![]() ![]() Petrobras has stated that it can produce its prolific “pre-salt” offshore fields at $35 per barrel. Petrobras is positioning itself as a low-carbon producer able to survive in a low oil-price environment, even deep into the energy transition. Among the major national oil companies, Brazil’s Petrobras and Colombia’s Ecopetrol, the only national oil companies in the region to pledge net zero by 2050, are emerging as leaders in the region. It’s too soon to pick winners and losers, given the uncertain pace of the energy transition, but it’s clear who is currently better poised to adapt. The pressing question is whether they will be replaced by national oil companies from China and India, or perhaps private equity investors or smaller companies. Judicial pressure on Shell in the Netherlands, as well as shareholder pressure on the boards of Exxon and Chevron, suggest the appetite of the traditional “oil majors” for investment in Latin America could drop or change focus into low carbon projects. Recent announcements by some of the largest European IOCs (BP, Shell, Total) tout accelerated plans to diversify their business models into renewables. ![]() Investment by large international oil companies (IOCs) looks set to cool off. When they are listed on stock markets, they are among the largest companies in terms of market capitalization. The Latin American national oil companies also have significant macroeconomic importance as providers of oil rents, generators of foreign exchange receipts, issuers of foreign debt. Though Argentina, Brazil, and Mexico are not as oil dependent, oil and gas are among the largest industries in each country in terms of fiscal revenues, exports, and investments. The small nation of Guyana is poised to become the largest per-capita oil producer in the world, just as the window for developing its reserves may be closing. Bolivia and Trinidad and Tobago depend on natural gas. Venezuela, Ecuador, and Colombia are particularly dependent on oil exports and revenues. The faster the decarbonization process ends up being, the more disruptive it will be for the region. But Latin American oil production involves higher costs and higher carbon intensity than the Middle East, which makes it less resilient to drops in demand. Latin America especially stands to lose from a decline in oil demand: It has the second largest oil reserves in the world after the Middle East. It’s unclear how long the process of decarbonization in the world energy market will take, but what is clear is the threat it presents to the market for oil and the rents that come from its extraction. The region’s national oil companies, especially in a few laggard countries like Venezuela and Mexico, must act quickly or be left behind by the global energy transition, with grim consequences for national economies. But with a rash of net-zero pledges from oil-producing and oil-consuming nations alike coming from COP26 negotiations in Glasgow, the future of Latin America’s oil industry is in jeopardy. Oil and gas prices are at multi-year highs - for now.
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