South American Energy Market Set to Boom
Collectively, the nations of South America have known reserves amounting to about 20% of the world’s provable underground and subsea oil deposits. They produce 6 MMbopd, and several of these producers are important exporters to the United States and other global markets.
Although the peoples and nations of this part of the Western Hemisphere are often referred to as The Orinoco Belt and Maracaibo Basin, both in Venezuela, and the area adjacent to El Tigre, a 75-mile, north-south trending fault in Argentina have greatest concentrations of oil and natural gas on the continent. Two significant basins located in deepwater offshore Brazil’s southeast coast provide that nation with close to 3 MMbopd output, placing it first among South American countries and ninth in the world. Most of the energy resources in South America have historically been controlled entirely by state-owned petroleum entities.
Petrobras is ranked 58th on the Fortune Global 500 List and owns or controls oil and gas assets in 16 countries which include Africa, North America, South America, Europe, and Asia. However, this semi-public multinational corporation has endured periods of mismanagement and corruption and is $128 billion in debt.
The second-largest producer of hydrocarbons on the continent, Venezuela (ranked 12th globally), nationalized its oil industry in 1975, creating Petroleos de Venezuela S.A. (PDVSA). Ecuador’s Petroecuador is also state-owned, created from the original national petroleum company Corporación Estatal Petrolera Ecuatoriana (CEPE) formed in 1972.
The Colombian government restructured the national oil company, Ecopetrol S.A. in 2003, as a public stock-holding corporation. On April 1, 2013 the pipeline and other transportation-related assets of Ecopetrol were transferred to Cenit-Transporte y Logistica de Hidrocarburos S.A.S. (Cenit) a wholly owned subsidiary. Many of these governments are partnering with foreign energy companies and auctioning off rights to their largest deposits of oil and gas. Venezuela’s PDVSA has entered into joint ventures with Chevron, China National Petroleum Corp., Repsol and others on projects that will require over $100 billion in capitalization.
Bogotá-based Ecopetrol is pursuing foreign capital and joint venture partners. Earlier this year the company announced Ronda Campos 2016, an open auction of 20 of its most prized production assets to creating sustainable value and see the assets operated more efficiently. Ecopetrol is the largest company in Colombia producing over 60% of its national crude oil output and one of the top 50 largest oil companies in the world. The 5,200 miles of primary and secondary crude oil of pipelines are inadequate to transport Colombia’s daily output of roughly 1 MMbpd. Dependence on tanker trucks to transport crude has reduced competitiveness and cut margins.
Ecopetrol’s subsidiary Cenit, operator of the bulk of the nation’s oil and gas pipelines and hydrocarbon storage facilities, spent $732 million in 2014 to increase pipeline capacity, expandeding daily throughput to a total of 954,000 bpd (crude oil) and 231,000 bpd of naphtha and other hydrocarbons. Cenit plans to invest $4 billion by 2019 to optimizing the performance of existing pipelines and increase takeaway capacity through ambitious construction projects.