Latin America’s 5 Biggest Oil Reserves

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  • Latin America, despite relatively unimpressive production levels, holds a significant portion of the world’s proved oil reserves.
  • Venezuela, once one of the major powerhouses of the global oil industry, still holds the largest proved oil reserves on earth.
  • Rounding off the list of the five largest oil reserves in the region are Argentina, Mexico, Ecuador, and Brazil.

Matthew Smith writes for Oil Price on the 5 Latin American Countries With The Largest Oil Reserves.

Global energy industry and oil production

Latin America is a region not normally associated with the global energy industry and oil production. It has, however, been blessed with considerable natural resources ranging from precious and base metals, rare earth metals crucial to the global energy transition, and fossil fuels such as coal, oil, and natural gas. Over the last decade, Latin America emerged as a prominent global player in petroleum markets, particularly after Brazil’s offshore pre-salt oil boom took off. Despite the copious petroleum reserves held by many countries in the region, most remain impoverished with fiscally weak governments and economies indicating that they are failing to appropriately exploit the tremendous wealth bestowed by their prodigious natural resources.

Latin America’s third-largest economy Argentina possesses the region’s fifth-largest proved oil reserves – totaling 2.48 billion barrels of crude oil at the end of 2021. During 2022 the economically strife-torn country pumped an average of 582,076 barrels of oil per day which was nearly 14% higher than a year earlier. Importantly, production continues to rise, regularly hitting new highs as Argentina’s shale oil boom continues expanding. Argentina lifted a record average of 631,000 barrels of oil per day during March 2023 which was nearly one percent greater than a month prior and 12% higher year over year. Incidentally, natural gas production is also expanding at a solid clip with Argentina pumping 4.5 billion cubic feet per day during March 2023, a 9.8% increase month over month and 2.7% year over year.

That solid expansion of hydrocarbon production is occurring because of the Vaca Muerta shale formation which is estimated to contain 16 billion barrels of oil and 308 trillion cubic feet of natural gas. It is anticipated that Argentina’s oil production will grow to one million barrels per day by 2026 which along with rising natural gas output will reduce dependence on energy imports. That, if it occurs, will allow oil exports grow to 500,000 barrels per day thereby bolstering national income and reducing Argentina’s ballooning current account deficit.

Despite the massive shale oil boom led by national oil company YPF, Argentina is once again caught in a deep financial crisis. Inflation is spiraling out of control rocketing to 104% during March 2023 or nearly double what it had been a year earlier. The Peronist government of President Alberto Fernandez views the Vaca Muerta as a silver bullet for Argentina’s long-standing economic problems, although this year’s presidential election will amplify the uncertainty surrounding the formation’s development.

#4 Mexico

The crisis-riven Central American country of Mexico ranks fourth in the region with 5.8 billion barrels of proved oil reserves. During 2022, Mexico pumped an average of 1.78 million barrels of petroleum per day, which by March 2023 had risen to an average of 1.9 million barrels per day making the country the second largest oil producer in Latin America. That notable production increase can be attributed to an ongoing focus on lifting the tempo of operations and drilling activity with crude oil an important economic driver for Mexico.

The debt crisis engulfing national oil company Pemex, which saw President Lopez Obrador during January 2023 guarantee the company’s debt, and aging mature oilfields are weighing on government plans to expand production. This, according to OPEC, will cause Mexico’s production volumes to decline with the cartel predicting that output will fall by around 40,000 barrels per day during 2023. Falling production will impact government revenues and its oil-dependent economy placing greater pressure on a fiscally fragile administration struggling to contain rising crime-fueled violence.

#3 Ecuador

In third place is the small impoverished South American country of Ecuador which has proved oil reserves totaling 8.3 billion barrels. Ecuador’s economically crucial energy patch, like many in Latin America, is struggling to recover from the 2020 COVID pandemic. Even industry reforms completed by former President Lenin Moreno have done little to attract oil industry investment and boost production. During 2022 Ecuador pumped an average of 480,299 barrels of oil per day, which while nearly 2% higher year over year was still less than the pre-pandemic output of 531,000 barrels per day for 2019. On taking office in 2021 current president Guillermo Lasso announced that he planned to double Ecuador’s oil production to over one million barrels per day, but regular industry outages forced that number to be revised down to 750,000 barrels per day.

Despite reforms and Lasso’s commitment to significantly boosting production Ecuador’s petroleum output is still well-below pre-pandemic levels. Energy ministry data shows that Ecuador was pumping 476,589 barrels per day at the end of April 2023, significantly less than the 531,040 barrels per day produced during 2019. Pipeline outages due to acute erosion and landslides in Ecuador’s Amazon, where most of the country’s oilfields are located, and frequent protests against industry operations are impacting production volumes.

#2 Brazil

Latin America’s largest economy Brazil possesses the region’s second-largest proved oil reserves, totaling 12.7 billion barrels. The country is undergoing a massive offshore oil boom driven by the ultra-deep-water pre-salt oilfields. For 2022, average oil production soared by 6.5% year over year to an average of 3.2 million barrels per day, while total hydrocarbon output was 4.1 million barrels of oil equivalent daily, a 5.8% increase over 2021. Substantial investment in Brazil’s energy patch is driving these impressive production increases.

Data from the industry regulator the National Agency of Petroleum, Natural Gas and Biofuels (ANP – Portuguese initials) shows that Brazil produced 3.1 million barrels of petroleum for February 2023. While that represents a decline compared to previous months, notably January 2023 when output hit an all-time high of 3.27 million barrels per day, analysts believe that Brazil will continue to report strong production growth.

While analysts and former Energy Minister Adolfo Sachsida stated production could grow by as much as 70% by the end of the decade, there are fears Brazil’s oil boom could stall because of increased intervention from the current Lula administration. Already President Lula, who emerged victorious from Brazil’s 2022 general election has signaled a return to more interventionist policies, especially regarding the operation of national oil company Petrobras. Lula introduced a surprise 9.2% tax on oil exports, vexing multinational energy companies Repsol, TotalEnergies, Shell, Equinor and Galp. These new policies may deter the much-needed investment required to build Brazil’s oil reserves and production.

#1 Venezuela

The largest proved oil reserves, and indeed the world, are held by crisis-riven Venezuela. The founding OPEC member possesses proved oil reserves totaling 303.5 billion barrels, yet it is struggling to exploit that vast natural resource. This is because decades of corruption and malfeasance since former President Hugo Chavez initiated his socialist Bolivarian revolution in 1999, coupled with a lack of investment in crucial infrastructure caused production to collapse. That sharp decline was accelerated by U.S. economic sanctions as they were steadily ratcheted up after Chavez came to power.

It was President Barack Obama’s 2015 executive order declaring Venezuela a national security threat that saw Washington ramp up sanctions with the goal of toppling the authoritarian socialist regime. Then in January 2019, President Donald Trump adopted a policy of maximum pressure which was designed to remove Venezuela’s President Nicolas Maduro and his supporters from power. This saw Washington tighten sanctions against Venezuela cutting the pariah stare off from international energy and financial markets, causing the county’s economic backbone the oil industry to collapse worsening an already grave humanitarian crisis.

As a result, petroleum production collapsed falling to a multidecade low of 569,000 barrels per day or less than a fifth of the 3.1 million barrels per day pumped during 1998, the year before Chavez took office. Since late-2020, national oil company PDVSA has experienced a muted recovery of sorts. Assistance from Iran with rebuilding shattered industry infrastructure and President Joe Biden authorizing energy supermajor Chevron to recommence lifting petroleum saw Venezuela’s March 2023 petroleum production average 754,000 barrels per day. While that is 3.6% greater than the same period in 2022 it is still significantly lower than the 1.5 million barrels per day lifted during 2018, a year before the harsh sanctions imposed by the Trump White House as part of the policy of maximum pressure.

Despite the considerable oil reserves that exist in Latin America and the region’s notable production volumes, the economies and finances of many countries remain weak. This indicates that significant oil reserves have been a curse for many Latin American countries rather than a blessing. There is substantial evidence that abundant oil wealth breeds corruption, undermines democratic institutions, and incites civil conflict.

A key example of this is Venezuela, where Chavez’s ascension to power was facilitated by the civil unrest fomented by the collapse of oil prices and subsequent weakening of the country’s democratic institutions. The oil curse weighs heavily on many countries in Latin America aside from Venezuela, even those like Colombia that don’t possess substantial proved oil reserves.

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Source: Oil Price