Energy Resources in the Andean Community*

Oil

An estimated 15% to 30% of the explored area of each Andean country has hydrocarbon potential, except for Venezuela, where the figure is larger.  The Subregion’s proven oil reserves rose 55.5% over the 1991/2000 decade, in Bolivia and Ecuador’s case increasing fourfold from their initial levels, to reach a total of 85  billion barrels overall at the beginning of 2001 (see Table 1).

Table 1: Oil reserves, production, exports and demands

The Andean Community’s oil reserves are more than four times the size of those of the United States and eight times those of MERCOSUR.  Production climbed almost 80% between 1985 and 2000, from 2.5 to 4.5 million barrels per day (MBD). Over that same period, consumption in the Andean subregion rose 40%, from 1.3 to 1.8 MBD and net exports doubled, rising from 1.3 to 2.7 MBD.

Venezuela, the possessor of 91.4% of the Subregion’s proven reserves and responsible for 78% of its exports, is expected to continue being the foremost exporter.

The Subregion’s refining capacity is in the neighborhood of two million barrels of crude oil a day (as seen in Table 2), with the refineries working at 85% of capacity on average.   

Table 2: Refining (January 2001)

Two different oil production and consumption scenarios can be identified in South America, as reported by Dr. Ramón Espinasa, Inter-American Development Bank and Andean Development Corporation Consultant, to the June 2003 Meeting of Andean Community Ministers of Energy and Mines. 

In a first scenario, given a growth rate of 5%, if the exponential growth trend of the past fifteen years continues, oil production will increase 2.7 fold, from 10 MBD to 17 MBD, over the next twenty years. At the same time, consumption will rise 2 MBD --50%-- to reach a level of 6 MBD and the exportable supply will multiply by four, to 10 MBD.  In a second scenario, with a growth rate equivalent to 3.5%, production will increase more slowly (3.5% vs. 5%) and will double over the next twenty years, to a total of 12.5 MBD. In that case, the exportable supply will multiply 2.5 fold to 6 MBD.

Today 20% of the United States’ oil imports come from South America.  Hypothetically speaking, if the region’s additional exportable supply were also to go to the United States market, by the year 2020 the Andean Subregion would be supplying 50% of US oil imports in the first scenario, but only 30% in the second. 

Natural gas

There are 5.451 billion cubic meters of proven natural gas reserves, of which 77% belong to Venezuela.  Over the past decade, Peru increased its reserves in the Camisea gas field, while reserves in Bolivia have quadrupled in the last four years.  Given the successful results of exploration in the Subregion, there is a strong likelihood of a still large undiscovered natural gas potential.  .It should be stressed, however, that because investments until very recently prioritized the location of new oil deposits, with very little exploration specifically targeting natural gas, the level of proven natural gas reserves was seriously neglected.   The success of Bolivia’s efforts to locate natural gas fields, the improvement in international gas prices, the need for more thermal electricity to be generated and the notable technological progress made in the areas of gas liquefaction, regasification and conveyance have triggered an increase in natural gas projects.  A case in point is the recent launching of gas exploration and development projects on Venezuela’s continental shelf. 

Table 3 reveals that the Andean Subregion has abundant resources and that its current reserves should last 97 years at the present rate of production. 

 Table 3: Natural gas reserves, production and trade