Latin America is the site of extensive hydrocarbon deposits, chiefly petroleum but also a significant quantity of natural gas. The region is less gas prone than oil prone, with natural gas reserves accounting for 4% of the global total. In contrast, the region’s oil reserves account for 17.3% of the global total, taking into account the recent increases in Venezuelan reserve estimates.
Venezuela’s changing role
Venezuela continues to play a vital role in Latin America’s energy markets, and the history of the country, including the role of the energy sector, constitutes a fascinating tale. The direction of the energy sector has changed significantly over time: under the leadership of President Hugo Chavez the oil industry has been shifted back to being a state run operation. The national oil company, Petroleos de Venezuela SA (PDVSA) was known as a highly competent company, but it came under fire for operating too independently from the state, with a profit orientated focus akin to that of a multinational oil company.
With its extensive reserve base and the growth in exploration and development, Latin America remains a key net exporter of crude. The main crude exporters typically find markets in other Western Hemisphere markets, chiefly the United States.
At present exports to the US have fallen below 1.7 million bpd. The decline is, in part, a function of weak demand in the US. However, it is significant the decline has come mainly in the form of a drop in Venezuelan exports. In 1993, Venezuela accounted for 77% of the crude exports to the US (from the aforementioned countries). This share fell to 51% in 2010 and 55% during the first quarter of 2011. Between 1993 - 2011, crude exports to the US from the other four countries have all grown. Most notably, exports from Brazil averaged 33 000 bpd in 1993 and increased to 271 000 bpd in 2010, before falling to 205 000 bpd during the first quarter of 2011. Exports from Ecuador grew from 81 000 bpd in 1993 to 197 000 bpd in 2010 and 187 000 bpd in the first quarter of 2011. Exports from Colombia grew from 171 000 bpd in 1993 to 365 000 bpd in 2010 and 318 000 bpd in the first quarter of 2011.
Latin American refinery capacity was in the process of rapid growth and expansion in the 1960s, yet capacity was forced to shrink in the aftermath of the oil price shocks of the 1970s and the global overcapacity in refining during the early 1980s.
Crude distillation capacity began to expand once again by the late 1980s. Latin America more than doubled its crude distillation capacity from approximately 3.56 million bpd in 1965 to over 7.2 million bpd in 1980. By 1986, capacity had dropped to 5.8 million bpd. The late 1980s, however, brought the collapse of oil prices, which stimulated demand, particularly in Asia where the beginnings of the ‘Asian Boom’ were being felt. Refining capacity began to creep back up, reaching approximately 6 million bpd in 1990, before stagnating once again, and then growing to its current level of approximately 6.7 million bpd.
Latin America is rich in both human and natural resources, yet many of the region’s economies still are considered as in development or emergent. Many of the region’s governments have moved toward more open markets and liberalisation of the energy sector, while some markets have done the reverse and exerted greater government controls over the energy industry.
Latin America’s refining industry has yet to see the type of boom in expansion and modernisation that occurred in so many Asian and Middle Eastern countries. Yet many projects are moving forward, and the industry is in a period of growth and development. Both upstream and downstream, Latin America remains a centre of vitality in the global oil market.
Author: Nancy Yamaguchi, Contributing Editor, Hydrocarbon Engineering.
The full version of this article can be found in the August 2011 issue of Hydrocarbon Engineering.