South America has increased its oil exports more than the US has so far this year as key producers in the region ramp up production and exports to a world that is looking for pollution that does not depend on the Strait of Hormuz.
In the past five years, South America’s largest producer and exporter, Brazil, has started production at several new offshore fields in the Santos offshore salt fields. Guyana has continued to expand offshore exports as an Exxon-led consortium begins development in the offshore Stabroek block, where more than 11 billion barrels of oil equivalent have been found over the past decade.
Colombia, Ecuador, and Peru saw their crude production decline. Venezuela, however, is increasing its production after more than six years of declining production and exports amid US sanctions on the Venezuelan industry in 2019 and the US arrest of Nicolas Maduro earlier this year.
In the past two months, Venezuela has increased its oil exports to a seven-year high and will increase its exports again as US-controlled sales, easing sanctions, and the return of oil firms boost Venezuela’s oil production.
The increase in supply from South America could not have come at a better time for these producers—buyers are looking for supplies that do not need to pass through the Strait of Hormuz after the Middle East war has crippled exports from the world’s most important region.
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A combination of rising production in Brazil, Guyana, and Venezuela, and strong global demand for non-Middle Eastern barrels has made South America the largest contributor to additional oil supply this year.
South American oil exports jumped by a total of 155 million barrels between January and May from a year ago, more than the 112 million barrels the United States exported in the same period, according to data from intelligence firm Kpler cited by Reuters correspondent Gavin Maguire.
The US remained the country with the largest jump in oil sales, which reached record highs in recent weeks. But collectively, South America has overtaken North America as the largest contributor to the global oil boom.
Not that this increase will make up for the massive loss of exports from the Middle East, where nearly 675 million barrels of oil have not reached consumers so far this year. Combined with major production shutdowns in the Middle East, the world has already lost more than a billion barrels of oil since the start of the Iran war, according to Kpler’s estimates.
Brazil’s Strong Rise
Oil exports to Brazil have increased since 2021 and have risen sharply since March, with exports to China doubling amid supply losses from the Middle East.
Brazil’s share of Chinese imports fell from about 10% in January to about 18% in April, even as overall demand for imports from China slowed, data showed earlier this year. The 1.43 million barrels per day of Brazilian crude received by Chinese refiners in April was the highest monthly reading on record, surpassing the previous record set in February.
Exports fell in May as state-owned oil giant Petrobras looked to raise refinery prices to ensure sufficient domestic fuel supplies, but the trend is toward higher exports for the rest of the year, especially if tensions in the Middle East continue.
The miracle of Guyana
Elsewhere in South America, Guyana has become one of the fastest growing oil exporters and an oil producing center with nearly 1 million barrels per day of production capacity in just seven years.
Guyana is now poised to increase its oil revenues and position on the global oil map as the Iran war has driven up oil prices and has consumers looking for raw food outside of the Middle East.
After starting its fourth project, Yellowtail, last year, the Exxon-led consortium operating in Guyana’s Stabroek block hit 900,000 barrels per day (bpd) of oil production.
Production capacity from the eight developments is expected to reach 1.7 million bpd by 2030.
Guyana is expected to reap huge benefits from the current turmoil in international energy markets—and some of the benefits could be more valuable than money.
The closure of the Strait of Hormuz has led consumers to look to non-Middle Eastern oil as a reliable source of energy. Countries with open access to the Atlantic, such as Guyana and Brazil, are not obliged to seek solutions if a point is closed, blocked, or attacked with missiles.
The return of Venezuela
Finally, Venezuela has returned to the international market with its oil sales under US control and marketed by the leading commodity trading houses Vitol and Trafigura. Venezuela’s oil exports rose to a seven-year high in May as exports to the United States and India increased.
Venezuela has been slowly increasing its oil exports since the US took control of its oil sales following Maduro’s impeachment earlier this year. The US has eased sanctions on Venezuela’s oil industry and its state oil company PDVSA, allowed Western firms to return to Venezuelan operations, and has encouraged US companies to sign production and export deals.
“Venezuela’s messy recovery is no longer predictable,” Kpler’s Naveen Das wrote in an analysis last week.
Venezuela’s output is growing strongly, with an estimated growth of 600,000 bpd per year to 1.3 million bpd by 2026.
The issuance of new operating licenses is scheduled to boost Venezuela’s production to 1.5 million bpd by 2027, according to Kpler.
By Tsvetana Paraskova of Oilprice.com
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