Latin America may not be the solution to Europe’s energy crisis, but it will add significant new production volumes next year and beyond.

The region’s two exploration hotspots, Brazil and Guyana, will anchor production growth in 2023 and could add 3.6 million bbl/d between 2023-2027, according to data compiled by Hart Energy.

This growth will come from the installation of six new FPSO units next year and 15 over the following four years.

New production from two emerging countries, among others, will provide some assistance to a global energy market still rattling from the loss of Russian supply, sanctioned after its invasion of Ukraine in early 2022.

Notwithstanding, Latin America will continue to encounter formidable headwinds, such as rising energy costs, despite an abundance of resources due to a high dependency on imports from LNG to refined petroleum products, which will continue to stoke inflation.

Brazil and Guyana 2023-2027 anchor growth
Sources: Production and FPSOs forecasts compiled from Petrobras' strategic plan 2023-2027, Exxon Mobil and Hess Corp. websites
   2023f 2024f  2025f   2026f  2027f
 Brazil oil production (bbl/d) 630,000 505,000  540,000  450,000  711,000 
 Brazil FPSOs 5  3  3  2  5 
 Guyana oil production (bbl/d) 220,000  0  250,000  250,000  0
 Guyana FPSOs 1  0  1  1 0 
 Total oil production (bbl/d) 850,000  505,000  790,000  700,000  711,000 
 Total FPSOs 6  3  4  3  5 

While Brazil and Guyana will garner the most investor attention and capital spend, other Latin American countries such as Colombia, Mexico and Venezuela could also boost production over the near-term if above ground risks mainly related to political uncertainties are kept to a minimum.

Leading the pack: Brazil and Guyana

Brazil: Brazil’s state-owned Petrobras announced a capex budget of $78 billion between 2023-2027, the company announced in its five-year strategic plan revealed December 2022. Approximately $64 billion of the capex will be destined for the prolific pre-salt, including $38 billion for the Santos Basin and $18 billion for the Campos Basin.

Petrobras looks to boost production with the addition of new FPSO units that will offset production declines from mature fields and basins, decommissioning, maintenance and asset divestments. The new production approximation for 2023 forecasts about 630,000 bbl/d from five FPSOs: Itapu P-71 (150,000 bbl/d), Marlim 2 Anna Nery (70,000 bbl/d), Buzios 5 Alm. Barroso (150,000 bbl/d), Marlim 2 A. Garibaldi (80,000 bbl/d) and Mero 2 Sepetiba (180,000 bbl/d). Another 13 new FPSO units will come online between 2024-2027, creating an additional 2.2 million bbl/d of production.

RELATED

Petrobras Eyes Addition of 14 FPSOs by 2026

Investors’ primary headwinds in Brazil will come by way of actions that could be taken by the recent election of Luiz Inácio Lula da Silva (Lula) as Brazil’s next president. Lula, who will be serving his third term as president, will try to steer clear of another corruption scandal like “Operacão Lava Jato” or “Operation Car Wash,” which tarnished his and Petrobras’ reputations.

Guyana: Newcomer to the Latin America oil production and exporting club, Guyana continues to ride a wave of successful exploration in its prolific offshore Stabroek Block. There, an Exxon Mobil-led consortium that includes Hess Corp. and China’s CNOOC has found gross recoverable resources estimated at around 11 Bboe. The three companies will continue with exploration efforts in Stabroek while other integrated oil companies (IOCs) explore other blocks. A recently announced offshore bid round for 14 blocks is likely to attract old and new IOCs and national oil companies (NOCs) seeking to replicate Exxon’s feats in Stabroek.

Currently, Exxon’s first two developments in Stabroek, Liza I and Liza II, are producing around 360,000 bbl/d from the Liza Destiny FPSO (140,000 bbl/d) and Liza Unity FPSO (220,000 bbl/d), respectively. New production forecast for late 2023 will come from incorporation of the 220,000 bbl/d capacity Prosperity FPSO, which corresponds to the third development Payara. Two additional FPSO units (with 250,000 bbl/d capacity each) are forecast for 2025 and 2026 corresponding to the fourth and fifth developments of Yellowtail and Uaru, respectively.

RELATED

Exxon Mobil’s 5-Year Plan Aims to Double Earnings, Cash Flow

Investor’s primary headwinds in Guyana relate to potential changes to new contracts offshore that will give better benefits to the government as it tries to reverse its misfortunes related to initial contracts with Exxon, which benefited the U.S. company more than the country, many energy sector pundits argue.

Runner-ups

Colombia: Colombia’s state-owned Ecopetrol is widely regarded as the industry-leading NOC in Latin America based on its investment track record, dividends and pursuit and achievement of strategic goals. Additional production forecast for 2023 will be minimal and come from the NOC’s efforts to maintain production around the 720,000 boe/d range. The company’s production in 2022 is likely to average 705,000 boe/d, Ecopetrol executives announced during the company’s third quarter webcast.

Investor’s primary headwinds in Colombia relate to political uncertainties around the country’s new leftist President Gustavo Petro, who campaigned against fracking and new exploration in favor of clean energies.

Mexico: Mexico’s state owned Petróleos Mexicanos (Pemex) is Latin America’s most indebted NOC with a debt load just over $100 billion. Additional production forecast for 2023 will come about as the company looks to maintain A production floor at around 1,800 Mbbl/d of oil and condensates, compared to an average close to 1,769 Mbbl/d forecast in 2022. Production growth in 2023 under this scenario could come in the upper end of the 1%-2% range, which has been the average range in recent years, Pemex executives alluded to during its third quarter webcast.

On the high end of the spectrum Pemex is optimistic it can go beyond single digit-production growth in 2023, according to details revealed Dec. 21 in its business plan for 2023-2027. Pemex’s plan envisions production reaching 1,966 Mbbl/d in 2023, growing to 2,319 Mbbl/d by 2027. Pemex has always been high on hopes while realities have tended to paint a different picture.

Investor’s primary headwinds in Mexico relate to political uncertainties around the country’s leftist President Andrés Manuel López Obrador and his vision for the energy sector. Pemex’s dire financial situation means foreign investors are needed to substantially move the production needle.

Venezuela: Venezuela’s state-owned Petróleos de Venezuela (PDVSA) looks to boost production next with the assistance of Chevron Corp., which just received authorization from Washington to pursue such goals. Additional production forecast for 2023 could emerge if Chevron joint ventures in the OPEC country can boost production by 100,000 bbl/d as predicted by numerous energy sector pundits. Production growth could potentially reach 200,000 bbl/d if the investment climate remains relatively stable.

Investor’s primary headwinds in Venezuela relate to the political uncertainties around the U.S.’ long-sought “free and fair” elections in 2024, which are premised on continued and fruitful negotiations in Mexico City between the ruling party and opposition around a solution to the country’s political stalemate.

UPDATE: This story has been updated to reflect details from Pemex's business plan for 2023-2027 released on Dec. 21.