Latin America still plays a major role in the global oil market despite recent infrastructure and political challenges. Carlos Rocha, a cost and technology expert in the region, shares insights on the future of the Latin America opportunities. Here's an excerpt of our conversation.

Jessica Nelson:
What is the future of the region in the global oil market? What role do you expect Latin America to play in the coming years?

Carlos Rocha:
Latin America, the region, considering Venezuela and Mexico, its producing around 11 million barrels a day of crude. That's more or less what the U.S. is producing. Or, maybe the same as what Russia produces. The entire region represents almost 10 percent of the world's production. So, its not a small amount, but not outstanding. One thing that has to be remembered is that the region absorbs 20 percent of the investments of offshore. The production of many countries in Latin America is onshore, but those areas are in depletion and there are no significant findings that can sustain production. Most of the new opportunities in the region are in offshore. By 2030, we do not expect a high net increase in production for Latin America- maybe 1-2 million barrels a day for the entire region- but we do expect higher participation from offshore. Now, we have more or less 60 percent of production is onshore and 40 percent is offshore. By 2030, we expect a complete inversion of this trend. We'll be closer to 70 percent of production offshore and 30 percent onshore.

For the global oil markets, the production is significant. But, more important is the development of the offshore supply chain and technology for the region. This is the new frontier for Latin America. And, we expect lots of development in this kind of activity.

Jessica Nelson:
When discussing the Latin American market, you are analyzing various countries potential. What are the current hotspots in Latin America for exploration and investments?

Carlos Rocha:
We have several investment opportunities in Latin America. But, I think four could be called hotspots. One is Brazil, specifically the pre-salt fields. Another one is Mexico's deepwater assets. Then, we have Argentina, a region that is an unconventional play with large potential (Vaca Muerta). And we have Guyana- where Exxon mobile recently had a large oil find in deepwater.

In Brazil, I can tell you this is a hotspot because the pre-salt is now relatively open to international oil companies (IOCs) since the new government has been in place. They reverted a law that denied access to IOCs in the pre-salt. So now, they can participate or partner with Petrobras or even as operators. The most interesting thing about the pre-salt is that its a high productivity area. So with a couple wells, each well from 30,000- 50,000 barrels a day, you can achieve a very high production. The reserves are very high- usually exceeding one billion barrels of recoverable oil per field. You also can see huge savings for very large projects in the region. The exploratory success rate is very high. I think the last number I saw was about 75- 80 percent for exploratory success. So, its easy to find oil and you have a lot of cost savings because of the size and productivity.

In Mexico, the last four years Mexico has been under energy reform, which opened the market to IOCs. Mexico had several bid rounds, mostly in ultra deepwater. And, ultra deepwater is the kind of play in which the majors like to operate. We have already seen some findings, but also have a lot of high expectations because of historical expectations of the U.S. Gulf of Mexico, which had very high production in deepwater. There are also some problems right now due to the change in government. But, it is an area of high potential and its worth the time to study opportunities.

Vaca Muerta is in the central southern part of Argentina. Its an unconventional play so its like shale gas or tight oil. We believe it has a good chance to be the first high success unconventional development outside the U.S. The main players are YPF and Chevron. They are starting to develop that area. There are some problems because the region is fairly deserted so there is little infrastructure, and worse, has very few sources of water. We know that's a problem for fracking as it requires a large amount of water. So, the current operators are trying to solve these problems. We expect more infrastructure to be in place soon.

Finally, I have Guyana as a hotspot. The only company having very high success over there is ExxonMobil. They had 3-4 very large discoveries. Their findings will add 2.5 billion barrels of recoverable oil. They are in the beginning of developing and exploring the full potential. Guyana is just starting to deal with oil production and exploration so they don't have fiscal legislation in place for the oil business. They are developing everything. For the time being, its open to companies. It's one of the deepwater hotspots in Latin America.

How will above-ground risk play into these hotspots? Listen to the full interview for more insights on the Latin American upstream market.Learn more about our coverage of the upstream market.

Posted 13 August 2018

This is an excerpt from Upstream in Perspective and has been professionally transcribed as accurately as possible. Please note, some words and phrases may have been unintentionally excluded.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.