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Latin America will remain a crude exporting region in the medium term, as refining capacity will fail to meet demand through at least 2018, according to the latest medium-term oil market report from the International Energy Agency (IEA).
However, Brazil is leading the charge in expanding refining capacity, which could be as high as 7.46Mb/d in 2018 compared to 6.15Mb/d at end-2012, with three new refineries on the horizon.
The Abreu e Lima refinery was intended to be a joint venture between Brazil's federal oil major Petrobras (NYSE: PBR) and Venezuelan state firm PDVSA, but the latter has failed to a pay US$5bn commitment it agreed to for 40% stake in the refinery in 2005. The 115,000b/d first phase of the project is expected on line by end-2014 and the 115,000b/d second phase II the following year.
The Comperj refinery and petrochemical project in Rio de Janeiro state is expected to add 330,000b/d capacity by 2018. The report also cites the 300,000b/d Premium II refinery in Ceará state but does not include an in-service date.
The challenge for Brazil will be financing the US$43.2bn downstream budget through 2017, says IEA. The report suggests partners will be necessary to prevent big delays in construction and says Petrobras is already in discussions with China's Sinopec.
Colombia will upgrade two of its refineries in the medium term, according to the report. Modernization of the Reficar refinery will boost capacity to 165,000b/d in 1H14 from 80,000b/d currently. The Barrancabermeja upgrade will expand capacity to 250,000b/d by 3Q17 from 205,000b/d today.
However, Venezuela slightly dampens the outlook for Latin America's growing refining capacity. While PDVSA was eyeing projects to expand capacity by more than 600,000b/d through 2018, last year's Amuay refinery explosion has highlighted the current mismanagement of refineries and put expansion on hold.
Venezuela's refinery capacity through 2018 is expected to increase by 60,000b/d with the Santa Ines project.
Brazil will be the regional leader in output growth through 2018, increasing to 3.19Mb/d from 2.15Mb/d in 2012, the report says.
Several factors are at play over the medium term. One is the ongoing debate over oil revenues, with a law threatening to redistribute revenues evenly among states instead of them being concentrated in oil-producing states.
The medium-term outlook could also be affected by the next set of oil and gas licensing rounds, which will not directly affect production before 2018 but could shift capex in the industry from development to exploration in the period, depending on the results.
Meanwhile, Colombia's medium-term output is dependent on security, transport and technology, and is likely to range between 1.0Mb/d and 1.1Mb/d through 2018.
Colombia's challenge will be to diversify production outside of the Llanos basin where 70% of oil is produced and 80% of reserves sit. The country must also expand pipeline capacity to keep up with production. The 980km Bicentenario line will meet some of this demand in the short term, but the ability to expand the Ocensa line in the medium term will determine their ultimate success.
Finally, Mexico's total liquids production is expected to decrease slightly through 2018 to 2.83Mb/d from 2.92Mb/d in 2012. The medium-term outlook for Mexico is heavily dependent on energy sector reform expected in the second this year, the report says.