LATAM Opportunities Offshore Oil & Gas

Drafted: Andrew Wright, LATAM Director of Market Entry - Biz Latin Hub

The Offshore Oil and Gas market in Latin America has been historically synonymous with the

pre-salt basin of Brazil, however other markets around the region are increasingly catching the

attention of some of the major players despite the ongoing challenges in the global market. Biz

Latin Hub has developed significant experience supporting natural resource companies and with

our local market knowledge we invite our readers to take a fresh look at the diverse opportunities

available across the region.

Sleeping giants and rising stars 

After more than 15 years without any major offshore developments, in Argentina the Ministry

of Energy is planning to launch an auction process for between 6 and 10 offshore exploration

blocks towards the end of 2017. The fields will be based in the Austral basin, to the South of

Tierra del Fuego, the only region which currently has offshore production at present where Total

(in association with Pan American Energy and Wintershall) are operating the Vega Pleyade field

that is expected to reach a daily production of 10 million daily cubic meters (MMm3/d) of gas. It

is also expected that a public tender will be offered to undertake a 3D seismic program for a

major part of the continental shelf running from the Colorada Marina basin in front of Buenos

Aires to the coast at the south of Santa Cruz.

Colombia, despite being historically recognized for onshore production and exploration, falling

productivity and reserves have driven the country’s authorities to look at enhanced recovery

methods and new fields, including offshore.

The National Hydrocarbon Agency (ANH) led a successful bidding round in 2014 that led to the

majors such as Repsol, Shell, ONGC Videsh, Petrobras, Anadarko as well as the national oil

company Ecopetrol being assigned blocks for exploration. Since then, there have been two

significant discoveries and increasing drilling activity scheduled for 2017. The Orca-1 discovery

(264MMbbl of oil equivalent) made by Petrobras in December 2014 was considered the most

important find in the region that year by the Consultants Wood MacKenzie, and this was

followed by the Kronos-1 find in the Fuerte Sur block by Anadarko at 1,584m depth of water.

Anadarko and the French multinational CGG have undertaken the largest ever seismic marine

prospection in the history of the country, studying over 16,000 km2 of Carribean deep waters off

the Colombian Coast. 

Such extensive exploration work and initial positive results have led to a steady increase of

offshore exploration and drilling, with 2017 forecast to be a record year of activity supported by

recent changes in regulation and tax incentives being implemented to support offshore

development.

Another relatively new kid on the offshore block is Guyana, which has also received a lot of

recent attention after ExxonMobil publicly announced that its substantial Liza oil discovery in

the Stabroek offshore block was commercial and that they also reported positive results from its

Payara discovery in the same block.

The Guyanese government has committed to reforms restructuring and developing new

legislation to oversee their nascient oil and gas sector, so this is another high potential,

developing market to keep on the radar. 

As Mexico continues to open up and increase work with international players, interest is high

with eight out of ten offered contracts for exploration and production of hydrocarbons in the

deep-water offshore Mexico being successfully assigned during its first bidding round in

2016. The Gulf of Mexico is highly attractive in terms of the volume of proven reserves, with a

privileged location well-serviced by neighbouring ports and service industry.

Sixteen international companies participated in the rounds with 10 blocks being offered across

the Perdido area and the Salina basin. In the end, eight blocks were awarded to six successful

consortia made up of a total of 12 different companies, including the heavyweights CNOOC

from China, Total, ExxonMobil, Chevron, Statoil and BP.

Furthermore, BHP Billiton was awarded two blocks offshore Mexico to operate, containing the

Trion discovery, in partnership with the Mexican national oil company Pemex, and beating an

offer made by the oil major BP.

A lesser-known but highly attractive market is Uruguay, where the French major Total began

exploratory drilling in 2016 in a country that has never proven any reserves or produced oil and

gas before. The Uruguayan offshore blocks have attracted significant interest from global players

such as BG (now Shell), Statoil and ExxonMobil, however BP who took 3 blocks actually

relinquished them in 2015. The Fraser Institute’s 2015 Global Petroleum Survey ranked Uruguay

Number One in terms of E&P market attractiveness for South America, and with Uruguay

planning to offer more blocks in 2017 their hydrocarbons future is worth monitoring closely.

Are the opportunities greater than the challenges?

Whilst Mexico perhaps offers the largest and most mature market at the moment, such frontier

offshore markets such as Uruguay, Guyana and Colombia still have a long way to go in terms of

legal and fiscal frameworks, infrastructure and support services, hence requiring high levels of

investment in relatively risky environments. Argentina is a sleeping giant awakening with huge

potential but again progress is expected to be slow.  

Despite these challenges there will be significant rewards for companies that are able to take a

long-term view and fill the void with products and services not yet available in local

markets. The importance of local partners and contacts can make the difference between success

and failure, so we invite our readers to contact Biz Latin Hub (marketentry@bizlatinhub.com) to

discuss further how we can assist your growth in Latin America in the natural resources sector.