South America is emerging as a growing world player in the oil and gas industry. With discoveries of new reserves across the continent, Brazil, Venezuela, Colombia, Chile, Peru and Argentina all look set to prosper.
In terms of major discoveries in the last century, Brazil has become a leading country in world rankings with oil reserves estimated to be around 26.9 billion barrels, only behind Venezuela in South America. While this figure does not yet constitute proven reserves, there is little doubt that Brazilian pre-salt discoveries are revolutionising the oil & gas market in South America today, with a number of major offshore investments taking place.
EICDataStream, the EIC’s project database that tracks over 8500 projects across the global energy supply chain, is currently monitoring 155 active and future projects in Brazil with a potential investment value of US$ 192 billion. Brazilian state-operator, Petrobras and other oil majors such as Total, Shell, BG and Repsol have all unveiled investment plans to explore in Brazilian offshore fields with opportunities being presented across the whole energy supply chain. Brazil’s economy is growing and its political landscape is stable, providing an attractive proposition for oil and gas investments.
The largest project in Brazil is the US$ 20 billion Maranhão refinery development, which is expected to become the largest refinery in Latin America, refining heavy oil from the Campos basin and light oil from pre-salt fields. One of the key technologies being used is a four-drum delayed coker based on Foster Wheeler’s SYDEC technology. The plant is due to come online in 2014, with full capacity being reached by the end of 2014.
Other major projects in Brazil include the US$16 billion construction by Petrobras of eight floating production, storage and offloading units that will be installed on pre-salt fields such as Lula, Guara, Iara and Carioca. Also, the US$ 12 billion exploration of the Lula and Cernambi pre-salt fields, 250 km off the south coast of Rio de Janeiro with estimates revealing that the field holds enough oil and gas to increase Brazil’s reserves by as much as 60%.
Aside from Brazil, other economies represent attractive prospects for investment in South America.
In Venezuela, EICDataStream is tracking 69 active and future projects with a total investment value of US$ 196 billion. Many of these projects can be found in the Orinoco heavy crude belt which accounts for over US$ 135 billion potential investment across over 20 predominantly active projects.
EICDataStream is currently monitoring 42 active and future projects in Colombia worth a total of US$ 27 billion. Columbia recently announced through the state-operator Ecopetrol a US$ 4.2bn Bicentennial pipeline project in partnership with Pacific Rubiales and plans of drilling 40 wells involving an US$ 8.5bn investment package.
Chile and Peru both look set to benefit from a currently small, yet promising hydrocarbons segment which is primed for development. In Peru, for example, a proposed US$ 3 billion 1000 km gas pipeline between Camisea to the port of Ilo in the southern region of Moquegua has recently had its environmental impact statement approved by the Peruvian Government and is planned to commence operation in 2015.
With IPOs and especially mergers and acquisitions, the Latin America region has seen the entry of Chinese majors such as Sinochem which acquired a 40% stake of an oil field in Brazil from Statoil for around US$ 3 billion in May last year, and a stake in Repsol Brazil for US$ 7 billion in October.
South America today clearly offers increasing development opportunities and has become an increasingly popular market for the UK energy supply chain, bolstered by a local environment of greater legal, financial and political security. While there are still barriers to investment across the region, the future looks bright.
Author: Mike Major, CEO of the EIC