Economy, Energy and Political Perspective
Latin America is a region with 20 countries and a population of 594 million habitants that speaks 5 different languages (Spanish, Portuguese, French, English and Dutch). With political stability taking place, its economy has been growing sustainably over the last decade generating in 2010, a gross domestic product (GDP) of US$4.5 trillion. Despite its continental area a few countries (Brazil, Mexico, Argentina, Venezuela, Colombia and Chile) concentrates 90.6% of total GDP. Brazil is the continent’s powerhouse with strong economical and political influence in the region, 7th largest global economy with a GDP of US$ 2.1 trillion and potentially 4th largest oil and gas producer, with the recent deepwater pre-salt reserves of 6.7 million barrels per day by 2020.
In the next 5 years, according to International Monetary Fund (IMF), Latin America’s economy may grow at the cumulative annual growth rate (CAGR) of 4.5%. GDP expected to be concentrated in Brazil (44.3%), Mexico (21.9%) and Argentina (7.8%).
Energy demand will grow at the CAGR of 2.2% from until 2015. The regional energy matrix is basically Petroleum 47%, Natural Gas 23%, Hydropower 8%, Coal 4%, Nuclear 1% and others. Key growth is expected in hydropower- with investments in Brazil of US$ 74 billion – and in natural gas pre-salt reserves, and potential huge shale gas reserves in Argentina of 257 TCF (trillions of cubic feet).
Notwithstanding economic growth, high government influence and dependence of external investments in the oil and gas and main industries; most notably Venezuela, Bolivia and Argentina, may compromise regional growth performance in the next years.
Latin America Oil and Gas
Total production of crude oil was 9.5 million barrels per day in 2010 and will increase in the coming years. Four countries (Venezuela, Mexico, Brazil and Argentina) are accountable for 84% of total regional production. New investments aim to increase refining capacity to 9.560 thousand barrels per day by 2030. Oil and gas industry growth will also bring environmental concerns. For example, Brazilian pre-salt production will turn the country into one of the largest CO2 offshore emissions, as well as risks of leaks and spills.
Distillates consumption will increase until 2015 at the CAGR of 2.5% diesel, 2.0% gasoline and fuel oil and 3% jet fuel. Mexico and Brazil will import large volumes during this period and Venezuela is expected to be the main exporter. Latin America does not have a common regional fuel quality standard, each country has its own fuel policy and regulation, which makes product trade flow inside the region even more complex.
Natural gas has increased its energy matrix participation in the region. In Brazil, demand will grow from 2.4 to 3.3 billion cubic feet per day by 2020. Natural gas as a new source of supply (from pre-salt reserves) will also ramp up petrochemical investments, new fertilizer plants and improve the current natural gas passenger fleet of 1.7 million cars . In Argentina, production is around 4.1 billion cubic feet per day. New shale gas reserves may dramatically change the oil and gas supply costs depending on future government regulations. By 2030, natural gas is expected to represent nearly 30% of the region’s total energy matrix.
Latin America Petrochemical
Major petrochemical consumer markets are Brazil, Argentina, Mexico and Colombia. For the next 5 years, there is expected demand growth for most olefins with investments in green fields and plant expansions. In Brazil, Rio de Janeiro petrochemical complex (Comperj) will demand investments of circa US$ 8.5 billion, a new PET plant in Northeast country of US$ 0.9 billion and US$ 8.1 billion investments in fertilizer sector: ammonia, urea and phosphates. Further investments planned, include expansions in Argentina (new LAB plant), in Peru (ethylene and polyethylene plant and in Mexico (ethyl benzene plant); reinforces the regional focus on investment to support domestic growth demand.
Latin America Biofuels
The region has great potential to export bio fuels in large volumes. It has the basis for bio fuels growth: available arable landmass, feedstock potential (mainly ethanol, corn, soybeans and palm oil), mandates across the region and the understanding of bio fuels as means of energy security. By 2020, Brazil, 2nd global largest ethanol producer, will export 4.5 billion liters of ethanol. Argentina remains the most competitive biodiesel supplier in the continent. Colombia is another significant player in bio fuels production.
In that growth context, the new UOP Rio de Janeiro (Brazil oil and gas hub) office will cover Latin America reinforcing the company’s commitment to position itself to better serve customers and understand their needs.