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CERAWeek: BP and Equinor optimistic of Latin America's future despite political uncertainties

 


 

By Daniel Rodriguez / Platts

HOUSTON
Petroleumworld 03 13 2019

Oil companies see Latin America as a major investment destination, from upstream to renewables, despite political volatility, executives from BP and Equinor said Tuesday at CERAWeek by IHS Markit.

BP sees Latin America as a significant source of new hydrocarbon production over the coming decade while Equinor expects up to 30% of its oil output to come from the region by 2030.

Despite Latin America's high prospectivity, companies wanting to do business have to be patient and reckon with changing political landscapes, executives said.

"If you have strategic clarity, you have to hibernate sometimes in these (Latin American) countries to wait for the right time to grow," said Luis Gustavo Baquero, Equinor's technology vice president.

There has been a mixed record on respecting upstream contracts in the region.

"We can't put in the same bag all Latin American countries regarding institutionally," he said.

BP as well Equinor seek to develop a position across the whole energy value chain in Latin America and both companies are investing in fuel marketing, the development of solar projects and production of biofuels.

ARGENTINA, A NEW OIL EXPORTER?

Felipe Arbelaez, BP's Latin America regional president, said it is feasible for Argentina to become an oil exporter as a result of the positive developments obtained in the Vaca Muerta, one of the world's biggest shale plays, in recent years.

"I sense that companies are redirecting more money into liquids from gas with promising results," Arbelaez said. "The greater challenges for Argentina are macroeconomic stability."

Argentina's Energy Secretariat forecast the country's oil production will grow to 1 million b/d by 2023 from 500,600 b/d reported in January. By then, it said half of Argentina's crude output will be exported.

Argentina's crude production is recovering as companies like Chevron, Shell and Total develop segments of the Vaca Muerta.

Equinor seeks to bring its knowledge gained in the US shale into Argentina, signing a partnership with YPF at the Bajo del Toro block, Baquero said.

"Scale still has to proven at a commercial level beyond Loma Campana," Baquero said.

The Norwegian company is a late arriver as Shell, BP, and ExxonMobil are already established in Argentina, he added.

BRAZIL'S NATURAL GAS CHALLENGES

In the case of Brazil, offshore gas production has become a significant challenge as significant volumes are being rejected at reservoirs, Arbelaez said.

Baquero said gas is a strategic challenge for the development of offshore projects in Brazil. The development terms of many of Brazil's offshore assets are limited by natural gas production.

This is a challenge the whole industry has to come together in Brazil to fix and build the infrastructure and find the demand to market the gas, Baquero said.

Arbelaez said it would be challenging for Brazil and other Latin American countries to develop as LNG exporters, considering the Atlantic basin is expected to be well supplied by the US Gulf Coast.

UPSTREAM OPPORTUNITIES

Technological transference from regions like the US into Latin America opens multiple development opportunities, Arbelaez said. Latin America is an attractive region that has excellent optionality, from proven basins to large underexplored areas, he said.

Baquero said the implementation of enhanced oil recovery technology is a significant opportunity for major companies to contribute to the region.

As an example, Equinor's partnership with Brazil's Petrobras in the Roncador offshore field, where companies seek to increase recoverable resources by 500 million barrels of oil equivalent.

Statoil produces more than100,000 boe/d today in Brazil, describing it as one of the company's core production regions.

PRICE INTERFERENCE CONCERNS

Arbelaez sees as concerning the tendency in Latin America to interfere with energy prices, which leads to higher prices for consumers and more expensive infrastructure.

"Latin America has had for different points in the past a track record of implementing energy subsidies," Arbelaez said. "We have had a problem to transfer the cost of energy to consumers fully."

Markets in Latin America that make it difficult to produce energy domestically can require imports to meet demand.

 


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Story by Daniel Rodriguez from Platts / SPGlobal.

- newsdesk@spglobal.com

spglobal.com
03 12
2019

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