The effect of US sanctions on the Venezuelan oil industry, together with the crisis in Mexico’s oil reserves, caused the decline of this crucial sector for the South American economy. Thanks to new oil discoveries in Brazil and Guyana, the region could once again become a world hydrocarbon powerhouse.
Brazil’s national oil company Petrobras made the first deepwater oil discovery in the Santos Basin in 2006, and the first crude was extracted just two years later.
Important world-class discoveries continue to be made in these immense fields, giving Brazil 14.9 billion barrels of proven reserves, according to the regulatory body, the National Agency for Petroleum, Natural Gas, and Biofuels.
“With this, Brazil is the second country in Latin America with the largest reserves of this hydrocarbon, after Venezuela; it ranks 16th worldwide, and there are clear signs that the reserves and production of hydrocarbons in Brazil will continue to grow”, says “Oilprice” columnist Matthew Smith.
The South American giant plans to develop existing basins and increase production to 5.4 million barrels per day by 2029. If this ambitious goal is achieved, Brazil will become the world’s fourth-largest oil producer. In May 2023, the country pumped an average of 3.2 million barrels per day, 11% more than in the same period of the previous year.
“considerable investment is needed in the development of marine hydrocarbon basins, and Petrobras, within its 2023–2027 strategic plan, allocated 64,000 million dollars to the development of exploration and production assets, of which 67% will be invested in pre-salt operations,” Smith said.
By 2027, Petrobras expects to extract 2.5 million barrels of oil per day and another 600,000 barrels of natural gas, with which the company will pump 3.1 million barrels of oil equivalent per day, of which 78% will come from such deposits.
Guyana is making its way after the American company ExxonMobil discovered oil in the territorial waters of the former British colony in 2015. More than 35 discoveries have endowed this impoverished country of some 800,000 inhabitants with more than 11,000 million barrels of oil.
The accelerated development of the Stabroek block, a 27 million-hectare offshore oil field, by ExxonMobil allows Guyana to extract some 400,000 barrels per day.
Georgetown plans to auction 14 blocks in 2023, although for the third time it has been delayed until mid-August 2023 so that the government can finalize changes to the regulatory framework.
Those reforms include the introduction of a new Production Sharing Agreement (APC), which increases royalties from 2% to 10%, lowers the cost recovery cap from 75% to 65%, and introduces a 10% corporate tax. Although these conditions are less advantageous than those obtained by ExxonMobil for the Stabroek block, they are still competitive compared to other countries in the region.
