South America

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Introduction to south america oil geography.

  1. Venezuela
    1. Economic situation
    2. PDVSA
    3. Oil exploitation zones
    4. Economic growth
    5. Orinoco belt
    6. First world oil reserves
    7. Politics, instability factor
  2. Brazil
    1. History
    2. Diversification
    3. Campos basin
    4. Iara and Tupi deposits
    5. Carioca deposit
    6. Profit redistribution policy
    7. Reserves
    8. Petrobras
    9. Perspective
  3. Argentina
    1. Production
    2. Falkland Islands conflict
    3. Future
  4. Columbia
    1. History
    2. Foreign exploitations of columbian oil
    3. New economics measures
    4. Foreign direct investments renewal
  5. Ecuador
    1. Digits
    2. Oil location
    3. Production
    4. Biodiversity preservation


Venezuela

Economic situation:

Venezuela own the first crude oil reserves of the world with 290.1 billions barrels proved. It is also the first oil producing country in South America, the 8th oil exporter in the world and the 4th supplier for the United States.

The main economical activity of this country is oil exploitation and refining for export and domestic consumption. The oil sector dominates economy with almost one third GDP (85 % benefits from export and 43 % from government incomes), what demonstrates that the country has been able to structure itself and is not totally dependent on its oil resources, compared to most other main oil producing countries.

PDVSA:

In Venezuela, oil has been processed by the national oil company Petroleos de Venezuela S.A. (PDVSA) since 1975.

pdvsa venezuela oil company

Its official exploitation started in 1875 in the Tachira State. Since 1922, large scale oil exploitation starts, involving many events which will modify the country operation. PVDSA holds 60 % projects undertaken by Petroleum PLC, Exxon Mobil, Chevron, ConocoPhillips, Total and Statoil.

Venezuela is the third Latin America economic power in terms of GDP after Brazil and Mexico, with a GDP estimated at 350.1 billion dollars in 2009.

In this oil country, a gasoline filling up costs less than one euro. Thanks to petroleum, State Funds are full and the Venezuelan purchase power is largely higher than in most other South American countries.

Venezuela GDP growth rate amounts to 5 % but presents a high inflation rate.

On 8th January 2010, bolivar (VEB) was devaluated to fight against inflation and a double change rate is instituted with dollar to favor the local industry.

Oil exploitation zones:

The oil exploitation is located in the north-western part of the country. The “Bolivar Coastal” is an aggregate (or “complex”) of deposits. It is the main conventional oil reserve in Venezuela. It is located in and around Maracaibo Lake.

The first deposit, Cabimas, was discovered in 1917. The three greatest deposits of Lagunillas, Tia Juana and Bachaquero were respectively discovered in 1926, in 1928 and in 1930. Oil, over there, is very heavy and has a low quality compared with the international standards.

venezuela oil deposits gisements petrole

Economic growth:

Discovered in the XIX century, oil will become little by little the economic lung of the country. It is first exploited by British, Dutch and American companies. It will be profitable to Venezuela budget only in 1946 when the country fixes with companies its share in profits, and essentially in 1975 with sector nationalization and the settlement of the national company Petroleos de Venezuela. Other deposits are then discovered in the Northern part of the country.

venezuela orinoco belt ceinture orenoque

This promoted then the construction of the country. So, the growth rate amounts to 7 % per year between 1930 and 1980. Social inequalities remain, but they are less marked than in any other Latin America States. During the third oil shock, its growth rate was among the highest in the world in 2004 up to 17 %.

Venezuela holds 7 % world oil reserves and it is one of main United States suppliers. Reserves were discovered in 2006 in Orinoco belt (Venezuela should own then over 60 % Latin American reserves).

Orinoco belt:

We call Orinoco Belt a geographic zone having the form of a belt, east-west, located in the north of Venezuelan Orinoco deposit. Its area covers 55 314 square kilometers (km²). It extends to the territory of Anzoategui, Monagas and Guarico States.

orinoco belt ceinture orenoque petrole oil field

At the end of 2009, American estimates stated about 1 360 billion oil barrels contained in the country underground, 513 billions of which are technically exploitable (a bit more than 70 billion tons), i.e. more than the third of planet oil reserves.

First oil proven reserves of the world:

On 18th March 2010, Prensa Latina announced that proved and certified oil reserves amounted to 211.173 billion barrels, ensuring to Venezuela the second world place – i.e. 52.827 billion less than reserves announced by Saudi Arabia. In 2011, the country get the first position in the world with 296,5 billions barrels of proven reserves. He considers to exceed 310 billions in 2013.

Venezuela intends to produce in 2013 some 5 million barrels a day, all types of qualities included.

Remember that Venezuela took the initiative to settle OPEC.

opep venezuela opec

Politics, instability factor:

On the other hand, as you know, this country is considered as being politically instable due to its political regime, managed by Hugo Chavez since 1998 having an ambiguous relation with the United States. In effect, as you know, he says to be a revolutionary fighter against the imperialism of the United States, while delivering oil to them. He approaches United States enemies, i.e. Fidel Castro, proposing to supply him with one third of Cuba oil consumption at an interesting price. He visited Saddam Hussein in Iraq, General Kadhafi in Libya and more recently Mahmoud Ahmadinejad in Iran.


Brazil

Brazil is the second Latin America oil producer behind Venezuela.

History:

Brazilian oil history is not recent : the first deposit discovery dates from 1939. As the Brazilian soil only has modest petroleum reserves, Petrobras, Brazilian state oil company approached coast basins where discoveries were more important than in onshore exploitations. Encouraged by its discoveries, Petrobras directed to deep waters ; that was a good choice considering the deposits exploited later. The first offshore discoveries in Brazil were Guaricema deposits in Sergipe basin in 1968 and Ubarana in Potiguar basin in 1973.

Then Brazil was interested in Campos and Santos basins, which energized its oil production. Petrobras company projects are various in Campos basin. They allowed Brazil to become a pioneer in deep water exploiting. Deposits discovered in Campos basin up to 1996 (Albacora Leste, Marlim Leste, Marlim Sul, Barracuda and Roncador) have reserves estimated at over 8 billion barrels combined.

In April 2006, the exploitation of these deposits allowed Brazil to meet totally its oil requirements with 1.93 million barrels of crude oil produced a day.

You must note that this production equivalent to that of Kuwait is a real performance for an emerging country counting 190 million inhabitants, which was historically a great importer. In effect, in 1979, Brazil still imported 80 % its oil, representing at that time 50 % its total imports.

Diversification :

With experience in oil exploitation and wishing to diversify its energy resources while reducing its CO2 emissions, Brazil took benefit from its raw materials to develop its biofuel sector. In effect, it is the first world ethanol producer with over 20 billion liters produced per year and the second world exporter. It wishes to increase its production to reach 35 billion liters per year in 2015.

Campos basin:

The first commercially exploitable basin, Campos basin, still contains a few promising deposits : Jubarte deposits, Cachalote and Papa-terra, discovered between 2001 and 2005, have reserves estimated at 1.65 billion barrels. The exploitation of these deposits will allow Brazil to comfort its oil production soon.

Iara and Tupi deposits:

In November 2007, Tupi and Iara offshore deposits were discovered off Rio de Janeiro in Santos basin. Their reserves are estimated officially at 8 billion barrels of light crude oil for Tupi deposit and 4 billion for Iara deposit.

santos campos basin brazil bresil

Tupi deposit, discovered offshore Rio de Janeiro (east and south east of country) contains reserves so estimated at 8 billion barrels oil, i.e. 40 % country reserves. The deposit is located under 2 140 meters water, 3 000 meters sand and rocks, as well as under 2 000 meters of salt. The underwater drilling through this thick salt layer is a first experience for Petrobras. With 1 billion dollars investment on these latter years, 15 wells were drilled to reach this layer. These wells produce today a light oil (28° API) at high commercial value, and a great quantity of associated natural gas. Data obtained from these wells allow to estimate the deposit surface : it spreads from Espirito Santo State to Santa Catarina State over 800 km long and 200 km large, under water depths included between 2 000 and 3 000 m. As per the Government, this deposit would allow Brazil to take its position among the first world exporters, at Venezuela level. Petrobras capital is held up to 32 % by the Brazilian State, which also owns 55.7 % capital with right to vote, ensuring Group control.

The exploitation of these latter deposits would increase Brazil oil reserves by 50 % and would place it to the first ten world oil reserves, to be compared with its present 16th position. This is foreseen for 2011.

Carioca deposit:

In April 2008, Carioca deposit was discovered in this even Santos basin. Not officially, it should contain 33 billion barrels at 6 km deep under a salt layer. If these estimations are confirmed, it would be question of the greatest third deposit in the world. However, drilling in deep water, even ultra deep water, into the sand and rock, takes a long time and is onerous. So, these deposits might be exploited in ten years only. This is the reason why Petrobras announced in last February investments reaching 92 billion dollars up to 2013, 29 billion of which for the exploitation of deposits discovered end 2007, Tupi and Iara basins. Let us note that deposits from Campos basin will be declining before Santos basin deposits produce massively.

carioca offshore oil brazil bresil

Investments foreseen require huge financial resources on a long term. It will be necessary to find them rapidly. According to ONIP (National Organization of Oil Industry in Brazil), the pre-salt region will necessitate approximately 260 billion US $ during the period 2011-2015. Out of this total, US $ 224 billion should be brought by Petrobras, while the difference would come from other domestic and foreign companies.

Profit redistribution policy:

On the other hand, the Brazilian government, center-left, of president Lula is studying a new mode of repartition of oil profits, aiming at investing in education and in fighting against poverty. As an example, the amount of royalties paid by private companies, essentially by foreign companies, reached 3.2 billion euros in 2007. The ministerial Committee is studying two possibilities : to increase this tax or to settle a system of production share between the state and the private sector. In effect, the state will not be able to assume alone the exploitation cost of these deposits (estimated at 600 billion dollars) and will have to find an average in order to make companies not to flee away while improving the profits repartition in its favor.

The challenge for Brazil is multiple : to share out oil profits to the profit of all the population, to ensure a regional stability and a narrow link with the great consuming countries while pursuing a diversification policy of resources and investments for the exploitation. Inversely, Brazil becomes a political and economical partner more and more influent for the future.

Reserves:

In official statistics of 2010, Brazil holds over 13.2 billion barrels of oil (reserves officially proved for the moment. Then, it will take into account in statistics some proved reserves of Tupi and Iara deposits, as well as surveys of pre-salted Carioca deposit : the value of proved reserves should explode in 2012), i.e. 1 % world reserves, and this mainly in offshore reserves. I do insist in the fact that these data are only temporary.

bresil offshore deposit brazil gisements petroliferes

Petrobras:

In July 2010, the mean production of crude oil in Brazil overran 2.1 million barrels a day (mmb/d), 98.5 % being produced by Petrobras.

Petrobras believes that its total oil and natural gas production should reach 3.2 mmbep/d in 2014.

petrobras oil company brazil

In September 2010, during the capitalization process, Petrobras revealed the headlines of its Business Plan 2010-2014 showing production targets and main corporative strategies. As from 2014, pre-salt resources will represent the great growth vector of Brazil oil production.

Perspective:

According to IEA, Brazil is a marginal exporter of crude oil during the reference period 2004-2030, it finds again a balance between domestic production and demand (this without taking into account the mega-deposit of Carioca).

Brazil, excess exporter since 2006 might soon enter OPEC (Iran ambassador already officially invited it in October 2008, a new proof of Brazil role importance on the world scenery.


Argentina

Production:

Argentina is a medium producer which reached its peak at 920 kbbls/d in 1997 to drop to 763 kbbls/d in 2005 (660 of which is crude oil) and carry on dropping. The two main oil basins (approx 45 % production each) are Neuquén, in the central western part of the country, a platform disposing of rocks dating from Jurassic, and San Jorge on the coast, the sources of which are lacustrine deposits dating from Cretaceous. These two basins characterized by a great number of small deposits are mature. The country has been for long a significant oil exporter, but exports fell to approx 50 kbbls/d in 2006 and the balance trends to reverse itself.

Austral basin, at the south end, Chile of which owns a small part, and the argentina fraction of that of Santa Cruz – Tarija have far lower oil reserves.

Falkland Islands conflict:

In territorial waters of Falkland Islands, located east Tierra del Fuego, geological indices revealed the presence of offshore oil. The discovery of a huge deposit which would represent 13 billion barrels crude oil (not confirmed estimates).

petrole malouines oil falkland islands

These islands are Britannic. They were colonized at XVII century by England. They were claimed by Buenos Aires and were the origin of a war in 1982. So, the oil exploitation have reawaken the tensions between Argentines and British in 2012.

Future:

With world energy growing demand, the South American continent is emerging as a first importance market. It represents 15 % of world oil production. In 2011, Mexico is the 7th world oil producer and Venezuela is 11th.

Note that the amount of Chinese oil imports was multiplied by 15 since 2001. Beijing concluded energy commercial agreements with various Latin America countries ; with Venezuela (free trade agreements in 2005 and offshore explorations contracts in 2005 between the Chinese company Sinotec and the Venezuelan national company). The Chinese company CNPC also won an exploration right in Ecuador and drilling permits in Mexico (yet being a part of Alena). China became the second oil importer in Latin America (behind the United States).

A new war will not appear, considering the difference between the estimates of oil capacities of undergrounds in Falkland islands and their reality, because further to a few drillings the results obtained reach only a few hundred million barrels. Moreover, England has all legitimacy on this island and the difference in the military capacity interstates is considerable.


Columbia

History:

First important oil discoveries in Columbia appeared at the end of the years 1980. They discovered the two most important fields in the country : Cusiana and Cupiagua, located east Casanare, in 1988 and 1991. Their discoveries allowed Columbia to be oil self-sufficient during the last decade of the second millenary. Both wells presently produce 150 000 barrels a day, i.e. one fifth Columbia production.

Most deposits are located east country, at Venezuela border.

colombie petrole oil columbia map plan

Columbia oil mining by multinational firms:

In 1997, one third the whole Columbia oil was produced by BP in Casanare region. In 1998, oil multinational firms extracted all oil produced in Columbia, BP being at first rank. In 1988, Ecopetrol (Columbia national company) explored 3 245 miles² of the territory, but in 1996 this figure dropped to 621 and in 1997 to zero. Gradually, the number of Ecopetrol wells passed from 216 in 1986 to 2 only today.

This situation generated vandalism (explosions) against oil pipelines belonging to multinational firms (950 between 1980 and 2000) by FARCS as well as the kidnapping of several responsible members of the oil industry. The consequence was the intervention of soldiers (3000) sent by Columbia government (under the impulsion of president Alvaro Uribe, with the support of the United States), to protect investments of their western partners.

Most Ecopetrol profits depended directly on its association with British Petroleum (BP).

Nowadays, contracts were not prolonged. In the past, Ecopetrol had to conclude alliances but it enjoys today a greater independence. Since its recent privatization, the national firm owns 2.5 billion dollars in new resources.

New economics measures:

Juan Manuel Santos, the present Columbia president (elected in June 2010) chose as main objective the development of the oil production.

The reserves of the country are presently estimated at 1.9 billion barrels. The production passed from 600 000 barrels a day in 2005 to almost 800 000 barrels a day in 2010. The production should reach 1.2 million barrels a day in 2012 and then reach 1.5 million in 2015.

evolution petrole colombie production chart columbia

Upward foreign direct investments:

Foreign companies are very present in this activity with an investment reaching 3 billion dollars in 2009.

You may note that the reserves of the country are clearly undervalued, with vast unexplored zones, mainly in the very rich regions next to Venezuela. The greatest exploration field, les Rubiales, should still contain 500 million barrels. These unexplored zones attract more and more foreign investors. In ten years, IDE (Direct Investments Abroad) flows towards Columbia made a good jump to reach 7.2 billion dollars investments.

evolution flux ide colombie fdi columbia

Columbia exports the major part of its production to the United States.

Hydrocarbons already represent over 40 % exports of the country.


Ecuador

Digits:

Ecuador is a medium producer (530 kbbls/d crude oil) disposing of great reserves (approx 5 Gbbls), even though it is question almost only of heavy oil (20-25° API) and having a high sulphur content. It quitted OPEC in 1992 but reintegrated the organization in 2007.

Oil location:

Ecuador owns important oil reserves, particularly in the Amazonian part of the country. In the southwestern part of the country, Progreso basin, issued from the delta of ancient Amazone, offered a few oil deposits, now depleted, at the beginning of the XX century. In the eastern part of the country, in Oriente, Putumayo basin supplies almost all the production, limited by the capacity of two oil pipelines crossing Andean. The exploration of the country seems to be almost ended and the depletion rate overruns now 4 % a year.

Production:

The production of the country reached 505 000 barrels a day in an average between January and November 2008, 53 % this production being ensured by the public company Petroecuador and the rest by different private companies.

Ecuador is the smallest OPEC member.

Crude oil represented in 2009 63 % country exports and 22 % of GDP.

The financial balance between oil extraction and the cost involved by impacts on human and animal health, as well as on ecosystem, would be negative : the amount brought by oil to the country is not sufficient to cover the price necessary for preventing from consequences of its extraction.

Up to now, oil would not be profitable if it was extracted “clearly” and securely for the earth and its inhabitants ; then, it is extracted by Texaco without precaution or almost any. Gaia says about this that there is “a real ecological and sanitary disaster : between 1972 and 1993, over 114 billion liters oil poured out into the earth and streams”, i.e. the equivalent of the pollution caused by Exxon Valdez shipwreck poured out each year into streams and forests of Ecuador.

Biodiversity preservation:

As said above, Ecuador is largely dependent on its oil exports, however recently it decided to renounce to the exploitation of new deposits at the profit of its biodiversity located in Amazonian Forest in Yasuni park.

Yasuni park:

The deposit is located in Amazonian Jungle in a real jewel of biodiversity. Thousands indigenous people live over there, essentially thousands Huaorani Indians : two indigenous populations : Tagaeri and Taromenane.

yasuni park columbia oil parc

In 2007, the government as well as various social movements of the country decide to leave underground 846 million oil barrels of Yasuni Amazonian Park, this little Andean country is convinced that it shows the way concerning fight against global warming and biodiversity protection. As a compensation, Quito requires 3.6 billion dollars (2.7 million euros) from the international community (i.e. half the part brought by deposits exploitation). An agreement had to be signed with the UNDP (United Nations Development Program) for creating Yasuni ITT Fund, the name of three oil deposits : Ishpingo, Tiputini and Tambococha.

The deposit might produce 850 million barrels a year, i.e. 1/5 domestic reserves.

The initiative was welcomed by the international community, but they did not receive any financial compensation.

The government believes that it will be necessary for it to spend one year to convince the international community of the merits of its initiative and to obtain 100 million dollars estimated necessary for the project viability. Lenin Moreno Garcés, Vice-president of Ecuador, announced it before the United Nations on 27th September 2010 : “If we do not obtain at least 100 million dollars compensation up to end 2011, we will be obliged to launch the exploitation of oil reserves which are located underground Yasuni natural park”.

Bolivia and Peru are also oil exporters but in a lower extent.

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