Analysis: Latin America Rig Activity Grows
Latin America oil and gas activity is booming, with year-on-year rig activity increases from April 2010 to April 2011 in Argentina, Brazil, Colombia, Ecuador and Venezuela, according to a recent report by London-based Evaluate Energy.
The five countries have experienced at least a 15 percent increase in active rigs from the April 2010 count. In Brazil, the average number of rigs grew from 85 in April 2010 to 108 in April 2011, and in Venezuela, the average number of rigs grew from 88 in April 2010 to 110 in April 2011. However, Colombia has leapfrogged the pair within two years to become the second most active country on the continent behind Mexico, with the average number of rigs growing from 79 in April 2010 to 111 in April 2011.
Ecuador has seen its rig activity increase from an average 18 rigs in April 2010 to 24 rigs in April 2011, but rig activity remains relatively low. Argentina has experienced significant growth, with the average number of rigs in April of this year at 91 compared with 78 in April 2010, but that growth was far less dramatic than the previous year, when the average number of rigs grew from 52 in April 2009.
Further increases in rig activity may be seen in the future thanks to YPF's discovery of an estimated 150 million barrels of shale oil in Argentina's Neuquen province, continued drilling activity in Brazil's highly productive pre-salt reserves and the finalization of contracts for Colombia's 2010 licensing round.
Mexico was the only Latin American country to experience a decline in rig activity since April 2010. Though it remains the country with the highest number of active rigs in the region, the level has fallen significantly since its own boom in mid-2009.
To address the decline in rig activity and production levels, Mexico's government has changed its energy policy, and state energy company Pemex recently reported it would seek to increase foreign investment in the nation's oil industry and increase focus on exploration in areas such as the Mexican portion of the Gulf of Mexico.
"Overall, the present and future of Latin America are both looking promising. If the new discoveries in Argentina, Brazil and Colombia eventually bear fruit, and Mexico's policy changes have the desired affect, the global oil and gas industry could look extremely different in the near future," Evaluate said.
Colombia's Heavy Oil Plays
Opportunities in Colombia's heavy oil plays, primarily in southeastern Colombia in the heavy oil belt in the Llanos Basin, continue to expand in both developed and underexplored areas, IHS noted in the IHS Herold 2011 Regional Resource Assessment: Opportunities in Colombia's Heavy Oil Play Continue to Grow.
The two most attractive areas in the Colombia oil play for investors and companies seeking acquisitions are the Llanos basin southwest of the Rubiales oil field, and in the Putumayo basin around the developing Capella oil field, said Donald McIvor, senior energy financial analyst and author of the report.
The two largest Colombian heavy oil discoveries to date are the Rubiales field, with 4.38 billion barrels of oil in place, and the Capella field, with 2.2 billion barrels of oil in place. "We also believe two other very large areas — the eastern Llanos basin and the Putumayo basin southwest of the Capella field — have potential for heavy oil discoveries," McIvor said, "but the license holders are doing very little to evaluate them."
Since 2008, the proven and probable reserves of the Rubiales field and four satellites have increased nearly three fold. Additionally, significant discoveries southwest of the Rubiales field have been made in the past 18 months, and the possibility exists that a very large part of the Llanos basin east and northeast of Rubiales is prospective for heavy oil. A large, heavy oil field in the Putumayo Basin is under development by Sinochem Group and Canacol Energy, and numerous discovery opportunities exist around that field and between it and the Andes Mountains, McIvor said.
While production has grown in recent years due to increased investment in secondary oil recovery oil fields, there has not been a big, new discovery recently, said Georgia Cooper, area coordinator for Colombia and Mexico in the Global E&P Reporting Service at IHS. Additionally, the Colombia government must address some key issues, particularly around infrastructure and transportation, to facilitate growth in oil and gas investment. Steps being taken to improve infrastructure include the approval by Ecopetrol's board of a US $3.39 billion modernization project for the Barrancabermeja refinery, which is expected to be completed in 2016.
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