Mexico and Venezuela have long been key oil producers of Latin America but with political uncertainty and market volatility mounting, a new generation of oil producing countries are set to transform the region. This includes the tiny country of Guyana, located on the northern tip of South America, where US oil major ExxonMobil is operator in an oil-rich area equivalent to approximately 2,000 Gulf of Mexico blocks.
Bloomberg’s Alix Steel examined the potential for Guyana, Colombia, Brazil and Argentina to transform Latin America into an oil production powerhouse.
The no-go is Venezuela – which holds the world’s largest oil reserves – but is a failed state and getting worse. “It’s going to be very difficult to bring it back in any volume,” says Dan Yergin, Vice Chairman of IHS Market.
It’s not only oil production but it’s the collapse of the whole economy; electricity water and everything else.
Yergin says the areas to go right now are Argentina, Brazil, Colombia and the new big surprise; Guyana, where ExxonMobil has made a record 14 discoveries amounting to more than 6 billion barrels of oil equivalent.
Wood Mackenzie’s Maria Cortez, Latin American Upstream Senior Research Manager, says Guyana is “incredibly cost competitive” and with multiple prospects left to pursue on the Stabroek block, the project is bound to get bigger.
“This is a country that wasn’t really on the radar ten years ago. It wasn’t really until 2015 with the Liza discovery that this country really became relevant in Latin America, but now actually on the global scene as well,” Cortez said.
Tullow Oil also recently made the first discoveries ever to be made outside the prolific Stabroek Block at its Jethro-Lobe and Joe prospects at Orinduik, further derisking the basin and opening up a new shallow low-cost play.
“I am very pleased that we have made back-to-back discoveries in Guyana and successfully opened a new, shallower play in the Upper Tertiary age of the Guyana basin with our second well,” Tullow’s Exploration Director, Angus McCoss has said.
But for Guyana to fully benefit from its new-found oil wealth, it must first develop the institutional and regulatory framework needed to effectively manage the emerging sector. As the country moves towards first oil, now just months away, it has been caught in a political fight which has distracted from much needed preparation at this critical stage.
“Guyana has hit the jackpot,” Cortez said. “If this small South American nation with a population of about 750,000 can properly manage the billions of dollars of revenue about to come its way, it may become the richest corner of the continent.”