19 July 2011, Reuters: Venezuela tops oil reserves league in OPEC table
September 19, 2011
New Fields May Propel Americas to Top of Oil Companies' Lists
By SIMON ROMERO
RIO DE JANEIRO -- Brazil has begun building its first nuclear submarine to protect its vast, new offshore oil discoveries. Colombia's oil production is climbing so fast that it is closing in on Algeria's and could hit Libya's prewar levels in a few years. ExxonMobil is striking new deals in Argentina, which recently heralded its biggest oil discovery since the 1980s.
Up and down the Americas, it is a similar story: a Chinese-built rig is preparing to drill in Cuban waters; a Canadian official has suggested that unemployed Americans could move north [1] to help fill tens of thousands of new jobs in Canada's expanding oil sands; and one of the hemisphere's hottest new oil pursuits is actually in the United States, at a shale formation in North Dakota's prairie that is producing 400,000 barrels of oil a day and is part of a broader shift that could ease American dependence on Middle Eastern oil.
For the first time in decades, the emerging prize of global energy may be the Americas, where Western oil companies are refocusing their gaze in a rush to explore clusters of coveted oil fields.
"This is an historic shift that's occurring, recalling the time before World War II when the U.S. and its neighbors in the hemisphere were the world's main source of oil," said Daniel Yergin, an American oil historian. "To some degree, we're going to see a new rebalancing, with the Western Hemisphere moving back to self-sufficiency."
The hemisphere's oil boom is all the more remarkable given that two of its traditional energy powerhouses, Venezuela and Mexico, have largely been left out, held in check by entrenched resource nationalism. Venezuela is now considered to have bigger oil reserves than Saudi Arabia, [2] putting it at the top of OPEC's rankings. If it opened up more to foreign investment, it could tip the scales further in the hemisphere's direction.
Exactly how the Americas' growing oil clout might rebalance energy geopolitics remains an open question. The Middle East can still influence oil prices greatly, its oil fields are generally cheaper to develop, [3] and some countries in the region are endowed with great reserves.
Moreover, the Americas still vie for investment with other oil-rich regions, like Russia's portion of the Arctic Ocean [4] and West African waters. Security concerns like the abduction of oil workers could, as they have in the past, prevent Colombia from continuing to raise output. And environmental and financing questions pose persistent challenges to the rapid growth of the hemisphere's oil production.
Still, the new oil exploits in the Americas suggest that technology may be trumping geology, especially in the region's two largest economies, the United States and Brazil. The rock formations in Texas and North Dakota were thought to be largely fruitless propositions before contentious exploration methods involving horizontal drilling and hydraulic fracturing -- the blasting of water, chemicals and sand through rock to free oil inside, known as fracking -- gained momentum.
While the contamination of water supplies by fracking is a matter of fierce environmental debate, the technology is already reversing long-declining oil production in the United States, with overall output from locations where oil is contained in shale and other rocks projected to exceed two million barrels a day by 2020, according to some estimates. The United States already produces about half of its own oil needs, so the increase could help it further peel away dependence on foreign oil.
The challenges of tapping Brazil's new offshore fields, located beneath 6,000 feet of water and salt beds formed by the evaporation of ancient oceans, are even greater. Petrobras, which has ambitions of surpassing ExxonMobil as the world's largest publicly traded oil company, is investing more than $200 billion to meet its goals.
"Brazil will become an oil power by the end of the decade, with production in line with that of Iran," said Pedro Cordeiro, an energy consultant here for Bain & Company, who sees the country's oil production climbing to 5.5 million barrels a day by 2020.
Construction backlogs could slow Brazil's offshore expansion. But resurgent industries related to the oil boom, like shipbuilding, and strategic efforts like nuclear submarine construction to defend oil wells, underscore Brazil's plan of using its energy resources to project global power from this hemisphere.
"No other place on the planet is seeing this kind of investment," said Marcio Mello, a former Petrobras geologist who is now the chief executive of HRT, a new oil company based here. "This decade is our chance to rise."
Optimism is plentiful here, and even a bit of hubris can creep into conversation. Still, oil analysts say the hemisphere's new energy profile is already challenging the sway OPEC has long held.
Canada, for instance, is already the top petroleum exporter to the United States, followed by Mexico. Beyond that, output from Canada's oil sands may almost double to three million barrels a day by 2020, and there is an effort under way to build a pipeline to the Gulf Coast, stirring an environmental debate.
Investors from other regions, notably Chinese oil companies, are also wading into the hemisphere's oil plays, whether in Brazil's "pre salt" fields or the tight oil areas in the United States. They are looking to secure new oil supplies or gain expertise that would help them explore similar rock formations within their own borders.
The United States and Brazil do not see eye to eye on every issue -- the Obama administration is still hesitant about endorsing the country's ambition for a permanent seat on the United Nations Security Council -- but the hemisphere's two largest economies are strengthening energy ties, further cementing an already expansive economic relationship.
As the United States has cut OPEC imports by more than a million barrels a day since 2007, Brazil and Colombia have emerged as leading suppliers to the American market, surpassing Kuwait.
President Obama visited Brazil in March, [5] refusing to delay the trip even as war was raging in Libya, emphasizing while here that he wanted the United States to be a "major customer" [6] for Brazil's oil once production climbed at new fields.
American officials came again for talks in August, focusing on offshore exploration and biofuels cooperation. The United States is close to overtaking Brazil as the world's largest ethanol exporter, a significant turn, and American producers may actually increase their corn ethanol exports to Brazil. The shift stems from factors including weak harvests of sugar, which is used in Brazil to produce ethanol, and rising costs for land and labor.
The hemisphere's capacity to meet demand for fuels from sources of new importance, whether agriculture or shale formations, is arguably what makes it competitive with countries like Iraq and Libya, which have abundant conventional reserves but face hurdles getting the oil out of the ground.
"Middle East turmoil is almost always bad for oil production," said Amy Myers Jaffe, associate director of Rice University's Energy Program. "This should make the world's megasuppliers nervous, since the pendulum has already begun to move in this direction."
[2] http://www.reuters.com/article/2011/07/19/businesspro-us-opec-oil-reserves-idUSTRE76I3SZ20110719
[3] http://blogs.cfr.org/levi/2011/08/18/the-end-of-opec/
[4] http://www.nytimes.com/2011/08/31/business/global/exxon-and-rosneft-partner-in-russian-oil-deal.html
[5] http://www.nytimes.com/2011/03/20/world/americas/20obama-brazil.html