Reprinted from the Chinese edition of The Wall Street Journal.
South American oil fields are booming.
Brazil, Guyana and Argentina are forecast to drive more than 80% of growth in global oil production outside the OPEC bloc over the next five years, offsetting losses where top producers are mired in conflict.
Brazil’s Petrobras plans to invest $111 billion by 2029 in projects including offshore finds near the mouth of the Amazon River. Argentina’s oil production is at the highest in two decades. Guyana is on the cusp of becoming the world’s largest producer per capita, and jungle-covered Suriname is one of the industry’s hottest offshore oil prospects.
South America’s oil bonanza comes as geopolitical tensions drive wild swings in oil markets. Israel fought a 12-day war in June with Iran, home to the world’s fourth-largest oil resources. Western sanctions on Russia since it invaded Ukraine in 2022 have disrupted oil exports and halted investments in the region.
U.S. oil companies are shifting investments south. Exxon and Chevron have piled into the Foz do Amazonas basin—part of the Equatorial Margin, Brazil’s most promising offshore frontier.
The shale boom made the U.S. the world’s top oil producer in recent years, ahead of Saudi Arabia and Russia. But with many of the richest shale basins from West Texas to North Dakota maturing and the quality of remaining drilling locations diminishing, companies are directing billions of dollars toward South America’s offshore bounties.
It is the start of a “reversion to more classical geologies,” said Ben Hoff, global head of commodity research at Société Générale. “That is much more of a South American story.”
South American oil barrels are less expensive to produce and generate lower emissions than the global average. Oil from Brazil typically contains fewer contaminants, and the country’s plentiful wells mean less infrastructure is needed to produce the same amount of oil, experts say.
South America’s oil boom marks a stark turnaround from the past decade. Oil production from Venezuela, which has the world’s largest oil reserves, collapsed in 2017 when authoritarian leader Nicolás Maduro tightened control of the industry. Bolivian oil production went into sharp decline in 2015, after government seizures of foreign oil assets in the previous decade scared off investment.
But Brazil has remained open to foreign investment for decades even as its leadership has oscillated from left to right-leaning politicians.
“Brazil gets it,” said Mario Jorge da Silva, head of strategy and planning at Petrobras, Brazil’s state-controlled oil producer and one of Latin America’s largest companies. “We saw what happened in Venezuela, in Bolivia…if there is any doubt over regulation or honoring contracts, capital doesn’t come in and without capital there is no prosperity.”
A few years ago, Exxon failed to find commercially viable amounts of oil in the deep waters off Brazil. It stopped a multibillion-dollar drilling campaign there, though it didn’t rule out pursuing other projects in the country.
During bidding rounds last month, in partnership with Petrobras, Exxon secured stakes in 10 blocks in the Foz do Amazonas basin. “Even they see the potential there,” said Schreiner Parker, head of emerging markets at Rystad Energy, a research firm.
Brazil sold rights to 19 oil-and-gas blocs in the bidding process after years of fighting environmental concerns at the exploration site some 300 miles from the mouth of the Amazon River.
President Luiz Inácio Lula da Silva has offered steadfast support to the oil industry despite his efforts to fight climate change, arguing that oil revenue is needed to finance Brazil’s transition to green energies. Fossil fuels account for more than 75% of global greenhouse gas emissions and nearly 90% of all carbon-dioxide emissions, according to the United Nations.
Further northwest along South America’s coast, Guyana’s offshore basins have turned the country of just over 800,000 people into an oil powerhouse, with reserves estimated at over 11 billion barrels of oil equivalent. Guyana’s oil industry, long led by Shell, drilled dry holes offshore for decades before Exxon and its partners Hess and China’s Cnooc made a string of big oil discoveries beginning in 2015 that stunned the industry.
“Guyana is a spectacular story of an emerging oil producer,” said Francisco Monaldi, director of the Latin American Energy Program at Rice University’s Baker Institute. “It’s going to become the largest oil producer per capita in the world.”
Production from the Stabroek Block—a 6.6 million-acre offshore concession—has climbed to around 650,000 barrels a day, with output expected to surpass 1.3 million barrels a day by the end of 2027.
Break-even costs are low—estimated at $25-$35 per barrel—thanks to large, high-quality reservoirs in relatively shallow waters. Brent, the global oil benchmark, recently traded at around $68 a barrel.
But Guyana’s leaders have had no experience handling such a windfall, raising concerns the country might be tempted to exert greater state control as production grows, Monaldi said. If the government maintains its current terms with Exxon, output is expected to nearly double over the next 10 years, he said.
Suriname is positioning itself as South America’s next major offshore oil producer, following years of exploration successes near its maritime border with Guyana. It is attracting investment from companies such as France’s TotalEnergies, Houston-based APA Corp. and Malaysia’s Petronas. Industry analysts at Rystad forecast upstream investment in Suriname could reach nearly $9.5 billion by 2027.
Argentina’s oil sector continues to expand, driven largely by the Vaca Muerta shale field. Since 2014, oil production at Vaca Muerta has risen 10-fold to more than 400,000 barrels a day, recently fueled by pro-investor policies under President Javier Milei.
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