Lecture 12- LAoil

7/31/2019 Lecture 12- LAoil

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Oil and Gas in Latin America


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South AmericaHydrocarbon

provinces

U. S. Geological Survey Open-File Report 97-470D


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Map ofCentral

andSouthAmerica

Assessed provinces(red areas), provinceboundaries (red), andcountry boundaries(black).

U.S.Geological Survey World Energy Assessment Team (USGS), 2000


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Mesoamerica and Caribbean MainOil Provinces

Province boundary line

Petroleum field location


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Latin America Production of Crude Oil, Natural Gas Plant

Liquids, and Other Hydrocarbons, 2001(Thousand Barrels per Day)

PetroEcuador open

Ecopetrol monopoly

YPF Privatized-sold

Petrobras joint

PdVSA nationalized1976

Pemex, monopoly

State oil Company

75,461World Total

10,456Total LatinAmerica

1Barbados

10Suriname14Chile

21Guatemala

44Bolivia

50Cuba

95Peru

125Trinidad&Tobago

421Ecuador*

614Colombia*

829Argentina*

1,561Brazil*

3,080Venezuela*

3,590Mexico*

2001Country

fromhttp://www.eia.doe.gov/emeu/international/petroleu.html#IntlProduction*We will discuss these


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Mexico Oil and Gas Basins

http://www.energia.gob.mx/

Hydrocarbon Productive Regions, 2000 (%of total production)

Majority in the Gulf of Mexico


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Gulf of Mexico Basins5301 Tampico-Misantla Basin

5302 Veracruz Basin

5304 Saline-Comalcalco Basin

5307 Campeche-Sigsbe Salt Basin

5308 Yucatan

5310 Sierra Madre de Chiapas-Peten

Golden Lane


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Mexico, Oil Exports OILMexico has the fourth largest provencrude oil reserves in the WesternHemisphere after Canada, Venezuela,

and the United States at 12.6 billionbarrels. During the first 10 months of2002, Mexico produced about 3.6 millionbarrels per day (bbl/d) of oil. Mexicoconsumed approximately 1.9 million bbl/dof oil in 2002, resulting in net exports ofroughly 1.7 million bbl/d.

About 1.5 million bbl/d of these exportswere bound for the United States, makingMexico the third largest foreign supplierof petroleum to the United States.

Mexico ranks as the world's fourth-

largest oil producer, behind the UnitedStates, Saudi Arabia, and Russia.


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Oil in Mexico:

History In 1868, the Gulf of Mexico Exploration Companybegan the first industrialized drilling for oil in thestate of Veracruz. They mined the oil and builtrefineries which produced kerosene. A law passedin 1884, gave underground development right to

the owner of the land. Investors from U.S. and Great Britain bought much

of the land securing their stake in Mexican oil. Two very important laws were passed in the early

1900's. The Petroleum Law (1901) allowed thegranting of concessions on public lands, and theMining Law of 1909 reaffirmed the rights of land-owners to develop their subterranean assets. Thislegislation helped keep the Mexican oil industry inthe hands of foreigners.

Edward L. Doheny started the Mexican PetroleumCompany. The company drilled for the next twenty-five years, and in 1916 commanded much of the

Mexican oil production including the well at CerroAzul, the largest well in the world at the time. TheBritish had similar success stories with Mexican oil.

Cerro Azul, National

GeographicFebruary, 1920


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DeGolyer UTD connection:GSI- TI -SCAS- UTD

In 1932 DeGolyer moved to Dallas andinitiated a number of prospecting firms

among them Geophysical Service,Incorporated with John Clarence(Karch) Karcher, and Eugene B.McDermott. The GSI was a seismiccontracting company, bought by the

founders from DeGolyer in 1941. GSI spawned Texas Instruments (T.I.) inthe early 1950s. As T.I. expanded theywere forced to import engineering talent.To produce more talent from the Dallas-

Fort Worth area, they established theGraduate Research Center of theSouthwest (later renamed the SouthwestCenter for Advanced Studies) in 1963.

The SCAS become UTD in 1969.GSI Founders, 1941- Left to Right:John Erik Jonsson, Eugene McDermott, CecilH. Green and Dr. Henry Bates Peacock

Eugene

McDermo t t


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During the WWII DeGolyerworked with the PetroleumAdministration for War.

DeGolyer was director of theAmerican Petroleum Institutefor more than twenty yearsand a founder of the AmericanAssociation of PetroleumGeologists, he served as itspresident in 1925 and wasmade an honorary member ofthe association in 1944.

After seven years' sufferingfrom poor health, he took hisown life at his office in Dallas,on December 14, 1956.

http://www.tsha.utexas.edu/handbook/online/articles/view/DD/fde29.htmlhttp://www.demac.com/degprofl.htm

8525 Garland Road"Rancho Encinal" was the estate of EverettDeGolyer. The sprawling Spanish Colonial Revivalhouse, designed in 1939 housed the massive

DeGolyer library, and was surrounded on itsprominent hillside site overlooking White Rock Lakeby formal gardens. It is now a part of the DallasArboretum.

HillcrestMemorialParkDallasTexas, USA


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Nationalization of the Oil Industry

in Mexico The Mexican oil industry continued to

expand through 1921. Also during thistime, foreign ownership increased to the

point that almost all of the productive oilland in Mexico was owned by foreigners. Article 27 of the 1917 constitution said

that any oil or energy related substancesfound underground, belonged to the state.Foreigners could lease the underground

privileges but never actually own them. At the same time, labor laws were passed

demanding more benefits for the oilworkers, which the oil companies refused.This began to create a larger rift between

Mexican government and the foreign oilcompanies. In 1938, President Cardenas expropriated

(nationalized) seventeen foreign oilcompanies. Since that time, all

production, refining, and sales of Mexicanoil and gas is done by the state oilcom an PEMEX.

President Lazaro Cardenas, announcing theexpropriation of the foreign petroleumcompanies in Mexico on March 18, 1938.


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Pemex

The Mexican oil industry wasnationalized in March 18th, 1938 andPemex was created in June 7 1938.

Petroleos Mexicanos (Pemex), the stateoil company, is the world's fifth largest oil

company, the single most importantentity in the Mexican economy, and isconsidered a symbol of Mexicansovereignty and independence.

Unlike many other major global oilcompanies, Pemex retains exclusive

rights to oil exploration, production andcommercialization in Mexico. The government relies on Pemex for

approximately 1/3 of its fiscal revenues,as an estimated 60% of the company'srevenues are turned over to federal

authorities.


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Privatization of Latin AmericanPetroleum

Privatization of a wide range of state-owned companies has occurred globally asa sweeping free market economic reform. Latin American economic reformsinclude the privatization of a wide range of state-owned industries--from phone

companies, to natural gas and electric utilities, to petroleum companies. The various countries of Latin America, however, have pursued different routesto privatization. At one extreme lies Argentina, which completely privatized itsformerly-state owned petroleum company, YPF. At the other end of thespectrum lies Mexico, which has largely maintained its state-owned petroleummonopoly, Pemex, although allowing more latitude to foreign investors in

Mexican petrochemicals. In general, privatization has allowed Latin American companies more freedom topursue joint ventures with foreign companies. It has also led to a major LatinAmerican petroleum investment and may have encouraged the acquisition ofsome Latin American petroleum companies by foreign firms as well as theacquisition of foreign companies by some Latin American firms. As example

YPF (ex national oil company Argentina ) bought Maxus (small USA companyfrom Dallas) and REPSOL (Spain state oil company) bought YPF. Will PEMEX be privatized?

http://www.eia.doe.gov/emeu/international/petroleu.html#ExecutiveSummaryprivatization.mht


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Bolivarian Republic of VenezuelaMeaning: little Venice.Area:

total: 912,050 sq km; land: 882,050 sq kmwater: 30,000 sq km

Venezuela is the sixth largest country inSouth America; it has the world's highestwaterfall and South America's biggestlake.Area comparative: slightly more than

twice the size of CaliforniaBorder countries: Brazil 2,200 km,Colombia 2,050 km, Guyana 743 km

Population:

24,654,694 (July 2003 est.)


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Lots of Oil in northern Venezuela

(and Colombia)

Province boundary line

Petroleum field location


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Venezuela Venezuela is as much aCaribbean country as it is aSouth American one.Because of its proximity tothe Equator, Venezuelaexperiences little climatic

variations. There are reallyonly two seasons: dry andwet. The dry season lastsfrom December to April, thewet one from May toNovember.

Economy - overview:Venezuela continues to behighly dependent on thepetroleum sector, whichaccounts for roughly one-third of GDP, around 80%

of export earnings, andmore than half ofgovernment operatingrevenues.

GDP - per capita:$5,500 (2002 est.)


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Venezuela Venezuela oil development began in

1921. Production surged and itquickly became a major oil exporter.Its rise was at least in part due to the

turbulence in Mexico which led majoroil companies to seek alternativeinvestments.

By 1932, Venezuela was Britain'slargest single supplier of oil (followed

by Iran and the United States). In 1939, Venezuela was producing

137 million barrels, making it secondonly to the United States in totaloutput. The country had alreadybecome Royal Dutch/Shell's largestsingle source of production.

The great oil hunt after World War I, led to the Los Barroso gusher in1922 and the Venezuelan oil boom.


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PdVSA

Venezuela nationalized its oil industry in 1975-1976,creating Petroleos de Venezuela S.A. (PdVSA), the

country's state-run oil and gas company. PdVSA is one of the world's largest oil companies, aswell as Venezuela's largest business and employer.PdVSA works with foreign investors in Venezuela underthe country's hydrocarbons law of November 2001,which stipulates that PdVSA hold a 51% stake in any

new exploration and production agreement. The privatization of PdVSA is banned underVenezuela's 1999 constitution.

Citgo, is an affiliate of PDVSA in United States Thecompany is owned by PDV America, Inc., an indirect,wholly owned subsidiary of Petroleos de Venezuela,

S.A., the national oil company of Venezuela.


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Brazilian Oil Brazil is a new, important producer of oil

(since 1980s). Oil production has been rising steadily since

the early 1990s, averaging nearly 1.6 mbl/din 2002. The offshore Campos Basin, northof Rio de Janeiro, is the country's mostprolific production area.

Brazil's oil consumption for 2002 was almost2.2 million mbl/d. Brazil's oil imports comemostly from Africa and the Middle East and,to a lesser extent, from Venezuela and

Argentina. Brazil contains the second largest oil

reserves in South America (afterVenezuela), at 8.3 billion barrels. Thecountry continues to strive for self-sufficiency in oil production by 2006 and hasmade positive steps towards reaching thisgoal.

Petrobrs is seeking to expand its oil andnatural gas operations outside of Brazil. InOctober 2002, The company acquired amajority stake in Argentina's PerezCompanc, increasing its oil and natural gasreserves significantly.


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BrazilPetrobrs

Petrobrs is the state oil company, owned 51%by the Brazilian government. It was created in1953 and given exclusive rights to explore,

produce, refine, and distribute oil in Brazil.Prices for Petrobrs oil were also fixed. Most of Brazil's reserves are located offshore in

deep water, requiring extensive capitalinvestment to develop.

In 1997, President Cardoso signed thePetroleum Investment Law. The law permittedjoint ventures between foreign oil companiesand Petrobrs. The law also opened up Brazil todrilling operations by foreign and Brazilian firms.


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One of the main drivers behind opening the oilsector was to increase oil production in order toreduce dependence on oil imports andeventually achieve self-sufficiency.

Petrobras is the world's 15th largest oil andnatural gas company and a leader in deepwaterdrilling and the use of floating productionsystems and subsea completions. Petrobras has

set many deepwater drilling records since itbegan exploring Brazil's continental shelf in the1970s.


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Exploration and Production

Petrobrs is theonly company to

have madecommercially viablediscoveries in Brazilin recent years.

Most of these arelocated in thenorthern CamposBasin, along thecoast of EspiritoSanto State.


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Campos

Basin

80 % ofBrazilian oilproduction

is from thisBasin


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ProductionOffshore MarlimField (Campos

Basin)


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Offshore Drilling:a dangerous task

The world's largest oil rig,located 78 miles off thecoast of Brazil, wasvictimized in 2001 bythree mysteriousexplosions that left up to10 people dead and onecritically burned. The

sinking of the 40-story righad the potential to dumpat least 400,000 gallons ofcrude and diesel oil into

the sea.

Time Magazine March 2001 : TheWorld's Largest Oil Rig Sinks (Brazil)

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Argentina Oil Argentina is the fourth-largest

oil producer in Latin America.

Argentina's oil sector is

completely privatized. Repsol-YPF, Argentina's largest oilcompany, was formed in 1999when Spanish oil companyRepsol bought Argentina'sformerly state-held YPF.Although exploration andproduction activity in Argentinaare completely open to theprivate sector, Repsol-YPFretains a position ofdominance


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Colombia Colombia is Latin America's

fifth leading oil producer. Afterseveral years of declining

production (due in large part toprogressive depletion of olderfields and rebel attacks onpipelines), oil output isbeginning to rise as recentfinds begin to come into

production. In Colombia, the state owns all

hydrocarbon reserves. Controlis exercised in the oil and gassectors through state-run

hydrocarbons companiesEmpresa Colombiana dePetrleos (Ecopetrol) andEmpresa Colombiana de Gas(Ecogs).


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Ecuador Area - slightly smaller than Nevada Climate: tropical along coast, becoming

cooler inland at higher elevations;

tropical in Amazonian jungle lowlandsTerrain: coastal plain (costa), inter-Andean central highlands (sierra), andflat to rolling eastern jungle (oriente)

Elevation extremes: lowest point:Pacific Ocean 0 m highest point:Chimborazo 6,267 m

Natural resources: petroleum, fish,timber, hydropower. Only 5.7% Of landis arable.Population:13,710,234 (July 2003 est.)

Ecuador has substantial oil resourcesand rich agricultural areas. Because the

country exports primary products suchas oil, bananas, and shrimp, fluctuationsin world market prices can have asubstantial domestic impact.

GDP - per capita:purchasing powerparity - $3,100 (2002 est.)


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Ecuador Ecuador is the sixth largest producer of oil in Latin America. Oil exports are Ecuadors main source of income. Oil exports in

2000 were about 44% of total exports. Crude oil production estimates for the first 10 months of 2001 was415,000 barrels per day (b/d). In 2000, the countrys oil consumptionwas approximately 149,000 b/d. In that same year, Ecuadorexported an estimated 276,000 b/d.

PetroEcuador, the state-owned oil company in Ecuador, is trying toattract foreign investment in the country's largest oil fields, and toboost its production from 230,000 b/d today (more than 50% ofnational production), to 600,000 b/d by 2005. In December 2000,Ecuador's Constitutional Tribunal rejected a government reform planwhich would have allowed private companies to take operational

control of PetroEcuador's top five oil fields. Is the tide going back towards nationalization?


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Major

natural gaspipelines in

SouthAmerica

Natural gas is animportant resource butdevelopment of a regionaldistribution network iscritical. Can the nations of

Latin America worktogether to make thishappen? For example,Bolivia will not sell gas toChile because of the 19th

century war.

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Lecture 12- LAoil