REGIONAL REPORT

LATIN AMERICA
Is Latin America’s fragile market cracking under pressure?
" EMILY QUERUBIN, Associate Editor

Despite the rise in crude prices, many Latin American coun- of unconventional wells, international oil majors and investors
tries are still grappling with considerable debt and declining are showing more interest in the region.
production rates. However, recent discoveries and licensing Last May, Wintershall launched its second operated pilot
rounds have attracted a strong uptick in foreign investment, project, spudding the first of three horizontal pilot wells in the
which could be the region’s key to economic resurgence. Bandurria Norte Block, in western Neuquén. According to the
company, its operations had, until now, been focused primar-
ARGENTINA ily on conventional reservoirs as a non-operator. The com-
Due to high inflation and declining production, Argentina pany, alongside partner GeoPark Limited (operator, 50%),
is putting forth an effort to counteract the deterioration of its discovered a new oil field in August. The Rio Grande Oeste 1
E&P sector. Since its 2001 default, caused by a severe eco- exploration well was drilled and completed to a 5,500-ft TD
nomic recession, Argentina has worked to escape its financial in the CN-V Block of Argentina’s Mendoza Province. GeoPark
crisis. The country, home to abundant shale reserves, has gone reported that early production tests showed a flowrate of 300
from a chief net exporter to a net importer of gas in recent bopd and de-risked other delineated light oil prospects in
years. To keep its energy industry above water, the govern- the block.
ment is promoting development of complex reservoirs. Several majors partnered with state-owned YPF last sum-
Argentina’s largely undeveloped Vaca Muerta shale, in par- mer, to explore the coveted shale formation. Statoil and YPF
ticular, is said to hold upwards of 16 Bbbl of oil and 308 Tcf of (operator) entered an agreement to explore the Bajo del Toro
recoverable gas. The unconventional shale formation covers a Block of the Neuquén basin. Holding 50% each, the companies
very large area within the Neuquén basin. After numerous in- will jointly explore the 38,800-acre block in Argentina’s west-
centives were proposed by President Mauricio Macri last year, ern region. Statoil was subsequently awarded the Bajo del Toro
in an effort to reduce the high cost associated with development Este exploration license, situated east of Bajo del Toro (Fig. 1),
Left: PDVSA, Venezuela’s state-owned oil and gas company, has ambitious plans for the future, as it aims to reach 6 MMbopd by some time after 2019, despite its recent drop
in output. Photo: PDVSA. Center: Repsol has been actively operating in Trinidad & Tobago since 1995, and holds rights to four offshore blocks. Photo: Repsol. Right: Last year,
Wintershall launched its second operated pilot project in Argentina’s western Neuquén basin. Photo: Wintershall.

66!MAY 2018!/!WorldOil.com
in November. As operator, with a 90% working interest (Gas
y Petroleo del Neuquén holds 10%), the major said it is com-
mitted to one wildcat within its four-year exploration period,
beginning this year.
Additionally, a $1.15-billion joint investment in the Vaca
Muerta formation was announced in July, after the provin-
cial government divided the Aguada Pichana area into two
sections and combined it with the Aguada de Castro area.
YPF, Total, Wintershall and Pan American Energy agreed to
the joint investment, which has Total operating the eastern
part of Aguada Pichana with a 41% stake, while BP unit Pan
American Energy operates the western part, as well as Agua-
da de Castro, with a 45% stake.
ExxonMobil is another active oil major in Argentina’s
Neuquén basin. The company says that it has invested more
than $500 million in the exploration and development of its
Vaca Muerta assets since entering the region. In October, it
announced that its investment plan for the development
of resources in the Los Toldos I South Block, about 108 mi
northwest of Neuquén City, had been granted government ap-
proval. The initial $200-million investment funds a pilot proj-
ect that should put seven wells into production. It also will
support construction of production facilities and associated
export infrastructure.
President Energy—which holds a working interest and is
the operator in the Puesto Flores and Estancia Vieja conces-
sions, as well as the Puesto Guardian license and two explora-
tion areas surrounding it—announced significant upgrades to
its prospective resources in November, Fig. 2. According to a
company release, results of an integrated basin study and geo-
chemical survey showed aggregate Paleozoic gas/condensate
prospects net to the company with mean unrisked prospective
resources (MUPR) of over 7 Tcf, with an upside case of over
20 Tcf and 185 MMbbl of condensate. Additionally, results
showed previously unreported Cretaceous oil prospects of
over 40 MMbbl, MUPR.
Just a few months later, the company reported that its Neu-
quén basin 2P net reserves had increased 66%, from 4.82 MM-
boe to 8 MMboe, while its 1P reserves increased more than
30%, from 3.2 MMboe to 4.5 MMboe, since the assets were
acquired. The success is a direct result of a successful four-well
workover program at Puesto Flores. The company said that it
expects further upgrades in reserves as it moves forward with its
2018 capex program.
VENEZUELA
Although it has some of the world’s largest oil and natural
gas reserves, Venezuela has failed to retain its status as a top oil
exporter in the Americas. When the industry downturn took
hold in 2014, Venezuela’s financial situation was already pre-
carious. Since President Nicolás Maduro took office in 2013,
production reportedly has tumbled nearly 40%. Petroleum
Economist (PE) reported that approximately 600,000 bpd of
that decline took effect last year, as the nation’s economic de-
pression continued to worsen.
This year, the situation is deteriorating even further. In the
May 2017 issue of World Oil, we reported that Venezuela’s pro-
duction rate had reached a low of 2.15 MMbopd. Since then, it
has continued its unrelenting descent to a meager 1.5 MMbopd.
The country’s production decline is now five times greater than
the amount it pledged to cut in the October 2016 OPEC deal.
According to EIA, the number of active rigs in Venezuela also
has fallen, from about 70 in first-quarter 2016 to an average of
43 in the last quarter of 2017.
World Oil®!/!MAY 2018!67
REGIONAL REPORT / LATIN AMERICA
Until recently, production of extra-heavy crude from the
Orinoco Belt was helping to keep Venezuela’s industry afloat.
The belt, which is in Venezuela’s Guárico state, overlies some
of the world’s largest petroleum deposits. Nevertheless, by the
end of 2017, Orinoco output had fallen to a reported level of
882,000 bpd—a decline of more than 300,000 bpd from the
year prior.
The drop in production could, in part, be due to reports that
the quality of Venezuelan oil has been waning, as well. Refiners
in the U.S. and Asia have reported issues in crude quality, in-
cluding high salt and water content. In some cases, buyers have
turned away cargoes entirely.
Moreover, the Venezuelan government initiated a compre-
hensive purge of PDVSA’s executive leadership last year, as part
of President Maduro’s promise to temper corruption within the
state oil producer. In a matter of months, more than 50 compa-
ny officials reportedly were arrested, including former company
head Nelson Martínez and ex-oil minister Eulogio del Pino. A
number of officials at Citgo, PDVSA’s U.S. refining company,
were detained as well.
Additionally, PDVSA’s operational and cash-flow issues
continue to prevent the company from climbing out of debt.
Although the company made multi-billion-dollar debt pay-
ments late last year, it reportedly still owes millions. To shore
up its economy, Venezuela introduced its own commodity-
backed cryptocurrency earlier this year. According to the gov-
ernment, each “petro” is backed by a barrel of oil and is sold
at the same price. Despite the reservations of many, President
Maduro said that the petro is sure to be “a total success for the
welfare of Venezuela.”
PDVSA has ambitious plans for the future, however, and
says it wants to increase Venezuelan crude production to about
6 MMbpd by 2019, of which 4 MMbpd are anticipated to come
from the Orinoco belt. Additionally, the company’s national
Fig. 1. Statoil reported that it will explore Argentina’s Bajo del
Toro and Bajo del Toro Este blocks. Image: Statoil.
68!MAY 2018!/!WorldOil.com
plan calls for a significant boost in natural gas production, up
to 10.5 Bcfd by 2019. Also by 2019, it hopes to reach an export
goal of 1.3 MMbopd to Latin America and the Caribbean, and
3.2 MMbopd to Asia.
BRAZIL
While much of Latin America’s energy sector is struggling,
Brazil’s pre-salt layer remains a hotspot for explorers. The at-
tractiveness of pre-salt blocks in the deep waters of the Campos
and Santos basins helped bring in billions during the country’s
latest licensing round. In late October, key E&P players, includ-
ing Shell, Statoil and ExxonMobil, won PSCs for pre-salt blocks
in the region.
As Latin America’s largest country, Brazil’s influence on
the future of the international energy marketplace continues
to grow. Accordingly, the country joined the International
Energy Agency (IEA) as an association country in October,
inserting itself into the global discussion on important energy
policy issues. “Brazil’s experience shows that policies do mat-
ter,” said IEA Executive Director Dr. Fatih Birol. “It’s deter-
mined and ambitious long-term energy policies, developing
deepwater oil resources and expanding biofuels output, set an
example to countries around the world. As a result, our lat-
est data shows that Brazil will become a net oil exporter this
year, the first major consumer in recent history to ever achieve
such a turnaround.” According to IEA, Brazil is on track to
be a net exporter of nearly 1 MMbpd by 2022. This results
from a reported 50% increase in oil production over the last
10 years, which can largely be accredited to the country’s bud-
ding deepwater sector.
Libra, one of the world’s biggest deepwater discoveries,
began producing in November. Soon after, the Libra Consor-
tium—made up of Petrobras (operator, 40%), Shell (20%),
Total (20%), CNOOC (10%) and CNPC (10%)—affirmed
Fig. 2. President Energy recently announced significant
upgrades to its prospective resources in Argentina. Photo:
President Energy,

commerciality of the oil accumulation in the northwestern
section of the block, calling it Mero field. According to Petro-
bras, the newly-named field has an estimated recoverable
volume of 3.3 Bbbl of oil. Plans for the development of Mero
field, nearly 112 mi off the coast of Rio de Janeiro in the San-
tos basin, include four new production systems. According to
Total, Libra production should reach more than 600,000 bpd
in the coming years.
Statoil tripled its production in Brazil late last year, with the
acquisition of a 25% interest in Roncador field in the Campos
basin. The field is Petrobras’ (operator, 75%) third-largest pro-
ducing asset, with approximately 10 Bboe, in-place, and an an-
ticipated remaining recoverable volume of over 1 Bboe. During
November 2017, it was reported that the field was producing
about 240,000 bopd, in addition to about 40,000 boed of as-
sociated gas.
During Brazil’s 15th licensing round, Statoil, with several ma-
jor partners, further strengthened its position in the deep waters
of Brazil with winning bids for four blocks—C-M-755, C-M-
657, C-M-709 and C-M-793—in the southern part of the Cam-
pos basin. Other key players, including Shell and ExxonMobil,
also won deepwater blocks during the licensing round. Winter-
shall, however, bolstered its position in a big way, becoming the
country’s fourth-largest producer with newly-awarded interests
in seven licenses. As operator of four of those licenses, the com-
pany said the areas “show huge potential.”
Last month, Petrobras reported the start of production at
Bùzios field, one of its principal pre-salt projects. The P-74
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LATIN AMERICA / REGIONAL REPORT
platform, situated about 124 mi off the coast of Rio de Janeiro,
reportedly is the 13th platform to begin producing in the Bra-
zilian pre-salt. According to Petrobras, the field’s potential for
high output is cause for the four additional platforms that are
planned through 2021.
GUYANA
Following a series of major discoveries by ExxonMobil,
Guyana has become a highly sought-after region for explorers.
As yet, Guyana has not been an oil producer. However, Wood
Mackenzie says it anticipates that the country will be one of Lat-
in America’s top producers by 2026, with an estimated output
of approximately 350,000-to-400,000 bopd.
ExxonMobil’s Liza development, which holds resources
between 2 Bboe and 2.5 Bboe, reached FID last June after
positive results were reported from the Liza-4 well. The first
phase of development will include a subsea production system
and an FPSO vessel capable of producing 120,000 bopd. The
field, which is approximately 118 mi offshore in the Stabroek
Block, is expected to start producing by 2020.
ExxonMobil reported more success offshore Guyana in July,
when its Payara-2 well encountered 59 ft of high-quality, oil-
bearing sandstone, confirming a second giant field in the Sta-
broek Block. The positive well results increased Payara field’s
estimated resources to approximately 500 MMboe.
By October, ExxonMobil had struck its fifth discovery off-
shore Guyana. The company’s Turbot-1 well encountered 75 ft
of high-quality, oil-bearing sandstone within the southeastern
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World Oil®!/!MAY 2018!69
REGIONAL REPORT / LATIN AMERICA

part of the Stabroek Block. The well, situated about 30 mi
southeast of Liza, was drilled to a depth of 18,445 ft in 5,912
ft of water. “ExxonMobil continues with its successful explora-
tion campaign offshore Guyana with the discovery of Turbot.
This shows that deep water can still be attractive. After [this]
announcement, ExxonMobil’s Liza and Payara complex might
approach the 2 Bbbl mark in commercial reserves,” Pablo Me-
dina, Wood Mackenzie’s senior analyst, said in a release. “Exx-
onMobil’s Latin American footprint has increased significantly
Fig. 3. Pemex recently reported Mexico’s largest onshore
discovery in 15 years at its Ixachi-I well, in the Veracruz basin.
Photo: Pemex.
with its recent streak of discoveries in Guyana and its aggressive
bidding in Brazil’s latest licensing round.”
In January, Exxon’s sixth Stabroek Block discovery was report-
ed. The Ranger-1 exploration well encountered about 230 ft of
high-quality, oil-bearing carbonate reservoir, after it was drilled
to a depth of 21,161 ft in 8,973 ft of water. “This discovery proves
a new play concept for the 6.6-million-acre Stabroek Block, and
adds further value to our growing Guyana portfolio,” Steve Green-
lee, president of ExxonMobil Exploration Co., said in a release.
Just one month later, the oil giant—along with partners Hess
Guyana Exploration Ltd. (30%) and CNOOC Nexen Petro-
leum Guyana Limited (25%)—reported its seventh discovery
in the Stabroek Block, at the Pacora-1 exploration well. The
well, which was drilled approximately 4 mi west of the Payara-1
well, encountered about 65 ft of high-quality, oil-bearing sand-
stone reservoir. It was drilled to a depth of 18,363 ft, in a water
depth of 6,781 ft. According to the company, it will be devel-
oped in combination with Payara field, helping to bring Guyana
output to more than 500,000 bpd.

MEXICO
E&P activity in Mexico has seen a dramatic decline of late.
As the country’s drilling activity hit record lows last year, its
proven reserves have been shrinking consistently. Energy re-
form in Mexico, however, has ended a 75-year state monopoly
in the oil and gas sector, and has shifted the nation’s attention to
attracting private capital and technical expertise that could help
rebuild Mexico’s ailing economy.

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70!MAY 2018!/!WorldOil.com

During this year’s CERAWeek in Houston, Pemex CEO Car-
los Treviño said that “the new name of the game, for Pemex,
is ‘partnerships.’” Through an aggressive farm-out strategy, the
company aims to lure foreign investment through a series of as-
set auctions that will, with any luck, help reverse the country’s
output decline.
In January, Mexico awarded 19 deepwater blocks to oil ma-
jors, including Shell and Eni, reportedly bringing in billions
of dollars’ worth of investment. In March, Mexico offered 35
shallow-water areas, which will be followed by an auction for 37
onshore developments in July. Overall, the country is expected
to offer more than 100 permits to oil majors before its July elec-
tion, when President Nieto’s term ends.
With its large-scale energy reforms, Mexico became the
IEA’s first Latin American member country in February. “It is
a historic day, because we welcome our first Latin American
member country, with more than 120 million inhabitants, an
important oil producer, and a weighty voice in global energy,”
IEA Executive Director Dr. Fatih Birol said. “The ambitious
and successful energy reforms of recent years have put Mexico
firmly on the global energy policy map.” Mexico is the associa-
tion’s 30th member.
Efforts to revive Mexico’s E&P industry showed progress
last year, when Talos Energy reported a significant discovery
in the shallow waters of the Sureste basin. The Zama-1 explo-
ration well, situated about 37 mi from the Port of Dos Bocas,
reportedly was Mexico’s first well to be drilled by the private
sector. It reached an initial TVD of about 11,100 ft, encounter-
ing a contiguous gross oil-bearing interval of more than 1,100
ft, with 558–656 ft of net oil pay in Upper Miocene sandstones.
“We believe this discovery represents exactly what the energy
reforms intended to deliver: new capital, new participants and
a spirit of ingenuity that leads to local jobs and government rev-
enues for Mexico,” Talos President and CEO Tim Duncan said
in a release.
According to the company, initial gross original oil-in-place
was estimated between 1.4 Bbbl and 2 Bbbl, which exceeded
pre-drill estimates. Following the installation of a liner, Talos
says it plans to drill deeper prospects in pursuit of Zama Main
and Zama Deep targets.
Mexico’s E&P sector continued to make headlines, when
Pemex reported the country’s largest onshore discovery in 15
years in November. The Ixachi-1 well (Fig. 3), 45 mi south of
the Port of Veracruz in the Veracruz basin, showed an original
volume of over 1,500 MMboe, representing total reserves of
about 350 MMboe. The reservoir’s close proximity to existing
infrastructure reinforces its economic value further.
COLOMBIA
Canacol Energy and GeoPark are two of Colombia’s most
active operators. Last year, Canacol identified a new com-
mercial shallow gas play in the Lower Magdalena basin, after
an exploration well tested at a combined rate of approxi-
mately 8,123 boed. The Toronja 1 exploration well, drilled
to an MD of 7,200 ft on the VIM 5 Block, was the company’s
eighth consecutive gas discovery in the basin. It was report-
edly being tied into the Jobo gas processing facility, just
south of the discovery.
Soon after, the company reported its ninth discovery. Its
Pandereta 1 exploration well encountered 149 ft of gas pay in
LATIN AMERICA / REGIONAL REPORT
the Lower Tubara, Cienaga de Oro (CDO) and fractured base-
ment reservoirs. Less than two months later, in December, the
Canadonga-1 well reportedly encountered 32 ft of net gas pay in
the CDO reservoir, confirming Canacol’s tenth consecutive dis-
covery in Colombia’s Lower Magdalena basin. The Pandereta
2 appraisal well confirmed that the finds were of significance,
encountering twice the amount of net gas pay of the Pandereta
discovery well.
In September, GeoPark reported a new oil field discovery of
its own. After drilling the Curucucu 1 to a TD of 14,600 ft, pro-
duction tests resulted in a production rate of about 1,700 bpd.
While the well was drilled from an existing well pad in the re-
cently discovered Jacamar field, it reportedly is on a new fault
trend to the east of the Tigana/Jacana fault trend, contiguous to
Jacamar field. The company says the find marks its 11th discov-
ery in the Llanos 34 Block since acquiring it in 2012.
The company saw recent progress at Tigana/Jacana, as well.
Oil shows at the Tigana Norte 3 and Tigana Norte 4 appraisal
wells indicated the potential for hydrocarbons in both the Gua-
dalupe and Mirador formations. “With the success of these
recently-drilled new wells, GeoPark has moved into becoming
the third-largest oil and gas operator in Colombia, with more
growth on its way,” CEO James F. Park said in a release.
TRINIDAD & TOBAGO
BP Trinidad & Tobago (BPTT) and Repsol are two of the
most active operators in Trinidad & Tobago, the southern Carib-
bean’s twin-island state.
One of BP’s largest upstream projects of 2017, the Trinidad
Onshore Compression (TROC) project started up in April. The
facility, which reportedly has the potential to deliver about 200
MMscfd, is expected to improve production capacity by increas-
ing output from low-pressure wells in BP’s existing Columbus
basin acreage through an additional inlet compressor at the Point
Fortin Atlantic LNG plant.
Later in the year, BP announced first gas from the Juniper de-
velopment, the company’s first subsea field development in Trini-
dad. The facility produces gas from Corallita and Lantana fields
via the Juniper platform, approximately 50 mi off of Trinidad’s
southeast coast. Gas from Juniper’s five subsea wells flows to the
Mahogany B hub via a new 6-mi pipeline. The project reportedly
boosted BPTT’s gas production capacity by approximately 590
MMscfd.
BPTT also announced last year that its Angelin gas project was
sanctioned. The project will include the construction of a new
platform about 37 mi off of Trinidad’s southeastern coast, as well
as four wells with a production capacity of about 600 MMscfd.
Gas from the project will flow to the Serrette platform hub via
a new 13-mi pipeline. According to BPTT, drilling is scheduled
to begin in third-quarter 2018, and first gas is anticipated in first-
quarter 2019.
Repsol, with BPTT, reported the discovery of its largest gas
volume in five years. The Savannah and Macadamia exploration
wells uncovered approximately 2 Tcf of gas in place. Savannah
was drilled into an untested fault block of the Columbus basin,
east of Juniper. Likewise, Macadamia was drilled to test explora-
tion and appraisal segments below the existing SEQB discovery,
which is situated 6 mi south of the producing Cashima field, in
the Columbus basin. Both reservoirs will be tied back to the Juni-
per platform.
World Oil®!/!MAY 2018!71