Oil and gas in the capitals
The fall in commodity prices continues to affect Latin American economies. However, adjustments, cost-savings, new markets and new resources for investment continue to stimulate the region’s oil industry. Nonetheless, the economies of Latin America and the Caribbean will shrink 0.6% through year-end, and foreign direct investment is expected to contract 9.1% (Cepal).
Colombia. The national oil company, Ecopetrol, reduced its projected investment this year from $4.8 billion, to between $3 billion and $3.4 billion. Based on low oil prices, 2016 will be a year of transition, during which it will complete transportation projects and implementation of the new refinery in Cartagena.
As of 2017, Ecopetrol’s investments will be focused on E&P. Of its resources, 93% will be invested in Colombia, to produce about 715,000 bopd. Despite facing lower oil prices, Ecopetrol—during first-quarter 2016—achieved a net income increase of 127%, compared to the same period in 2015, thanks to reductions in costs and expenses, optimizing procurement plans and contracting. Additionally, in June, Ecopetrol came to New York to seek resources from foreign investors by selling bonds to finance its operations, and to fund its investment plan for this year. Ecopetrol, at the same time, launched a new round that offers 20 new fields in various regions.
Ecuador. Oil accounts for 50% of Ecuador’s export sales and, in 2015, it lost $7 billion.
The Ecuadorian state is partnered with PetroChina until the year 2024, with a production commitment of approximately 181 MMbbl for eight years, with a two-year grace period. It is the largest volume committed to a purchase contract for crude oil with PetroChina since these operations began in 2009.
This agreement is possible, due to a newly discovered oil field, with a projected capacity of 772 MMbbl of reserves. The field could provide the country with an additional $19.5 billion in revenue.
Bolivia. Repsol could increase its natural gas reserves in Bolivia significantly. The Spanish oil company is aiming to identify new deposits. This is why the president of the company, Antonio Brufau, will visit Bolivia in the coming weeks to announce an investment of about $1.2 billion. After the first seismic tests, Repsol was able to identify three new exploration prospects—Boyuy, Boicobo and Ipaguazu—where they still are evaluating options for exploration and development.
In terms of increasing Bolivia’s gas reserves, Boyuy provides an estimated reserve of 2.7 Tcf. In Boicobo, an estimated 1 Tcf of gas is calculated, and Ipaguazu has an estimated 0.3 Tcf. These new reserves are equivalent to 10 years of gas supply in Brazil. Drilling will begin in Boyui in early 2017, at an estimated cost of $92 million.
Argentina. National oil company YPF and the Argentina subsidiary of Chilean company Enap Sipetrol announced an investment of more than $165 million to increase production in the Magellan reservoir, in Tierra del Fuego. The Magellan Area Incremental Project (PIAM) will increase daily gas production by more than 60%, and the production of associated crude oil by 25%. In late June, YPF said it would seek funding on international markets through the issue of bonds totaling up to $750 million, with a variable rate and maturity in 2020.
This will be the second international bond issued by YPF. The first was on March 23, when it placed $1 billion for maturity in 2021.
YPF also signed an agreement with YPFB in July to search for hydrocarbons in the area of Charagua, which has potential reserves of 2.7 Tcf of gas, and would require an investment of $1.1 billion. The Charagua area, which covers 99.250 hectares, is in the department of Santa Cruz, where it is estimated that there are 2.7 Tcf of recoverable natural gas.
However, to further boost this sector, which has stagnated in the diversification of exploration investment, there are an additional $1.4 billion from Pan American Energy (PAE). About 64% of the total will go to the San Jorge Gulf basin (Chubut), $300 million will go to Neuquen, and $70 million is earmarked for Tierra del Fuego. The remaining amount is allocated to capital investments throughout the country.
Mexico. The oil trade balance of Mexico went from a surplus of $97 billion in 2014, to a deficit of $9.855 billion in 2015. This deterioration reflects a decrease in terms of oil trade, as well as an increase in the volume of petroleum product imports.
Pemex announced a loss of $3.564 billion in first-quarter 2016. The net loss this quarter, 38.3% lower compared to last year, is a result of the 43% decline in the average price of Mexican crude oil. Oil revenues totaled nearly $13 billion, representing a 19.5% decrease over the first quarter of last year. The quarterly results also were affected by a 3% decrease in crude oil production, which averaged 2.23 MMbpd. During first-quarter 2016, the average oil and gas wells in operation was 9,209, which is 3.1% lower than the same period last year.
Venezuela. Thanks to cooperation with China, production continuity of the largest oil reserve in the world is ensured. Petrόleos de Venezuela (PDVSA) was supported with a new loan of $5 billion. PDVSA received $72.169 billion in revenue last year, while it stood at $121.895 billion in 2014, which is a 40.7% drop over the last year.
The average price per barrel of Venezuelan crude oil has settled at $44.65, but, in the first half of this year, the value of Venezuelan crude declined further, with an average of $31.15/bbl. PDVSA’s net profit fell 19% last year, and stood at $7.345 billion. In total, PDVSA owed $19.052 billion to suppliers at the end of 2015. In case their production plan does not yield the expected results, the door is open for litigation and seizure of company assets. The only confirmed investment for PDVSA, to date, is $600 million to reactivate the repairs of a refinery in Aruba. 
