Brazil, with 14.9 billion barrels of proven reserves, is aiming to boost oil output to 5.4 million barrels per day by 2029, potentially becoming the world’s fourth-largest oil producer.
Guyana, following a series of discoveries by Exxon since 2015, is becoming an increasingly important player in the global oil sector, currently producing around 400,000 barrels per day.
Latin America’s oil sector, led by Brazil and Guyana, is projected to expand significantly over the next decade.
The near collapse of Venezuela’s once colossal oil industry under the weight of endemic corruption‚ and strict U.S. sanctions, along with Mexico’s sputtering mature oil fields, saw Latin America’s economically crucial hydrocarbon sector fall into decline. By 2020, Venezuela’s oil output had crashed to an all-time annual low of 569,000 barrels per day, while Mexico’s sputtering aging oilfields pumped less than 1.7 million barrels daily. Then a series of world-class offshore discoveries in Brazil’s territorial waters captured the attention of energy supermajors and put Latin America back on the world hydrocarbon map. That was followed by Exxon’s world-class offshore discoveries in Guyana, which put the tiny South American on track to become a leading global petroleum producer and exporter. These events see Latin America poised once again to become a global hydrocarbon powerhouse once again.
Brazil’s national oil company Petrobras made the first offshore deepwater pre-salt oil discovery in the Santos Basin in 2006, with the first oil being pumped a mere two years later. Those vast pre-salt reservoirs continue to deliver major world-class discoveries which have endowed Brazil, according to data from the regulator, the National Agency of Petroleum, Natural Gas and Biofuels, with 14.9 billion barrels of proven or 1P reserves. This now sees Brazil holding the second largest oil reserves in Latin America after Venezuela and ranked 16th globally. Those impressive oil reserves, along with ongoing discoveries, are sustaining Brazil’s epic offshore petroleum boom. There are clear indications Brazil’s hydrocarbon reserves and production will continue to expand.
The Ministry of Mines and Energy is targeting significant production growth. The ministry is doing this by implementing strategies to develop existing basins and lift output to 5.4 million barrels per day by 2029. If that ambitious target is achieved, it will make Brazil the world’s fourth-largest oil producer. For May 2023, Brazil pumped an average of 3.2 million barrels per day, which was an impressive 11% greater than the equivalent period a year earlier. Total hydrocarbon output was 4.1 million barrels of oil equivalent per day for May 2023, a notable 9% higher year over year. While Brazil’s hydrocarbon production is growing at a steady clip, there is still a significant way to go before the country is lifting more than 5 million barrels per day with 80% flowing from the pre-salt layer.
It will take a considerable investment in developing Brazil’s offshore hydrocarbon basins to lift production to the targeted volume. Petrobras, as part of its 2023 to 2027 strategic plan, has allocated $64 billion to developing exploration and production assets, with 67% of that amount to be invested in pre-salt operations. By 2027, Petrobras envisages lifting 2.5 million barrels of oil per day and another 600,000 barrels of natural gas, seeing the company pump 3.1 million barrels of oil equivalent per day, with 78% being sourced from pre-salt fields.
Brazil’s booming oil production is an important economic driver for Brazil. By 2012 Petrobras had become a key government policy tool seeing it emerge as the world’s most indebted oil company with the administration of President Dilma Rousseff looting its coffers to fund social programs and other policy initiatives. After a massive corruption scandal involving Petrobras and construction firm Odebrecht rippled through Brazil, eventually claiming Rousseff’s scalp, Petrobras was set on a more independent pro-business footing by her successor Michel Temer with that approach continued by his successor Jair Bolsonaro. There are fears that the return of Luiz Inácio Lula da Silva, known as Lula, to the presidency, will lead to further heavy-handed government intervention.
It isn’t only Brazil which has brought the spotlight back on Latin America’s oil industry. Neighboring Guyana is following in the footsteps of Latin America’s largest oil producer after global energy supermajor Exxon discovered oil in the former British colony’s territorial waters in 2015. Since that discovery in the Stabroek Block, Guyana has emerged as what is being called the world’s hottest offshore frontier oil play. More than 35 discoveries have endowed the impoverished country of around 800,000 people with over 11 billion barrels of oil. The Exxon led consortium’s accelerated development of the Stabroek Block, with it taking four years to go from the first discovery to first oil, sees Guyana pumping around 400,000 barrels per day.
Georgetown plans to auction 14 blocks during 2023, although for the third time, it has been delayed until mid-August 2023 so the government can finalize changes to the regulatory framework. Those reforms include introducing a new Production Sharing Agreement (PSA), which will increase the royalty from 2% to 10%, reduce the cost recovery limit from 75% to 65% and introduce a 10% corporate tax. While those terms are less advantageous than those secured by Exxon for the Stabroek Block, they are still competitive compared to other countries in the region.
Guyana’s first-ever oil auction is intended to reduce the country’s dependence on Exxon. It will do this by attracting other petroleum explorers and producers to the South American country’s territorial waters. Given the considerable petroleum potential believed to exist in Guyana’s shallow water and deepwater blocks, further oil discoveries are only a matter of time. Analysts estimate Guyana will be lifting 1.2 million barrels per day by the end of 2027, making the former British colony become a leading global oil exporter. This is delivering a mega economic boom for Guyana, which will have the fastest growing economy during 2023, with gross domestic product forecast by the IMF to expand by 37.2%.
There are signs that Latin America’s hydrocarbon sector will expand substantially over the next decade despite heightened geopolitical risk, the clean energy transition and looming peak oil demand. Venezuela’s oil output is growing because of assistance from Iran while U.S. sanctions are being loosened with supermajor Chevron permitted to lift oil in the crisis-riven country. Argentina is undergoing an onshore unconventional hydrocarbon boom as the Vaca Muerta shale body is developed. While those will boost hydrocarbon production in Latin America and the Caribbean, it is Brazil and Guyana which are driving the massive explosion in oil production expected in the region. Those two countries alone will add up to 3 million barrels per day to Latin America and the Caribbean’s oil output, but that will occur at a time when petroleum prices are under pressure from falling global demand due to the clean energy transition. That makes it a race against time for oil producers in the region to exploit their hydrocarbon wealth.
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The post Brazil And Guyana Are Fueling Latin America’s Oil Resurgence appeared first on Energy News Beat.