In 2024, energy investors interested in Latin America will find the most attractive opportunities arguably linked to developments in Argentina, Brazil, Guyana, Mexico and Venezuela. That’s if they can hold their nerves amid ongoing uncertainties mainly tied to politics in many of the countries.
The five countries, rich in hydrocarbons, offer opportunities in conventional oil and gas, heavy oil, pre-salt and shale oil and gas, offshore exploration as well as piped-gas and LNG exports.
Argentina’s Vaca Muerta Shale formation could assist the country in joining the global league of LNG exporters. Exploration offshore Brazil and Guyana now lends itself to massive FPSO deployments. Mexico, which still relies on piped-gas imports from the U.S., will soon export its initial LNG cargoes, while investors eyeing Venezuela have another opportunity as Washington eased some sanctions—a development that bodes well for boosting oil production and starting gas exports to Trinidad and Tobago.
But with those opportunities come formidable headwinds—spanning economic, financial and infrastructure needs —all primarily rooted in political uncertainty. In 2024, presidential elections will grab the spotlight in Mexico and Venezuela, but politics will likely dog all five countries.
‘Dead cow’ dreams
Argentina continues with its quest to attract capital from skittish foreign investors — something the country could continue to address through changes in its laws. Uncertainties will reign over the near term as newly elected president Javier Milei, who won the November election over economic minister Sergio Massa, settles in and begins to formulate policy.
Argentina has technically recoverable shale gas resources of 802 Tcf—of which 308 Tcf are found in the Neuquén Basin, second only to China’s 1,115 Tcf, according to the U.S. Energy Information Administration (EIA).
Within the Neuquén Basin is the prolific Vaca Muerta or ‘Dead Cow’ formation, which will anchor Argentina’s main oil and gas production opportunities. Rising production has already given way to higher oil and gas exports. And a massive game-changing rise in gas production on the short-term horizon could allow Argentina to reduce its reliance on gas imports and enter the league of global exporters.
Argentina’s aim is to attract around $51 billion in investments over some 15 years. Of that amount, $31 billion will be needed to fund LNG facility capacity and pipelines to transport Vaca Muerta gas to a port at Bahía Blanca in the province of Buenos Aires. Another $20 billion will be needed to develop Vaca Muerta gas blocks to boost production.
A rise in Vaca Muerta production will paramount to feed a 25 million tonnes per annum (mtpa) LNG facility with Atlantic Ocean access proposed by state-owned YPF SA and its Malaysia counterpart, Petronas. The first stage of the facility will have an installed capacity of 5 mtpa, while subsequent stages would add 20 mtpa, according to YPF, which expects the first module could be installed by 2028.
Brazil’s exploration fades, developments rise
Brazil is Latin America’s largest oil producer and poised to be a key source of growth over the medium term. President Luiz Inácio Lula da Silva hasn’t said or done anything yet to drastically change investor confidence but his last term was marked by the “Operacão Lava Jato” or “Operation Car Wash” scandal involving allegations of bribery.
Efforts to explore offshore Brazil have solidified the resources available in Brazil’s pre-salt formation —one that will drive long-term production growth along with new frontier basins, such as the equatorial margin, among others.
Brazil is on the cusp of achieving production of 5 MMboe/d with production of 4.7 MMboe/d (3.67 MMbbl/d of oil and 157.99 MMcm/d) in September 2023, according ANP, the country’s oil regulator. For Brazil, the volumes were the highest ever recorded, surpassing a record of 4.5 MMboe/d in July 2023. In September, pre-salt accounted for 77% of production and offshore fields accounting for 97.6% of the oil and 87.2% of the gas.
However, Brazil’s reputation as an offshore exploration hotspot has been somewhat relegated to the lower leagues amid Guyana’s quick rise and discovery after discovery. Nevertheless, Brazil still has an impressive story for producers and investors as the country focuses on bringing FPSOs and production online.
State-owned Petrobras aims to bring online 13 FPSOs between 2024-2027 which will add production of around 2.31 MMbbl/d in that four-year window followed by:
- Three FPSOs in 2024 with 505,000 bbl/d of production capacity;
- Three FPSOs in 2025 with 540,000 bbl/d of capacity;
- Two FPSOs in 2026 with 550,000 bbl/d; and
- Five FPSOs in 2027 with 711,000 bbl/d.
That’s on the back of the five FPSOs added in 2023 with 630,000 bbl/d in capacity.
Offshore, the high productivity in the pre-salt formation reinforces Petrobras’ more complex and high-capacity platform strategy. Petrobras expects value generation from the production units will come from higher efficiency in the implementation and operations and increased operational reliability and safety while reducing emissions.
Guyana production and discoveries rise
Guyana is the newest country in Latin America to join the oil production and exporting club. The country’s initial production started in late 2019 and first exports followed shortly. Since then, production has been in a gradual upward stair-step trend and shows no signs of slowing anytime soon.
Guyana is on track to be amongst the top three oil-producing countries in Latin America by 2030, which based on current developments would put it behind only Brazil and Mexico. While Guyana remains politically stable, a spat brewing with neighboring Venezuela over the disputed Essequibo region is something to watch.
So far, Guyana’s success has been limited to its prolific offshore Stabroek Block where an Exxon Mobil-led consortium that includes Hess Corp. (which is on track to be acquired by Chevron Corp. in a $53 billion all-stock deal) and China’s CNOOC found gross recoverable resources estimated at approximately 11 Bboe.
Offshore production is expected to reach 620,000 bbl/d in the first half of 2024, according to the three consortium partners with the recent startup of a third development.
Guyana’s third Stabroek development, Payara, initiated operations in November 2023 and is expected to hit its nameplate production capacity of 220,000 bbl/d over the next seven months, if not sooner, as new wells are brought online. Payara’s production will add to Guyana’s first Stabroek development Liza Phase 1 and Liza Phase 2, which combined are producing around 400,000 bbl/d.
Two additional projects in Stabroek are in progress. The fourth development, Yellowtail, will add production of 250,000 bbl/d, while the fifth, Uaru, will add another 250,000 bbl/d. Exxon continues to work with the Guyana government to secure regulatory approvals for a sixth development called Whiptail.
Exxon expects to have six FPSOs in Stabroek with a production capacity of 1.2 MMbbl/d by year-end 2027, while Hess continues to reiterate the potential forup to 10 FPSOs to develop the current recoverable resources in Stabroek.
Mexico’s eye on U.S. gas to anchor LNG exports
Mexico, like Argentina, is chasing what it hopes will be lucrative LNG exporting capability. Mexico plans to start exporting its initial LNG cargoes in late-2023 or early-2024 and join the Latin America LNG exporting club, which already includes Peru and Trinidad and Tobago. It’s no longer a matter of if but when for Mexico, regardless of 2024’s presidential election.
The elections aren’t expected to produce a surprise in terms of a wild-card candidate and the top two forerunners, Claudia Sheinbaum and Xóchitl Gálvez, aren’t likely to rock Mexico’s energy boat enough to spook investors. If anything, one or the other could prove more enticing to foreign money. Neither woman is right-leaning and Sheinbaum is a climate scientist while Gálvez is pro-renewables.
Beyond Mexico’s political uncertainties, the U.S. also has to contend with its own political uncertainties around aspiring presidential candidate Donald Trump and what a potential second term could bring in terms of U.S.-Mexico relations.
Trump or no Trump, continued oil-related drilling in the Permian Basin will lend itself to higher associated gas production that can increasingly feed more Mexican-domiciled LNG export plants. That come on top of average piped-gas volumes of 6 Bcf/d in the first half of 2023 that U.S. sent south of the border for internal use by Mexico’s electric power sector.
If Mexico is able to push forward with actual, approved and planned liquefaction plants, it could bring to market around 32 mtpa over the near-to-medium term, according to Rystad Energy. Estimates from BTU Analytics, a FactSet Company, put Mexico’s ultimate liquefaction capacity at around 45 mtpa.
While Mexico’s political environment presents some uncertainty, private investors such as New Fortress and Sempra continue to move related projects forward. Three projects under construction would add 1.1 Bcf/d by 2026 and include: Fast LNG Altamira and Fast LNG Lakach, both on Mexico's East Coast, and Energia Costa Azul on Mexico's West Coast.
At Fast LNG Altamira, which will have three units with 0.18 Bcf/d capacity each (a combined 0.54 Bcf/d), offshore exports could flow in December 2023, while onshore exports could begin in 2025. At Fast LNG Lakach, which will have one unit with 0.18 Bcf/d capacity, first exports are expected in 2026. At Energia Costa Azul LNG, which will have an initial capacity of 0.4 Bcf/d (Phase 1) while a later facility will have a capacity of 1.6 Bcf/d(Phase 2).
Venezuela’s sanctions relief opens window
Venezuela—home to 304 Bbbls in proven reserves, the world’s largest, and enough to last more than 1,000 years based on current production as well as the world’s seventh largest gas reserves—is back on the hydrocarbon map for now. That’s in great part due to a General License Nov. 44, issued in October by the U.S. Office of Foreign Assets Control (OFAC). The license opens a brief window of opportunity for companies interested in returning to or assuming new investments in the OPEC country.
U.S. sanctions imposed in 2019 by the Trump administration weighed heavily on the Caribbean country’s economy. But the recent OFAC license, coupled with an earlier one, General License No. 41, issued to Chevron Corp., turned attention on Venezuela’s production potential. Production averaged 800,000 bbl/d in October, a far cray fromthe high of 3.23 MMbbl/d in 1997, according to OPEC figures from secondary sources.
Moves by the White House come after a Venezuelan-led political agreement in early October in Barbados raised hopes of Venezuela achieving Washington’s much sought-after “free and fair” elections in 2024. However, investors shouldn’t let down their guards as Washington has already warned Venezuela’s President Nicolás Maduro that General License No. 44, which is only good for six months, could be revoked if the Venezuelan leader is doing his part to facilitate the electoral process the U.S. wants.
Additionally, an on-again, off-again spat between Venezuela and Guyana over the disputed Essequibo territory located between both countries is gaining momentum. Venezuela continues to claim that so-called aggressions by Guyana come under mandates from Exxon and the U.S. Southern Command as part of a plan by Washington to rob its resources. A planned referendum in Venezuela regarding the territory raised red flags in Georgetown, Guyana as well as Washington as Maduro said his country is prepared to protect the Essequibo region “by all means, according to/with the law.”
While Venezuela’s above-ground uncertainties continue to garner attention, many energy investors are seemingly focused on the remaining upstream opportunities as the world continues to demand hydrocarbons despite calls to decarbonize.
Near-term investments by Chevron and other companies could push Venezuela’s oil production above the 1 MMbbl/d mark in 2024 and allow Venezuela to export gas to Trinidad and Tobago if Washington doesn’t walk back recent actions around sanctions. Further production gains will require a longer licensing period, which will likely only come about through “free and fair” elections, and massive investments in the double-digit billions of dollars over multiple years, energy sector pundits argue.
Amos Global Energy CEO and president Ali Moshiri, who formerly headed Chevron’s Latin America and Africa business, believes the investments in Venezuela will likely come in three waves.
An initial wave could take Venezuela’s production to around the 1.2 MMbbl/d market in around two-to-three years. A second wave could increase production to around 2.5 MMbbl/d and would require foreign investments of around $60 billion, and thereafter there could be another investment wave, according to Moshiri.