Going up: Brazil; Colombia; Peru
Without a doubt, Brazil’s oil and gas sector leads all of South America, with a stable investment policy, growing production and tremendous offshore exploration potential. Advances in exploration have allowed Petrobras and its partners to identify as much as 100 billion bbls of oil in sub-salt reservoirs at the base of the Campos and Santos basins, inspiring the Brazil government to examine the disposition of sub-salt prospects and its current legislation, with the intent of capturing a greater percentage of future petroleum wealth. “The pre-salt discoveries are a game-changer for Petrobras and for Brazil,” says Roger Tissot, a consultant associated with the firm Gas Energy Latin America.
Colombia follows closely on Brazil’s heels as a petroleum powerhouse, invigorated by both smaller independents and Ecopetrol, the partially-denationalised state petroleum company. Legislative reform has created one of the most advanced fiscal regimes in South America.
Peru possesses tremendous geological potential and a very stable tax and fiscal regime. Over the last decade, several dozen international companies have purchased licenses and drilled wells in the major basins throughout the country. Natural gas reserves have increased almost 50%, from 11 trillion ft3 to 16 trillion ft3.
Going down: Venezuela
Of the total proven reserves in South and Central America, Venezuela holds well over 80%. Less than a decade ago, production stood at 3.5 million bpd, and progressive fiscal policies had encouraged international oil companies to commit US$ 30 billion to upgrade bitumen in the Orinoco heavy oil belt into 600,000 bpd of sweet synthetic crude. Since President Hugo Chavez came to power, however, the sector has suffered a crippling strike at PdVSA (the state oil company), as well as nationalisation of joint ventures in the Orinoco heavy oil belt and the seizure of 76 service companies (after they complained about US$ 12 billion in unpaid bills).
Moving sideways: Mexico
Mexico, another petroleum giant among Latin American countries, is floundering in a mire of its own making. Since nationalising the sector in the 1930s, Mexico has relied upon the super giant Cantarell field in the Gulf of Mexico to not only meet its own energy and social service needs, but to export large amounts of crude to the USA. As late as 2004, Mexico’s daily production stood at 3.8 million bbls; now, thanks to rapid decline in the Cantarell field, it stands at 2.6 million bpd. President Calderon is relying on recent relaxations of the constitution that allow foreign companies to participate in exploration and development on a limited basis in order to reverse the decline in production.
Currently in South America, new pipelines are largely being built to service internal needs. “I think for now the trend will be toward national energy solutions dependent on LNG or domestic supply,” says Tissot. As far as a major international oil and gas pipeline network similar to that found in North America is concerned, however, few proposals exist. Regional rivalries and geographical barriers, such as the Andes and the Amazon basin, make such projects economically unviable. “In a more distant future, however one cannot discard the return of the regional integration of a South American gas market through pipeline as efficiency will - despite politics - eventually find its path,” says Tissot.
Author: Gordon Cope, a World Pipelines contributing author.