Within Latin America, the ratios between oil producers are shifting: Guyana, Brazil and Argentina will increase their production by 2030. Ecuador, Mexico and Colombia, on the other hand, will lose importance – as will Venezuela.
by Alexander Busch, Latin America correspondent for Handelsblatt and Neue Zürcher Zeitung
Latin America has the second largest oil and gas reserves in the world after the Middle East. However, the majority of the around eight million barrels per day (bpd) produced by these countries are consumed in the region.
But that could change – if you look at the forecasts of the International Energy Agency (IEA). According to these forecasts, Latin America’s oil production will grow to between ten and eleven million bpd by 2030 – depending on whether or not the countries comply with the climate emissions pledged under the Paris Agreement. This means that a quarter of the world’s growing oil production will come from Latin America.
The balance within the region is shifting – as it has in recent years. Brazil currently produces around 35% of the oil in Latin America. Mexico follows with 25 percent. Colombia, Venezuela and Argentina each contribute less than ten percent to regional production.
However, traditional oil-producing countries such as Mexico, Colombia and Ecuador will continue to reduce their oil production. In Colombia and Ecuador, the governments do not want to issue any new production licenses for climate policy reasons. In Ecuador, the population has just rejected oil production in the rainforest in a referendum. In Colombia, President Gustavo Petro wants to reduce oil and gas production.
In Mexico, on the other hand, President Andrés Manuel López Obrador is firmly committed to oil production rather than renewable energies. However, the state-owned company Pemex is the most indebted oil company in the world and is not in a position to develop the deep-sea deposits in the Caribbean.
Brazil, on the other hand, has concentrated fully on developing the so-called Pré-Sal deposits following the discovery of deep-sea deposits off Rio de Janeiro in 2007. The state-owned company Petrobras and private oil companies have increased production from 40,000 barrels to 2.2 million bpd. Brazil is now the number 8 oil-producing country in the world.
Further large deposits are suspected in the north of Brazil, near the mouth of the Amazon. A political tug-of-war is currently taking place in Brazil between environmentalists and the oil industry as to whether these deposits should be developed or not.
The oil industry is confident that large oil reserves exist north of the equator. Not far from there, the oil company Exxon discovered the world’s largest new oil reserves in Guyana in 2015. Production in the Caribbean is expanding rapidly. By 2030, production off the coast of Guyana can be increased from the current 300,000 bpd to 1.2 million bpd.
Argentina could be the third country in Latin America to increase its production by 2030. Traditional oil reserves are drying up there. However, the country has huge shale oil reserves that private companies want to develop.
While Brazil and Guyana could each produce an additional one million bpd by 2030, the IEA estimates the increase for Argentina at half a million bpd. Oil production in Brazil and Guyana also releases significantly less carbon dioxide than the global average.
By contrast, the once most important oil country in the region, OPEC founding member Venezuela, will not be able to significantly increase its production in the foreseeable future, the energy agency expects.
There, the corrupt management of the state oil company and the lack of investment are preventing the country from regaining its former leading role as a South American oil power: The state-owned company produced three million barrels 25 years ago, when President Hugo Chávez came to power and used the company to further his political goals. Production has still not recovered from this. Venezuela currently still produces around 700,000 bpd.