Seesawing year for Latin American producers
Brazil was hoping to start a new page in 2018, while Mexico’s new president also announced changes. But Venezuela continued its precipitous decline
In Latin America, a spate of discoveries and licensing rounds attracted a strong uptick in foreign investment.
In Argentina, efforts were underway to counteract the deterioration of its E&P sector. The country, home to abundant shale reserves, has gone from a chief net exporter to a net importer of gas in recent years. To keep its energy industry above water, the government is promoting development of complex reservoirs. The largely undeveloped Vaca Muerta shale, in particular, is said to hold upwards of 16bn barrels of oil and 308tr cf of recoverable gas. After numerous incentives were proposed by President Mauricio Macri, in an effort to reduce the high cost associated with development of unconventional wells, international oil majors and investors showed interest in the region.
Several majors partnered with state-owned YPF to explore the coveted shale formation. Norway's Equinor (formerly Statoil) and YPF entered an agreement to explore the Bajo del Toro Block of the Neuquén basin. Holding 50pc each, the companies will jointly explore the 38,800-acre block in Argentina's western region. Equinor was subsequently awarded the Bajo del Toro Este exploration license, committing to one wildcat within its four-year exploration period, beginning in 2018.
Latin America's blackspot in 2018 was Venezuela. Output dropped to 1.19mn bl/d in September, according to Opec figures, down more than 700,000-bl/d since the start of the year. Contributing factors to its precipitous decline were an exodus of skilled workers, difficulties sourcing diluent for use in Orinoco extra-heavy oil production, the collapse of investment to sustain mature fields, currency devaluation, hyper-inflation and a spiralling debt crisis.
Elsewhere, Brazil's licensing round sparked intense interest and expectations that its production will soon begin to rise well above its current 2.7mn b/d. Brazil's pre-salt layer remains a hotspot for explorers. The attractiveness of pre-salt blocks in the deep waters of the Campos and Santos basins helped bring in billions during the country's latest licensing round.
700,000bl/d—the amount of oil production Venezuela had lost by September from the start of the year
During Brazil's 15th licensing round, Equinor, with several major partners, further strengthened its position in the deep waters of Brazil with winning bids for four blocks in the southern part of the Campos basin. Other key players, including Shell and ExxonMobil, also won deep-water blocks during the licensing round. Wintershall, however, bolstered its position in a big way, becoming the country's fourth-largest producer with newly-awarded interests in seven licenses. As operator of four of those licenses, the company said the areas "show huge potential."
In April 2018, Petrobras reported the start of production at Bùzios field, one of its principal pre-salt projects. The P-74 platform, located off the coast of Rio de Janeiro, reportedly is the 13th platform to begin producing in the Brazilian pre-salt. According to Petrobras, the field's potential for high output is cause for the four additional platforms that are planned through 2021.
Following a series of major discoveries by ExxonMobil, Guyana has become a highly sought-after region for explorers. As yet, Guyana has not been an oil producer. However, Wood Mackenzie says it anticipates that the country will be one of Latin America's top producers by 2026, with an estimated output of approximately 350,000 to 400,000bl/d.
In January 2018, ExxonMobil's sixth Stabroek Block discovery was reported. The Ranger-1 exploration well encountered about 230 ft of high-quality, oil-bearing carbonate reservoir, after it was drilled to a depth of 21,161 ft in 8,973 ft of water. "This discovery proves a new play concept for the 6.6-mn acre Stabroek Block, and adds further value to our growing Guyana portfolio," Steve Greenlee, president of ExxonMobil Exploration Co., said in a release. Just one month later, ExxonMobil, with partners Hess Guyana Exploration (30pc) and CNOOC Nexen Petroleum Guyana (25pc), reported its seventh discovery in the Stabroek Block, at the Pacora-1 exploration well. The well, which was drilled approximately 4 miles west of the Payara-1 well, encountered about 65 ft of high-quality, oil-bearing sandstone reservoir. It was drilled to a depth of 18,363 ft, in a water depth of 6,781 ft. According to the company, it will be developed in combination with Payara field, helping to bring Guyana output to more than 500,000bl/d.
Mexico's last deep water offering in January, before July's presidential election, saw the government award 19 out of 29 contracts on offer in three deep offshore areas. The total prospective investment under the tender neared $100bn, as modifications to the tender terms made the round the most successful to date.
President López Obrador and his team focused their efforts on minimising imports of refined product from the US, with which Mexico runs a sizeable product deficit. Mexico's six refineries are ailing due to lack of investment and government rent-seeking. On 27 July, López Obrador announced that a seventh refinery would be built in his home state of Tabasco at a cost of 160bn pesos ($8.5bn) and that the existing facilities would be upgraded (49bn pesos).