The International Energy Agency (IEA) expects global oil production to increase this decade, even though the world is in the midst of a climate change crisis, which appears to be a stark contrast.
Experts project that in the coming years the international market will continue to demand a greater amount of crude oil, although before the end of this decade the trend should be reversed as renewables gain ground over fossil fuels.
Until that happens, black gold will continue to spin the engines of the international economy.
In this context, the IEA estimates that world oil production will increase by 5.8 million barrels per day by 2028, and about a quarter of that additional supply will come from Latin America.
Who will be the leaders of this new boom?
Brazil, Guyana, and, to a lesser extent, Argentina are three countries leading a new chapter in the Latin America’s oil production.
The era dominated by nations such as Venezuela, Mexico, Ecuador, and Colombia that, for various reasons, will reduce the supply of crude oil on the international market in the next five years, according to the IEA, is likely to be left behind.
“It’s very difficult for these countries to reverse their decline,” Francisco Monaldi, director of the Latin American Energy Program at the Baker Institute at Rice University, told BBC News Mundo.
Brazil: the region’s oil leader
Together, Guyana and Brazil will be the main protagonists of the Latin American oil boom.
Under three kilometers of water and five more of rock and salt, the country extracts its fuel source from one of the largest oil fields in the world. The discovery of these pre-salt deposits changed the fate of the country, making it the largest oil producer in Latin America in 2017, surpassing Mexico, which at the time held the lead.
Venezuela, which for years was the oil icon in the region, was in a time of crisis so deep that its production had collapsed.
Thus, in the last six years, Brazil has not stopped increasing its oil production until it reaches 2.2 million barrels in 2022, which has allowed it to become the eighth largest producer in the world.
But it’s not just about the number of barrels per day each country produces. Both Brazil and Guyana produce crude oil more efficiently and profitably than other countries.
And as for the polluting effects of this fossil fuel, which is one of the main causes of the climate crisis that the world is experiencing, the two countries emit a smaller amount of CO2 per barrel produced compared to the world average, Monaldi argues.
Guyana
Guyana is one of the smallest and poorest countries in South America, with a population of approximately 800,000 people. Or so it seemed until 2015, when ExxonMobil discovered the first of its proved crude oil reserves, estimated to be over 11 billion barrels, deep in the Atlantic Ocean.
Taking advantage of the strong demand for oil that will be present in this decade, Guyana’s production is accelerating, and it is believed that by 2028 it could reach 1.2 million barrels per day.
“If the projections come to fruition, Guyana will become the country that produces the most barrels per inhabitant in the world, surpassing Kuwait,” Monaldi explains.
In this scenario, Guyana would go from a poor country to a rich country (considering per capita wealth), given the spectacular increase in its Gross Domestic Product (GDP), which last year rose by 57.8% and this year is forecast to rise by 37.2%.
Argentina
In third place is Argentina, which, despite having inflation above 100% per year and a chronic debt crisis, has seen its oil (and gas) production grow in recent years.
At the center of this development is Vaca Muerta, a gigantic field located in the northwest of the country that has the world’s second-largest reserves of shale gas and the fourth-largest of shale oil.
Both resources are extracted in an “unconventional” format, as it is called, by the hydrocarbons that must be extracted from the generating rock by the technique of fracking (or hydraulic fracturing).
The projections for the development of the Argentine oil industry are positive.
The IEA expects production to reach 700,000 barrels per day this year, and some estimates suggest it could reach 1 million barrels per day by the end of this decade, according to consultancy Rystad Energy.
However, after 2030, projections point to a decline because conventional oil production is expected to continue falling and shale production is not expected to be enough to compensate.
If the predicted scenario materializes, the great jump in oil trade would last a few years until it reached lower levels of production.
Experts say it is also necessary to take into account that unconventional production requires large, long-term investments. This requires a guarantee of stability in the sector’s policies, something that in Argentina is difficult to predict.
Falling Behind
The historic leaders of oil production in the region have lagged behind. In Mexico, production peaked in 2004 and has since halved.
To try to improve the situation, the government of Andrés Manuel López Obrador tried to promote the development of Pemex, the state oil company, but so far it has not achieved the expected results.
Although the government gave the company millions of dollars in tax breaks and other financial aid, Pemex has failed to recover.
With more than US$100 billion (about R$490 billion) in debt, Pemex is the most indebted oil company in the world.
“In addition to being a company with commercial purposes, it also operates for political purposes, Production has stopped,” says Diego Rivera, a research associate at Columbia University’s Center for Global Energy Policy in the United States.
Venezuela
Venezuela’s state-owned company, PDVSA, has had a sharp fall, closely linked to the deep economic and political crisis affecting the country.
Venezuelan oil production, mostly heavy and dense, has plummeted from 3.4 million barrels per day in 1998 to 700,000 today.
“What is happening in Venezuela is a brutal fall that can be explained by reasons ranging from negligence to corruption,” Rivera said.
Ecuador
in the case of Ecuador, expert projections point to a drop from the current 460,000 barrels per day to 370,000 in 2028. Such a decline would hit the country hard because its economy depends on oil revenues more than any other country in Latin America.
Colombia
Meanwhile, Colombia is moving in another direction. The government of President Gustavo Petro intends to advance in the country’s energy transition, gradually reducing oil production.
Recently, licenses were granted for renewable energy projects in the province of La Guajira, with the expectation that the clean energy produced by that region will provide all the electricity that the country needs.
The idea is that this type of project will make up for the drop in oil exports without harming the economy, but some experts are quite skeptical about the possibility of this goal being achieved in the coming years.
“If the world reaches the goal of net zero emissions by 2050, the region will fare very badly,” Monaldi says.
“But if we go to the other extreme, to the scenario predicted by the Organization of the Petroleum Exporting Countries (OPEC), in which there is a plateau in demand instead of a fall, Latin America would do very well, because it is the region with the most oil resources in the world, after the Middle East,” expert says.
