The Future of Latin American Oil: Can the Production Decline be mitigated and reversed?
Many oil producing countries in Latin America (Mexico, Colombia, Argentina, Venezuela and Brazil) are experiencing supply stagnation or decline challenges, potentially weakening the global oil market relevance of this region in the long-term. In 2015, investments in the Latin American oil sector fell by 19%. The oil price drop since mid-2014 has clearly been playing a big part in this reduction. However it was larger than in most other regions. Many analysts expect a further fall of similar magnitude for 2016. Why is this region being particularly hit, and to which extent can investors and policymakers succeed in reversing the negative trend, especially in a potentially long-lasting low oil price world? The purpose of this paper is to assess whether this trend can be mitigated and potentially reversed, and in what timeframe and the implications for Latin America both within the region as well as in its role as a potential major source of oil supply growth to the world. The paper will address both subsurface and aboveground dimensions, with a particular focus on investment and policy aspects.