Guyana could be on course to become the second largest oil producing country in Latin America by the end of this decade, particularly if conditions in neighbouring Venezuela fail to improve and Mexico’s decline in output progresses.
Oil production in the region is currently dominated by Brazil, Mexico, and Venezuela. These countries are responsible for about 75% of the region’s total output.
Brazil’s crude oil production topped 3 million barrels per day for the first time ever in November 2019. The strong output result came on the back of ongoing ramp-up of production at eight new floating production, storage, and offloading facilities. The ramp-up added more than 100,000 bpd to the country’s total production between October and November.
Domestic oil production in Mexico has declined steadily for the past 15 years, falling rapidly from 2.6 million b/d in 2015 to around 1.6 million b/d at the close of 2019.
Meanwhile, plagued by political turmoil and social upheaval, Venezuela’s oil exports plummeted 32% last year to 1.001 million barrels per day as a lack of staff and capital drove output to its lowest level in almost 75 years and U.S. sanctions shrank exports markets.
But Guyana, the newest oil producing country in the region, is poised to rapidly increase production, moving from peak 120,000 barrels a day from its first development offshore which started in December, to well over 1 million barrels per day by the end of the decade. Analysts have said this figure is likely to be higher taking into consideration it only factors in the 16 discoveries made to date at Stabroek Block where potential for more oil strikes remains high and other blocks are also coming into play.
Luiz Hayman, Senior Analyst for the Latin American region at Wood Mackenzie has said that based on the rapid production ramp up in Guyana, the country is on track to be the fourth largest producer in the region but can potentially catapult to the number 2 position, after Brazil.
“Depending on how Mexico and Venezuela perform the next five years, before the end of the decade Guyana could become the second largest producer in Latin America,” he said.
The region could see a small uptick in its oil production in 2020 after four consecutive years of hefty declines, according to analysts at Raymond James & Associates Inc., who point out that Guyana may well make the difference between 2020 being another down year for Latin America as a whole, or a slight up year.
“Guyana stands out as the world’s No. 1 deepwater exploration success story of the past decade,” the analysts said.
Norway-based Rystad Energy forecasts that Guyana’s oil production could reach 1.2 million barrels per day by the end of the decade, lifting total annual oil revenues to about US$28 billion, assuming an oil price of about US$65 per barrel. Government income in the country – projected to be a modest US$270 million or so in 2020 – is forecast to grow rapidly and could reach nearly US$10 billion annually within a decade.