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Central and South America could become net oil and gas importers

Bnamericas Published: Wednesday, March 21, 2018

Growing indigenous demand means that Central and South America are on the brink of becoming net importers of oil and gas unless the region attracts more investment, the international association of oil & gas producers (IOGP) and the Latin American oil, gas and biofuels association (ARPEL) claim.

Their report, says however, that given the geological potential and increasingly equitable tax and fiscal regimes in most countries, the future looks promising.

The report focuses on indicators that balance the region's production of oil or gas against its indigenous demand. A production indicator score of 100% or more means a region is self-sufficient; 99% or less requires imports to meet demand.

Central and South America's production indicator for oil is 107%, which means that for the first time in more than 30 years, the region is on the verge of losing its oil self-sufficiency, despite holding 20% of the world's crude reserves. Regional production growth is predicted to be led by Brazil. Offshore opportunities in Guyana and Suriname could improve the region's score, as would any move on Venezuela's part to attract investment.

The situation is similar for natural gas, with a regional production indicator of 103%. Recent production increases in Bolivia, Brazil, Colombia and Peru are encouraging, the report says, as is the recovery of gas production in Argentina, particularly unconventional gas in Vaca Muerta.

"Recognition of rising local demand for both oil and gas means that producers and governments alike are working together with a renewed sense of commitment to enable Central and South America to live up to its potential," ARPEL upstream director Miguel Moyano said.

Also, according to the report's figures, Brazil has surpassed Venezuela as a producer of oil.

The report finds that the two principal gas producers in the region, Argentina and Venezuela, are losing the lion's share of production. Until around 2000, the two countries were the biggest producers but soon after Trinidad & Tobago became a contender as well.

The top three producers have recently been joined by a number of other countries, which are now producing natural gas to supply their local markets. Whereas Argentina and Venezuela accounted for more than 65% of region's gas production in 2000, this share has fallen to 40% in 2016. Bolivia, Brazil, Colombia and Peru have all become significant gas producers.

"Changes in national policies of most countries are creating more equitable tax and fiscal regimes. These can attract significant investment from national, regional and global players in the upstream oil industry," said Moyano. Major areas of opportunity include offshore Brazil and Guyana; in the latter the huge Stabroek block has yielded five successful wells. Offshore Suriname, still in the exploratory phase is also promising. Great potential also remains in Venezuela and its realization relies on major changes by government to make the country attractive to investors once more.

Challenges include maintaining dialogue and cooperation with governments within the standards of anti-corruption compliance, logistics costs, labor union issues and weak coordination between local and national governments for access to land."

***

In related news, participating OPEC and non-OPEC producing countries have set a new record in February with their voluntary production adjustments, achieving a level of 138%, according to the OPEC-non-OPEC Joint Ministerial Monitoring Committee (JMMC).

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