9 mn bpd. The country’s Energy Ministry has a scenario suggesting that Mexican output could be as low as 2.2 mn bpd by the same date, under the most pessimistic of assumptions, turning Mexico into a net importer of 0.7 mn bpd. Even on the Ministry’s most optimistic production forecast Mexico’s net exports look like being down to 0.3 mn bpd by 2015.

Net Trade

High levels of oil consumption in relation to production means that Latin America and the Caribbean have only six significant net exporters of oil. Only Venezuela and Mexico export more than 1 mn bpd. Colombia and Ecuador each export around 0.3 mn bpd, Argentina about 0.2 mn bpd whilst Trinidad & Tobago’s net trade amounts to just 0.1 mn bpd (see Table 5)

Table 5
Latin America/Caribbean: Net Oil Trade, 2007

Country

Net Trade

(th bpd)

Argentina

206

Brazil

(359)

Chile

(332)

Colombia

333

Ecuador

339

Mexico

1,453

Peru

(31)

Trinidad & Tobago

104

Venezuela

2,017

Others

(1,587)

Total

2,143

Totals rounded
Source: OET calculations based on BP Statistical Review of World Energy, 2008

Mexico’s exports are falling and could disappear within a decade. Venezuela meanwhile is switching its exports away from the US to other parts of Latin America, the Caribbean and to Asia. Mexico and Venezuela are the third- and fourth-largest crude oil suppliers to the US (see Table 6).

Table 6
US: Crude Oil Imports, 2007

Country

Volume

Market Share

(th bpd)

(%)

Canada

1,864

18.6

Saudi Arabia

1,453

14.5

Mexico

1,410

14.1

Venezuela

1,150

11.5

Nigeria

1,082

10.8

Angola

496

5.0

Iraq

485

4.8

Algeria

443

4.4

Ecuador

198

2.0

Kuwait

176

1.8

Others

1,260

12.6

Total

10,017

100.0

Percentage totals rounded
Source: US Department of Energy

Latin America and the Caribbean supply some 3.2 mn bpd of crude oil to the US (see Table 7), amounting to 31.5% of the total in 2007 (see Table 6). Mexico and Venezuela between them accounted for 81.2% of the region’s crude oil exports to the US in 2007.

Table 7
Latin America/Caribbean: Crude Oil Exports to the US, 2007

Country

Volume

(th bpd)

Mexico

1,410

Venezuela

1,150

Ecuador

198

Brazil

167

Colombia

137

Trinidad & Tobago

48

Argentina

33

Guatemala

11

Total

3,154

Totals rounded
Source: US Department of Energy

OET ARCHIVE: ‘Latin American Militancy grows’, Focus, Feb07.
‘US faces Supply Threat as Latin American Exports look set to fall’, Focus, Aug08.

Argentina

Argentina is a net exporter of oil (see Table 8), though most of its exports are absorbed within the region, mainly in Chile. Consumption is nevertheless rising, boosted by low government-controlled domestic prices. Controlled crude prices and export taxes are discouraging exploration, and reserves and production are both falling.

Table 8
Argentina: Oil Profile, 2007

Reserves*

2.6 bn bbl

Years remaining:

10.2

(th bpd)

Production

698

Consumption

492

Net Trade

206

* At 1.1.08
Source: (Reserves) Oil & Gas Journal
(Other) BP Statistical Review of World Energy, 2008

HYPER-LINKS

Brazil

Oil production of 1.8 mn bpd and consumption of 2.2 mn bpd make Brazil a net importer to the tune of 0.4 mn bpd. The country nevertheless has high hopes of achieving self-sufficiency–or even becoming a net exporter–but production has shown signs of slipping in recent years as output has failed to achieve the modest targets set for it.

Things may be about to change, however, following the discovery of several large offshore fields. Output additions of 1-3 mn bpd have been forecast, but the fields are geologically complicated and are likely to prove difficult and expensive to exploit.

Stagnating Production

Brazilian oil production has almost doubled since 1997, reaching 1.8 mn bpd in 2007; but this steady rise appears to have halted, at least for the time-being. There has been little change in output since 2006, when output was also 1.8 mn bpd.

Table 9
Brazil: Oil Profile, 2007

Proven Reserves*

12.6 bn bbl

Years remaining:

18.9

(th bpd)

Production

1,833

Consumption

2,192

Net Trade

(359)

* At 1.1.08
Source: (Reserves) Oil & Gas Journal
(Other) BP Statistical Review of World Energy, 2008

Offshore Prospects

Brazil’s production prospects appear to have been transformed following the discovery in 2006 and 2007 of large oil deposits over 150 miles offshore in the Atlantic Ocean. The fields lie under more than 6,000 ft of water and are 12,000 ft below the sea-bed. They are found in a large and highly prospective offshore area known as the Santos Basin. Some other, smaller deposits have been discovered in the shallower Espirito Santo basin.

The main interest at present is in the deeper Tupi field, discovered in 2006, which lies in the Santos basin, some 180 miles offshore from Rio de Janeiro. The field’s recoverable reserves are as yet unproven, but are estimated between 5bn and 10bn barrels, with up to 30bn barrels of oil-in-place.

Petrobras speculates that Tupi could eventually produce 1 mn bpd. The oil is generally lighter than that found off Brazil, which is a further bonus. Petrobras hopes to be able to announce a development programme some time next year. It is hoped to begin production in late-2010.
Tupi and other fields in the Santos basin will not be easy to develop. The water depths will require floating production, storage and offloading (FSPO) platforms.

Sub-salt Fields

Water depths are not the only problem. Geology provides another major difficulty. The oil deposits at Tupi and in neighbouring areas lie under some 6,000 ft of salt, which is both difficult and costly to drill.

It has still to be resolved which companies shall develop the new sub-salt fields. Foreign companies have shareholdings in some of the smaller, shallower fields, but the government is giving every indication that it wants the work on the largest fields to be carried out by Petrobras.
Petrobras hopes to have Tupi on-stream in 2010 or 2011 with an output of 100,000 bpd. If all goes well, production could go on rising to 500,000 bpd in 2015 and 1 mn bpd by 2017. Some optimists are predicting national output of 5 mn bpd by 2025 as other sub-salt fields are developed.

OET ARCHIVE: ‘Brazil: a future Member of OPEC?’, Looking Ahead, Sep08.

HYPER-LINKS

Colombia

Colombia’s oil industry has suffered from the attentions of the country’s drug barons and socialist armed guerrilla groups such as the Fuerzas Armadas Revolucionarias Colombianas (FARC) which have attacked oil installations as part of their operations against the central government. The government has recently had some success against FARC in particular, including the rescue in July 2008 of a number of hostages amongst whom was the former presidential candidate, Ingrid Betancourt.

Contrary to developments elsewhere in Latin America, the Colombian government is reducing its role in the oil industry–despite some domestic opposition–and has announced the privatization of up to 20% of the state oil company, Ecopetrol, which produces just over 60% of the country’s oil. Colombia needs to develop new production to replace the BP-operated Cusiana-Cupiagua field, which is now in decline. Its recent successes against guerrilla groups should enable it to develop prospective areas that were once violence-prone, including Meta, in the south-east of the country and the Llanos basin, in the east.

OET ARCHIVE: ‘Latin America carries on protesting’, Looking Ahead, May07.

Table 10
Colombia: Oil Profile, 2007

Proven Reserves*

1.5 bn bbl

Years remaining:

7.4

(th bpd)

Production

561

Consumption

228

Net Trade

333

* At 1.1.08
Source: (Reserves) Oil & Gas Journal
(Other) BP Statistical Review of World Energy, 2008

HYPER-LINKS

Ecuador

Ecuador has the region’s fourth-largest reserves and production and is one of only two Latin American producers to have increased its production in recent years (Brazil is the other). Ecuador’s output increased by 31%, or 123,000 bpd, between 1997 and 2007, but fell by 4%, or 20,000 bpd, between 2006 and 2007.

The country’s oil production is split roughly 50-50 between private oil companies and the state-owned Petroecuador. The government wants a greater role for Petroecuador and also wishes to raise the tax-take from private and foreign oil firms. The latter have managed to moderate some of the demands for higher taxes, but Quito appears determined to press ahead with a greater role for the national oil company. This may slow down the rate of new developments since Petroecuador appears to lack the money or expertise to undertake the ambitious new developments planned for Ecuador. There is also environmental opposition to proposed new fields near the Amazon. Ecuador will struggle to surpass its 2006 peak of 540,000 bpd again.

OET ARCHIVE: ‘Latin America carries on protesting’, Looking Ahead, May07.

Table 11
Ecuador: Oil Profile, 2007

Proven Reserves*

4.3 bn bbl

Years remaining:

22.5

(th bpd)

Production

520

Consumption

181

Net Trade

339

* At 1.1.08
Source: (Reserves) Oil & Gas Journal
(Other) BP Statistical Review of World Energy, 2008

HYPER-LINKS

Mexico

Mexico is the region’s largest oil producer, but possesses only its third-largest reserves which are, in turn, sufficient for fewer than ten years at current rates of extraction. The state oil company, Pemex, is short of money and expertise to address the twin problems of declining reserves and production, and the government is unwilling to allow foreign and private investment in the upstream sector.

Falling Production

Mexico produced 3.1 mn bpd of crude oil in 2007, of which 1.4 mn bpd, or 45.5%, came from one field-complex, Cantarell. Cantarell, however, is in decline. Output appears to have peaked around 2.2 mn bpd in 2003, since when it has fallen sharply. (The output figure in Table 12 includes about 0.4 mn bpd of NGL.)

Cantarell began production in 1979. Concerns were raised about production as early as the 1990s when, late in the decade, a sharp decline in reservoir pressure was observed. A programme of enhanced oil recovery (EOR) using nitrogen injection was instituted, which helped to revive output from the field, but this proved only temporary. By 2004, it was clear that Cantarell was in long term decline.

The field itself lies about 55 miles offshore in the Bay of Campeche, in the Gulf of Mexico. It was estimated to have a massive 35 bn bbl of oil originally in place, making it one of the largest fields in the world. Since then, reserve estimates have been revised considerably downwards.
The decline in Cantarell’s output is being partly offset by production from another field in the Bay of Campeche, Ku-Maloob-Zaap (KMZ); but KMZ’s output is only 650,000 bpd and is close to its peak.

Declining Exports

Mexico is currently a net exporter of oil. Its gross exports amounted to 1.8 mn bpd in 2007, of which just over 1.4 mn bpd went to the US–along with 124,000 bpd of products–making Mexico the second-largest supplier of crude oil and products to the US last year.

In terms of crude oil only, Mexico is the third-largest foreign supplier to the US, with a total of 1.41 mn bpd in 2007, accounting for 14.1% of the total. The US regards Mexico as a particularly important supplier given its location outside the Persian Gulf and the fact that Mexico is not a member of OPEC. For some years, the US has sought to increase the volume of crude it imports from within its own hemisphere as part of its policy of improving national energy security.

In recent years, Mexican imports have become all the more important to the US as a result of events in another western hemisphere producer, Venezuela, where the government is taking an increasingly anti-US line in its domestic and foreign policy. The government of President Hugo Chavez has declared its intention both to reduce the proportion of Venezuela’s oil exports that go to the US and to reduce the role of American oil companies inside Venezuela.

Table 12
Mexico: Oil Profile, 2007

Proven Reserves*

12.2 bn bbl

Years remaining:

9.6

(th bpd)

Production

3,447

Consumption

2,024

Net Trade

1,453

* At 1.1.08
Source: (Reserves) Oil & Gas Journal
(Other) BP Statistical Review of World Energy, 2008

OET ARCHIVE: ‘Mexico struggles to stem Production Decline’, Looking Ahead, July07.
‘Mexico faces Collapse in Oil Exports’, Focus, March08.

Peru

Peru, like some of its neighbours suffers from unrest that affects the oil industry along with other parts of the economy. Pipelines have become a particular target for groups of native inhabitants protesting against oil industry operations in the Amazon Basin, from which they receive little economic benefit. There is also opposition to oil operations on environmental grounds and because of the threat they pose to native ways of life.
Output appears to have peaked in 2005 at 165,000 bpd, though there are plans to develop a 100,000 bpd heavy crude field in the Amazon rain forest by 2010. Little increase in total output looks likely, however, as output declines from many existing fields.

Table 13
Peru: Oil Profile, 2007

Proven Reserves*

1.1 bn bbl

Years remaining:

26.4

(th bpd)

Production

114

Consumption

145

Net Trade

(31)

* At 1.1.08
Source: (Reserves) Oil & Gas Journal
(Other) BP Statistical Review of World Energy, 2008

HYPER-LINKS

Trinidad & Tobago

Trinidad & Tobago is the Caribbean’s only significant oil producer, with 154,000 bpd. Its principal hydrocarbon industry is the production of natural gas. Oil production began in 1908 and peaked as long ago as 1978, when it stood at 230,000 bpd.

There were plans for production of about 200,000 bpd early in the present century, but the highest so far achieved is 174,000 bpd, in 2006. Since then, output has fallen. Most future upstream development looks like being gas rather than oil.

Table 14
Trinidad & Tobago: Oil Profile, 2007

Proven Reserves*

0.8 bn bbl

Years remaining:

14.1

(th bpd)

Production

154

Consumption

50

Net Trade

104

* At 1.1.08
Source: (Reserves) Oil & Gas Journal
(Other) BP Statistical Review of World Energy, 2008

HYPER-LINKS

Venezuela

Venezuela is the region’s second-largest supplier and has the largest reserves. Its oil production is becoming increasingly heavy and Venezuela has chosen to try and develop its heavy oilfields without the help of the US oil industry which was instrumental in developing much of the Orinoco Belt, where much of the reserves lie.

Venezuela is also reducing the volume of oil supplied to the US in favour of Latin America, the Caribbean and Asia, particularly China. Since 2004, its exports to the US have fallen by 15% and look set to decline further.

Political Considerations

The decline is partly the result of falling production but it is also being dictated by the policy of the country’s President, Hugo Chavez, who professes a strong dislike of the US and its government. The antipathy stems largely from Chavez’ desire to use Venezuela’s large oil revenues to extend his political influence within South and Central America and the Caribbean. Under an arrangement known as Petro-Caribe, the state oil company PDVSA has been supplying oil at concessionary rates to more than a dozen neighbouring countries.

Chavez has taken particular delight in supplying cheap oil to Cuba, which is subject to a US trade embargo. He has also offered technical and financial help to various countries to enable them to build new refineries which would then be tied further to Venezuela by means of long term crude oil supply agreements. Amongst the countries offered such aid have been Cuba and Nicaragua.

Exports to nearby countries amount to just over 200,000 bpd. Whilst such deliveries could rise in future Chavez regards Asia as the main area for the growth of its exports. He is particularly anxious to sell more oil to China and India in the hope that this will encourage these two countries to invest in production projects in Venezuela. In 2007, Venezuela exported 83,000 bpd to China. Chavez wants to raise this to 1 mn bpd by 2012.
Chinese involvement is being sought in a number heavy oil projects in the Orinoco Belt, which are designed to provide much of the future growth in Venezuelan production. The Orinoco projects were initially mainly financed and run by US companies but Chavez has sought to decrease their involvement substantially. Last year, Chinese state-owned company Sinopec joined another Chinese state company, CNPC, in agreeing to participate in Orinoco. The two companies are thought to have committed $1.5 bn to heavy oil production there. This could mark an important further step in further reducing Venezuela’s energy ties with the US.

Table 15
Venezuela: Oil Profile, 2007

Proven Reserves*

87.0 bn bbl

Years remaining:

91.3

(th bpd)

Production

2,613

Consumption

596

Net Trade

2,017

* At 1.1.08
Source: (Reserves) Oil & Gas Journal
(Other) BP Statistical Review of World Energy, 2008

OET ARCHIVE: ‘Latin American Militancy grows‘, Focus, Feb07.

HYPER-LINKS

Outlook for Oil Production

Despite proven reserves of 123.4 bn barrels and a reserves:production ratio of 33.4:1, Latin America and the Caribbean are unlikely to see any increase in their total oil production over the next 5-10 years. In one or two cases this may happen, but most oil-producers in the region are probably past their long term peak.

Countries in Decline

Countries where output is currently in decline are shown in Table 16. These are the majority of countries in the region.

Table 16
Latin America/Caribbean: Countries with Declining Production

Country

Peak Production

Production 2007

Year

Volume

Volume

(th bpd)

(th bpd)

Argentina

1998

890

698

Colombia

1999

838

561

Mexico

2004

3,824

3,477

Peru

1985

190

114

Trinidad & Tobago

1978

230

154

Venezuela

1998

3,480

2,613

Source: Country data
BP Statistical Review of World Energy, 2008

Growing Production

The countries in decline include the region’s two largest producers, Mexico and Venezuela. Only two other large producers–Brazil and Ecuador–appear likely to increase their output over the next 5-10 years. One or two new producers may emerge, including Cuba, but their combined output is unlikely to exceed 200,000 bpd: far less than the decline expected elsewhere in the region.

Table 17
Latin America/Caribbean: Countries with Rising Production

Country

Production 2007

Projected Production 2015

Volume

Volume

(mn bpd)

(mn bpd)

Brazil

1.83

2.00-3.00

Ecuador

0.52

0.50-0.70

Cuba

0.04

0.10-0.15

Falkland Islands

0.00

?

Other South Atlantic

0.00

?

Antarctica

0.00

?

Source: Country data
BP Statistical Review of World Energy, 2008

Frontier Areas

Interest in the southern Atlantic Ocean is growing. One of the most prospective areas is the continental shelf around Antarctica, but legal titles to the sea-bed have still to be established. The British government has expressed cautious optimism about the seas surrounding the Falkland Islands and other British overseas territories including South Georgia, the South Sandwich Islands, St Helena, Ascension Island and Tristan da Cunha.
There are nevertheless considerable logistical problems in exploiting all the areas listed above and in some cases continental shelf boundaries are disputed. Oil production from any of these areas looks unlikely before 2015.

Production Outlook

For the remainder of Latin America and the Caribbean, oil production looks likely to decline and any decline is unlikely to be offset by increases from those countries listed in Table 17. The net result is that the region’s total production, which stood at 10.1 mn bpd in 2007, is likely to be between 8.5 mn bpd and 9.5 mn bpd by 2015, with the actual amount dependent as much on politics as geology.

Latest Developments

Refining Plans

Work has begun on the 165,000 bpd refinery at Cartagena in Colombia, to be opened in 2013.

Petrobras is to build a 330,000 bpd refinery at Comperj, near Rio de Janeiro.

Chile

Chile is considering allowing private investment in state-owned ENAP. The company restarted its 104,000 bpd Aconcagua refinery following February’s earthquake but its 116,000 bpd Bio Bio unit remains offline.

Previous:

Chile

An earthquake in Chile damaged the Aconcagua and Biobio refineries, which together can produce 220,000 bpd.

Brazil

Petrobras is to double capacity at its 115,000 bpd Comperj heavy oil refinery.

Oil and Gas Production and Trade

OET ARCHIVE LINK: ‘Latin America plans to produce more oil and gas’, Focus, Mar 10

Mexico

Refining

Pemex has chosen Tula in central Mexico as the site of its long-delayed 300,000 bpd refinery.

Venezuela

Oil Production

OET ARCHIVE LINK: ‘Venezuela faces future of declining output’, Looking Ahead, Aug 09

Oil Production

OET ARCHIVE LINK: ‘Latin America battles geology and politics to prevent decline in oil production (Part 2)’, Focus, July09

Oil Production

OET ARCHIVE LINK: ‘Latin America battles geology and politics to prevent decline in oil production’, Focus, June09

Biofuels

OET ARCHIVE LINK: ‘Oil companies’ interest in biofuels grows’, Looking Ahead, June09

Mexico

World oil prices fell in late-April 2009 on fears of a fall in jet fuel consumption following the outbreak of influenza in Mexico, amid fears that it would develop into a worldwide pandemic. Much of Mexican commerce was shut down for five days as a precautionary measure, but the government announced that oil exports would be unaffected.

Refining

OET ARCHIVE LINK: ‘Refiners reassess projects as recession deepens’, Looking Ahead, Feb09

Venezuela

OET ARCHIVE LINK: ‘Non-Conventional oil production reassessed’, Focus, Jan09

Venezuela

OET ARCHIVE LINK: ‘OPEC battles with financial crises and recession’, Focus, Nov08

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