Latin America oil production, excluding Mexico, will grow about 25% by 2028, anchored by Brazil, Guyana and Argentina, the International Energy Agency (IEA) forecasted this week in a new report.
“Total oil supply in non-OPEC+ Latin America grows 1.9 MMbbl/d to 7.5 MMbbl/d by 2028 as low-cost resources tapped in Brazilian offshore pre-salt reservoirs, the Stabroek block in offshore Guyana and the Neuquén Basin in Argentina’s offset declines from the rest of the region,” the IEA said June 14 in its Oil 2023: Analysis and Forecast to 2028 report.
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Energy-rich Latin America has massive oil resources—specifically in the southern hemisphere, Brazil, Guyana and in Argentina’s Vaca Muerta (‘Dead Cow' in English) shale formation, as well as Venezuela’s Orinoco heavy oil belt. However, growth through 2028 will be concentrated in the first three countries.
Vaca Muerta is not dead yet
Argentina will grow production to just over 1 MMbbl/d in 2028 from around 0.78 MMbbl/d in 2023, according to the IEA. The increase comes as the Vaca Muerta has reverted to growth mode after the COVID-19 pandemic slowed activities in 2021-2022.
State-owned Yacimientos Petrolíferos Fiscales (YPF) and BP-backed Pan American are doing their part by boosting the total feet drilled for exploration wells. In 2022, the growth was a reported 15%. In 2021, that increased 128%. In 2023, the growth will be around 20%, the IEA said.
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Oil exports, which rose 45% in 2021, have grown in 2022 and will grow further in 2023 “with completion of the Trans-Andean pipeline revamp, providing a Pacific loading terminal for Argentinian crude and a capacity increase on the existing line to Puerto Rosales on the Atlantic coast,” the IEA said.
Brazil’s pre-salt ramp up continues
Brazil will boost production by 970,000 bbl/d to reach 4.1 MMbbl/d in 2028, with more than 70% of the increase to come from projects led by state-owned Petrobras.
The remaining production gains will come from international oil companies (IOCs) such as TotalEnergies and Shell, as well as national oil companies such as Equinor, China National Offshore Oil Corp. and China National Petroleum Corp., all expanding their reach offshore.
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Brazil’s Santos Basin, responsible for 70% of Brazil’s crude, will claim the major projects and expansions through 2028. However, “with a base production decline rate of between 10%-15% per year, any significant project delays or operational issues could put Brazil’s projected growth at risk,” the IEA said.
The mega multi-phase Mero and Búzios projects will have a combined 15 FPSOs by 2028, of which five are already in service. Including these FPSOs, Petrobras also looks to bring online 15 new FPSOs between 2022 and 2027. Three additional FPSOs, awaiting final investment decisions, would total 360,000 bbl/d of capacity but were not included in the IEA forecast.
“This represents approximately half of the world’s FPSOs put in operation over this timeframe,” the IEA said.
Guyana’s Stabroek emergence
Guyana and its nascent oil sector will continue to grow through 2028, according to the IEA.
A consortium led by Exxon Mobil Corp. can’t seem to stop making discoveries in the prolific offshore Stabroek block, which to date boasts recoverable oil resources of more than 11 Bboe.
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Production in Stabroek commenced in 2019 from the Liza Phase I development. Liza Phase II started in February 2022. A third phase, Payara, is planned for fourth-quarter 2023, and the three more phases envisioned over the next six years will take total production capacity to around 1.2 MMbbl/d, the IEA said.
Venezuela’s missed opportunities
Venezuela, home to the world’s largest oil reserves and sizable non-associated gas reserves, is at risk of stranding the bulk of those reserves amid a global race to net zero and ongoing political uncertainties.
“Venezuela appears to have finally stemmed a long-running decline, with crude oil production rising for a second straight year” to reach 700,000 bbl/d in 2022, the IEA said. “That is still 70% down on 2016, when it stood at nearly 2.5 MMbbl/d.”
Venezuela’s oil capacity, under the reins of state-owned Petroleos de Venezuela (PDVSA), will reach 840,000 bbl/d in 2028. Political changes could give the OPEC country one last window of opportunity to rebuild its energy sector.
“Any recovery in production would require replacing lost professional skills and investment capital now and for the longer term,” the IEA said.
Modest gains are expected this year due to a new U.S. Treasury license—the first issued after U.S. sanctions were imposed in 2019—that allows Chevron Corp. to produce oil, including diluent used to move Venezuela’s heavy and extra heavy oils, as repayment for investments.
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“PDVSA is meanwhile aiming to boost output by reopening wells and carrying out maintenance in its vast Orinoco belt,” the IEA said. “Upgraders managed by foreign joint venture partners in the heavy oil belt have malfunctioned due to lack of maintenance and difficulty sourcing equipment, poor security and corruption.”
Mexico, Peru, Ecuador and Colombia to disappoint
Production in a number of Latin American countries will decline through 2028 due to lower investments and a lack of new projects, the IEA said.
Mexico, which is not included in the IEA’s forecast under Latin America, is expected to post the largest loss among OPEC+ producers after Russia, declining by 500,000 bbl/d to 1.5 MMbbl/d.
Elsewhere, a new government in Colombia led by President Gustavo Petro has changed direction, halting new exploration licenses and planning to use fracking to exploit the country’s shale resources.
In Peru and Ecuador, “the roadmap to increased volumes remains unclear,” the IEA said.