Why South America Is Big Oil’s New Favorite Continent
By Matthew Smith - Aug 23, 2021
South America continues to feature prominently among petroleum industry headlines. Offshore Brazil and Guyana have become the focal point of what is shaping up to be the continent’s two biggest oil booms, while Venezuela’s once mammoth oil industry has nearly collapsed. Ongoing wrangling within OPEC plus over production cuts, with the United Arab Emirates disagreeing with Saudi Arabia at the last meeting, is putting considerable pressure on oil prices. The international oil price benchmark Brent has lost 16% since soaring to over $78 per barrel in early July 2021 primarily due to uncertainty over OPEC plus production and the impact of the coronavirus delta variant on global energy demand. These latest events, however, are not deterring big oil from investing in South America.
Argentina’s hydrocarbon sector, notably the exploitation of the vast Vaca Muerta shale oil play, is gaining considerable momentum after national oil company YFP, which is leading the charge, narrowly avoided a debt default earlier this year. Even the latest market ructions have done little to blunt spending and activity in the Vaca Muerta. Earlier this year Omar Gutierrez, governor of Neuquen province, where most of the shale play is located, stated that the Vaca Muerta will attract $3.8 billion of investment. Such a significant injection of capital will progress the exploitation of the shale formation which Buenos Aires views as a silver bullet for Argentina’s economic woes.
It is national oil company YPF that is spearheading the exploitation of the Vaca Muerta budgeting $1.5 billion in Neuquen province alone to be spent on exploration and development activities to boost oil reserves and production. Big oil is also investing heavily in the Vaca Muerta, including developing vital energy infrastructure such as pipelines and processing facilities.
This includes energy supermajor Shell which earlier this year committed to drilling 100 wells in the shale formation during 2021 and 2022. The integrated energy company also allocated $80 million to construct a 120,000 barrel per day pipeline connecting its Sierras Blancas block in the Vaca Muerta to the town of Rio Allen. Shell also commenced a 30,000 barrel per day processing plant on its Vaca Muerta acreage during June 2021. Growing investment in the Vaca Muerta saw Neuquen’s governor announced he anticipates provincial oil production by the end of 2021 of 235,000 barrels per day which represents a 47% year over year increase. That will further cement Neuquen as being Argentina’s leading hydrocarbon producing province which for the first half of 2021 pumped 36% of the Latin American nation’s crude oil and 55% of its natural gas.
Momentum is even picking up in Colombia where the economically crucial oil industry has suffered a series of setbacks since the March 2020 oil price crash. Recent nationwide anti-government protests, an emerging security crisis, growing political uncertainty, and the pandemic have all impacted the beaten-down hydrocarbon sector hard. Investment during 2020 fell by 49% year over year to $2.05 billion while annual crude oil production declined by nearly 12% to an average of 781,300 barrels per day. By June 2021 petroleum output had plunged to an average of 694,151 barrels per day, the lowest level in over a decade, because of heightened political turmoil and nationwide anti-government protests.
Despite these problems and a sharp decline in production the national government in Bogota as well as the leading industry body, the Colombian Petroleum Association (ACP – Spanish initials), are optimistic regarding the future of Colombia’s economically vital oil industry. The ACP stated in early (Spanish) 2021 that investment in Colombia’s beaten down petroleum industry could reach up to $3.45 billion or a notable 68% greater than a year earlier. Even recent anti-government protests and an emerging security crisis will not deter that significant uptick in investment, particularly with the international benchmark Brent trading at over $65 per barrel well above Colombia’s average breakeven price.
Earlier this year Colombia’s hydrocarbon regulator, the National Hydrocarbon Agency (ANH – Spanish initials) unveiled its 2021 bid round (Spanish). A total of 32 hydrocarbon blocks comprised of 23 onshore and 9 offshore contracts are being offered. Colombia’s energy minister Diego Mesa believes this will attract much-needed investment to boost urgently required oil reserves and production. Bogota is focused on promoting offshore drilling in the Caribbean Sea to offset aging onshore oil fields with high decline rates where production is regularly interrupted by community blockades and pipeline outages, usually caused by acts of sabotage. For those reasons, Mesa expects Colombia’s oil production to rebound and average around 790,000 barrels per day during 2021. While that appears ambitious, if drillers aren’t roiled by the latest decline in oil prices, it is feasible with output averaging 729,808 during the first six months of 2021 and the rig count steadily rising to 19 operation drill rigs at the end of July.
The Guyana-Suriname basin is attracting considerable attention with new offshore oil discoveries being since the start of 2021. The former British colony of Guyana is on track to become a leading regional oil producer with Exxon and its partners Hess and CNOOC experiencing outstanding success in the offshore Stabroek Block. Exxon has identified around nine billion barrels of recoverable oil resources and late last month made its 21st discovery in the Stabroek Block at the Whiptail-1 well. The energy supermajor’s Liza Phase One operation reached full capacity pumping around 130,000 barrels per day during March 2021. Exxon is in the process of developing Liza Phase 2 and the Payara projects which will see it pumping around 750,000 barrels per day from the Stabroek Block by 2026.
The former Dutch colony of Suriname is fast becoming one of South America’s hottest offshore drilling locations. TotalEnergies, which is the operator, and partner Apache has made five quality medium-to-light grade crude oil discoveries in offshore Block 58. The latest being the Sapakara South-1 well 4 kilometers south-east of the Sapakara West-1 discovery. Next for TotalEnergies is targeting the Bonboni prospect in Block 58. It is estimated that Block 58 contains up to 6.5 billion barrels of recoverable oil resources and production will commence in 2025 with Suriname’s crude oil output expected to hit 650,000 barrels daily by 2030. Suriname’s national oil company and industry regulator Staatsolie recently awarded three shallow-water contracts with Chevron winning block 5 and TotalEnergies with partner Qatar Petroleum being awarded blocks 6 and 8. That will generate further investment and exploration activity in offshore Suriname.
Related: Japan’s Strategic Plan For LNG May Be Unrealistic
Brazil, Latin America’s largest oil producer, should not be forgotten. In the space of a decade, the region’s largest economy has expanded its oil output by nearly 40% from 2.17 million barrels per day in 2011 to 3.03 million barrels daily during 2020. Brazil’s oil production continues to expand at a steady clip as national oil company Petrobras and foreign energy majors ramp up investment. Toward the end of 2020, Petrobras announced plans to invest $55 billion from 2021 to 2025 to develop Brazil’s subsalt oil fields with the company estimating that oil production will reach 2.7 million barrels per day by 2025.
Key to that plan is developing the 210,000-acre Buzios oilfield which has an installed capacity of 600,000 barrels per day and is pumping around 569,648 barrels of sweet medium grade crude oil daily. Demand for Buzios grade crude oil has grown at a rapid clip since the introduction of IMO 2020 in January last year significantly reduced the sulfur content of marine bunker fuels. This has seen it become particularly popular among refiners in China, which is a major global shipping hub.
The low carbon intensity of Brazil’s sweet medium and light crude oil grades makes the country’s offshore pre-salt fields particularly attractive for energy majors, especially in a world where there is growing pressure to decarbonize the global economy. TotalEnergies, which holds a 20% interest, announced in early August 2021 that along with its partners Petrobras (40%), Shell (20%), and CNOOC (10%) it was proceeding with the development of the Mero 4 project in the Libra Block. On completion of the Mero project in 2024, the Libra Block will have an installed capacity of 720,000 barrels per day. For these reasons, Brazil is now one of the top global destinations for investment in crude oil projects. That, according to energy minister Bento Albuquerque, will see Brazil pumping 5.3 million barrels per day by 2030, which is 75% higher than 2020, making Latin America’s largest economy the world’s fifth-biggest oil exporter.
South America is fast emerging as one of the world’s hottest drilling locations with offshore exploration and projects in Guyana, Suriname and Brazil set to drive reserves and production higher. The high-quality low sulfur content oil found in offshore South America is particularly attractive to oil majors seeking to reduce their carbon footprint and reach emissions goals to please investors. The continent, even if Venezuela’s oil industry fails to recover, could be pumping more than nine million barrels per day by the end of this decade, with Brazil the leading producer.
By Matthew Smith for Oilprice.com
https://oilprice.com/Energy/Crude-Oil/Why-Sou...inent.html
By Matthew Smith - Aug 23, 2021
South America continues to feature prominently among petroleum industry headlines. Offshore Brazil and Guyana have become the focal point of what is shaping up to be the continent’s two biggest oil booms, while Venezuela’s once mammoth oil industry has nearly collapsed. Ongoing wrangling within OPEC plus over production cuts, with the United Arab Emirates disagreeing with Saudi Arabia at the last meeting, is putting considerable pressure on oil prices. The international oil price benchmark Brent has lost 16% since soaring to over $78 per barrel in early July 2021 primarily due to uncertainty over OPEC plus production and the impact of the coronavirus delta variant on global energy demand. These latest events, however, are not deterring big oil from investing in South America.
Argentina’s hydrocarbon sector, notably the exploitation of the vast Vaca Muerta shale oil play, is gaining considerable momentum after national oil company YFP, which is leading the charge, narrowly avoided a debt default earlier this year. Even the latest market ructions have done little to blunt spending and activity in the Vaca Muerta. Earlier this year Omar Gutierrez, governor of Neuquen province, where most of the shale play is located, stated that the Vaca Muerta will attract $3.8 billion of investment. Such a significant injection of capital will progress the exploitation of the shale formation which Buenos Aires views as a silver bullet for Argentina’s economic woes.
It is national oil company YPF that is spearheading the exploitation of the Vaca Muerta budgeting $1.5 billion in Neuquen province alone to be spent on exploration and development activities to boost oil reserves and production. Big oil is also investing heavily in the Vaca Muerta, including developing vital energy infrastructure such as pipelines and processing facilities.
This includes energy supermajor Shell which earlier this year committed to drilling 100 wells in the shale formation during 2021 and 2022. The integrated energy company also allocated $80 million to construct a 120,000 barrel per day pipeline connecting its Sierras Blancas block in the Vaca Muerta to the town of Rio Allen. Shell also commenced a 30,000 barrel per day processing plant on its Vaca Muerta acreage during June 2021. Growing investment in the Vaca Muerta saw Neuquen’s governor announced he anticipates provincial oil production by the end of 2021 of 235,000 barrels per day which represents a 47% year over year increase. That will further cement Neuquen as being Argentina’s leading hydrocarbon producing province which for the first half of 2021 pumped 36% of the Latin American nation’s crude oil and 55% of its natural gas.
Momentum is even picking up in Colombia where the economically crucial oil industry has suffered a series of setbacks since the March 2020 oil price crash. Recent nationwide anti-government protests, an emerging security crisis, growing political uncertainty, and the pandemic have all impacted the beaten-down hydrocarbon sector hard. Investment during 2020 fell by 49% year over year to $2.05 billion while annual crude oil production declined by nearly 12% to an average of 781,300 barrels per day. By June 2021 petroleum output had plunged to an average of 694,151 barrels per day, the lowest level in over a decade, because of heightened political turmoil and nationwide anti-government protests.
Despite these problems and a sharp decline in production the national government in Bogota as well as the leading industry body, the Colombian Petroleum Association (ACP – Spanish initials), are optimistic regarding the future of Colombia’s economically vital oil industry. The ACP stated in early (Spanish) 2021 that investment in Colombia’s beaten down petroleum industry could reach up to $3.45 billion or a notable 68% greater than a year earlier. Even recent anti-government protests and an emerging security crisis will not deter that significant uptick in investment, particularly with the international benchmark Brent trading at over $65 per barrel well above Colombia’s average breakeven price.
Earlier this year Colombia’s hydrocarbon regulator, the National Hydrocarbon Agency (ANH – Spanish initials) unveiled its 2021 bid round (Spanish). A total of 32 hydrocarbon blocks comprised of 23 onshore and 9 offshore contracts are being offered. Colombia’s energy minister Diego Mesa believes this will attract much-needed investment to boost urgently required oil reserves and production. Bogota is focused on promoting offshore drilling in the Caribbean Sea to offset aging onshore oil fields with high decline rates where production is regularly interrupted by community blockades and pipeline outages, usually caused by acts of sabotage. For those reasons, Mesa expects Colombia’s oil production to rebound and average around 790,000 barrels per day during 2021. While that appears ambitious, if drillers aren’t roiled by the latest decline in oil prices, it is feasible with output averaging 729,808 during the first six months of 2021 and the rig count steadily rising to 19 operation drill rigs at the end of July.
The Guyana-Suriname basin is attracting considerable attention with new offshore oil discoveries being since the start of 2021. The former British colony of Guyana is on track to become a leading regional oil producer with Exxon and its partners Hess and CNOOC experiencing outstanding success in the offshore Stabroek Block. Exxon has identified around nine billion barrels of recoverable oil resources and late last month made its 21st discovery in the Stabroek Block at the Whiptail-1 well. The energy supermajor’s Liza Phase One operation reached full capacity pumping around 130,000 barrels per day during March 2021. Exxon is in the process of developing Liza Phase 2 and the Payara projects which will see it pumping around 750,000 barrels per day from the Stabroek Block by 2026.
The former Dutch colony of Suriname is fast becoming one of South America’s hottest offshore drilling locations. TotalEnergies, which is the operator, and partner Apache has made five quality medium-to-light grade crude oil discoveries in offshore Block 58. The latest being the Sapakara South-1 well 4 kilometers south-east of the Sapakara West-1 discovery. Next for TotalEnergies is targeting the Bonboni prospect in Block 58. It is estimated that Block 58 contains up to 6.5 billion barrels of recoverable oil resources and production will commence in 2025 with Suriname’s crude oil output expected to hit 650,000 barrels daily by 2030. Suriname’s national oil company and industry regulator Staatsolie recently awarded three shallow-water contracts with Chevron winning block 5 and TotalEnergies with partner Qatar Petroleum being awarded blocks 6 and 8. That will generate further investment and exploration activity in offshore Suriname.
Related: Japan’s Strategic Plan For LNG May Be Unrealistic
Brazil, Latin America’s largest oil producer, should not be forgotten. In the space of a decade, the region’s largest economy has expanded its oil output by nearly 40% from 2.17 million barrels per day in 2011 to 3.03 million barrels daily during 2020. Brazil’s oil production continues to expand at a steady clip as national oil company Petrobras and foreign energy majors ramp up investment. Toward the end of 2020, Petrobras announced plans to invest $55 billion from 2021 to 2025 to develop Brazil’s subsalt oil fields with the company estimating that oil production will reach 2.7 million barrels per day by 2025.
Key to that plan is developing the 210,000-acre Buzios oilfield which has an installed capacity of 600,000 barrels per day and is pumping around 569,648 barrels of sweet medium grade crude oil daily. Demand for Buzios grade crude oil has grown at a rapid clip since the introduction of IMO 2020 in January last year significantly reduced the sulfur content of marine bunker fuels. This has seen it become particularly popular among refiners in China, which is a major global shipping hub.
The low carbon intensity of Brazil’s sweet medium and light crude oil grades makes the country’s offshore pre-salt fields particularly attractive for energy majors, especially in a world where there is growing pressure to decarbonize the global economy. TotalEnergies, which holds a 20% interest, announced in early August 2021 that along with its partners Petrobras (40%), Shell (20%), and CNOOC (10%) it was proceeding with the development of the Mero 4 project in the Libra Block. On completion of the Mero project in 2024, the Libra Block will have an installed capacity of 720,000 barrels per day. For these reasons, Brazil is now one of the top global destinations for investment in crude oil projects. That, according to energy minister Bento Albuquerque, will see Brazil pumping 5.3 million barrels per day by 2030, which is 75% higher than 2020, making Latin America’s largest economy the world’s fifth-biggest oil exporter.
South America is fast emerging as one of the world’s hottest drilling locations with offshore exploration and projects in Guyana, Suriname and Brazil set to drive reserves and production higher. The high-quality low sulfur content oil found in offshore South America is particularly attractive to oil majors seeking to reduce their carbon footprint and reach emissions goals to please investors. The continent, even if Venezuela’s oil industry fails to recover, could be pumping more than nine million barrels per day by the end of this decade, with Brazil the leading producer.
By Matthew Smith for Oilprice.com
https://oilprice.com/Energy/Crude-Oil/Why-Sou...inent.html
