As some European oil majors place their bets on renewables and natural gas as the prevailing fossil fuel for the energy transition, players in Latin America—with its bountiful resources—could seize an opportunity with portfolio readjustment.

Colombia’s Ecopetrol SA is among the companies making moves.

“We want to make gas more important in our portfolio, moving it from 20% of our current upstream portfolio to 35% by the end of 2030,” Juan Manuel Rojas, corporate vice president of strategy and business development for Ecopetrol, said during the recently held CERAWeek by IHS Markit.

The company, which sealed a deal with Royal Dutch Shell Plc late last year to acquire a 50% stake in Colombia Caribbean deepwater blocks where a new gas province was unearthed, has allocated 14% of its planned 2021 investment to growing the gas chain and other energy sources. The plan also includes investments of more than $150 million for decarbonization projects along with more than $200 million in energy efficiency projects and the incorporation or renewable energies.

Oil and gas companies have been tweaking strategies and portfolios, aiming to boost profits and returns for shareholders while shrinking carbon footprints, meeting the world’s energy needs and adapting to the unknowns.

European and U.S. majors are leading the push toward net-zero emissions and cleaner energy. Companies in Latin America, where fossil fuels dominate like other parts of the world, are also taking steps.

Speaking on the energy transition, Rojas said the industry has responded by restructuring portfolios to incorporate more gas assets, reducing emissions and diversifying into other sectors. Ecopetrol, he said, has focused on avoiding stranded assets to keep lifting and operational costs low; diversifying into energy transmission as well as solar, wind and geothermal energy; accelerating decarbonization of operations and taking technology, environmental, social and governance-driven actions.

Brazil’s Petrobras is also adjusting due to the energy transition and sustainability focus, setting goals to lower operational emissions by 25% and end routine flare burning by 2030. The company also aims to reinject about 40 million tonnes of CO2 by 2025 via carbon capture, utilization and storage projects among other steps.

Rafael Chaves Santos, chief strategy officer for Petrobras, senses the energy transition drive will accelerate.

“The cost of fossil fuels, for sure, is going to increase as well, making oil and gas exploration and supply more challenged,” he said. “Emissions tend to be controlled and monitored and also financial conditions for these companies in the industry become tighter.”

Gas Potential

Though potential is seen in the global gas market, Petrobras’ portfolio remains focused on oil in ultradeepwater in the presalt—which the world will still need.

“We are going to provide more gas, but we must have a regional look when talking about the gas, and we have a huge supply coming from Bolivia. Then, we have this associated gas,” Santos said. “The gas demand is very seasonal.”

Session moderator Ricardo Bedregal, executive director of upstream research and analysis for IHS Markit, pointed out the tremendous potential of gas in the Brazilian presalt. Most of the gas is reinjected for reservoir needs, but bringing some of it onshore could prove beneficial depending on demand, market conditions and pricing.

“This type of market needs a lot of investment, infrastructure investment,” Santos said. “So, it’s very important to have this investment at place.”

It’s tough to pass on importing gas, especially if positioned next to one of the cheapest gas markets in the world—the U.S.

Ulises Hernandez-Romano, director-general PMI for Mexico’s Pemex, recalled a time when U.S. shale oil and gas producers were paying to have their natural gas taken away as prices plummeted.

“It makes things very difficult for non-associated gas projects in Mexico and for our stranded assets,” Hernandez-Romano said.

Still, large gas reserves—about 8 Tcf in the Burgos and Veracruz basins alone—offer opportunity. Developing those assets would require governmental policies that incentivize national production as well as private investment and needed distribution networks and pipelines in place, he added.

Pemex is maintaining focus on shallow water and the onshore parts of the Sureste Basin, which Hernandez-Romano called the company’s most important assets.

“These are the areas where we have the most competitive exploration, development and production costs, which on average are below $12 per barrel,” he said, noting the company has stopped drilling on some of its higher cost assets such as deep water and shale oil and gas.

“We have to remain focused on these shallow water and onshore assets, which have proved to be the most resilient because of the low cost and, of course,” said Hernandez-Romano adding, “the blend of heavy and light oil that we produce from these fields have good demand in the international market.”