Talk of the energy transition dominated this week’s CERAWeek by IHS Markit, with Latin America’s national oil companies (NOC), which have long served as key sources of revenue for their governments, part of the discussion.

LatAm rig count

The consensus is oil and gas will remain relevant for decades as energy use intensifies across rapidly developing economies. However, investment will only flow to the best assets. 

As such, the state-owned NOCs are looking to maximize existing hydrocarbon assets while also looking to technology and natural gas in decarbonization efforts. 

“We want to make gas more important in our portfolio,” said Ecopetrol SA’s Juan Mauel Rojas, vice president of Business Development. Speaking in a panel discussion Tuesday, he said the goal is to make natural gas 35% of the Colombia NOC’s assets by 2030, up from 20% today.

The company is also using advanced technology to increase recovery in mature fields. Secondary and tertiary recovery programs are crucial to “our upstream business’  competitiveness,” he said. Fields with recovery programs accounted for 30% of output in 2019.

He also detailed 400 MW in solar, wind and geothermal projects and a diversification strategy into the power transmission segment as electrification intensifies. Ecopetrol is in talks to purchase Colombian transmission firm Interconexion Electrica SA.

At Brazil’s Petróleo Brasileiro SA (Petrobras), lifting costs are falling dramatically in the deepwater pre-salt region making Brazilian oil among the most competitive in the world.

Chief strategy officer Rafael Santos said Petrobras is looking at lifting costs of under $4/bbl oil in the pre-salt, thanks to “knowledge and experience” and cutting-edge technology. The company has a goal of getting oil to market 1,000 days after it is found.

“At Petrobras we are going to focus on activities where we have a comparative advantage,” he said. “The climate issue is very important and deserves our attention.” Still, “the world also requires affordable energy.”

Petrobras supplies about 3% of the world’s total oil demand, or about 2.3 million b/d, making Brazil the biggest oil producing country in Latin America.

Pemex Priorities

Cost efficiencies are also the priority at Mexico’s state oil giant Petróleos Mexicanos (Pemex).  

Pemex’s focus during the current administration has been on shallow water and onshore reserves in the southeastern region “where we have the most competitive exploration and production costs which average below $12/bbl,” said Pemex PMI’s Ulises Hernandez, director general. Pemex PMI is a subsidiary that manages crude and oil product imports and exports for the state firm.

Pemex is working in “the most profitable basins,” which have also proven to be the most resilient during coronavirus. “We have not found the need to decrease exports during the entire crisis,” he said.

“Because of the history that we have had with declining production we have plenty of spare capacity that can be used to further reduce development costs,” he added.

Natural gas production, however, is unlikely to increase dramatically in Mexico. 

Mexico boasts 141.5 Tcf of prospective unconventional gas reserves and 76.3 Tcf of prospective conventional reserves, according to upstream regulator Comisión Nacional de Hidrocarburos (CNH). However, “there has to be a strategic position from the government” to increase natural gas output, Hernandez said.

“Being so close to the cheapest gas market in the world makes things very difficult for non-associated gas projects here in Mexico and for stranded assets like Lakach,” he said.

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Lakach is a deepwater gas field in the Gulf of Mexico with proved and probable resources, i.e. 2P reserves, of close to 1 Tcf. It was discovered in 2008 and saw development halted for budgetary reasons ahead of Mexico’s 2013-2014 energy reform.

“Several projects were being executed, but they went into standby after the shale gas boom in the U.S,” Hernandez said.