
Extracting oil in marine waters is transforming the economy of one of South America's smallest and poorest countries, Guyana. In 2015, ExxonMobil, an American oil giant, found the first of today's 11 billion barrels of proven crude oil reserves, or about 0.6% of the world's total.
By 2028, it could reach 1.2 million barrels per day - a rate that would make Guyana one of the top 20 oil producers today. That's impressive for a country of about 800,000 inhabitants. If a US giant like ExxonMobil is already present in Guyana and benefiting from high oil prices, that's bad news for Brazilian companies that, it seems, are missing the timing of investment in Guyana.
Market commentators say that by 2028 about a quarter of additional oil supply will come from Latin America, reversing a decade of declining production in the region. Argentina, Brazil and Guyana will grow, and the other countries will decline. While oil will still be needed throughout the energy transition, it will have to be produced cheaply and with low carbon emissions to remain competitive. Brazil and Guyana are likely to benefit more than most exporters.
On the other hand, the energy transition will be punitive for other Latin American countries. Many state-owned oil companies are inefficient and produce dirty barrels. Countries like Ecuador, Venezuela and Mexico are unprepared and this will have economic consequences.

In Brazil, this growth has been going on since 2006, with the discovery of the pre-salt. That unforgettable image of President Lula with his hand dirty with oil and wearing the orange Petrobras overalls. Production from the fields increased from 41,000 barrels a day in 2010 to 2.2 million a day last year. The pre-salt fields have made Brazil the world's eighth-largest producer. The geology, coupled with Petrobras' investments in cutting-edge technology, makes extraction particularly efficient. It has long been known that Brazil can produce oil profitably at $35 a barrel, less than half the current price. The amount of CO2 equivalent emitted per barrel is almost a third compared to a global average. This less polluting oil is already drawing the world's attention to the privileged barrels of Brazil and Guyana.
The Northeast is the new bet for Brazilian oil
The new Lula government is banking on another round of good news. Petrobras plans to spend nearly half its exploration budget over the next five years on the equatorial margin, an area in northeastern Brazil near Guyana. The government hopes the area will hold the equivalent of pre-salt fields. IBAMA recently denied a license to drill the area, but it is hoped that these demands from the environmental regulator can be overcome. Brazil's current minister of mines and energy has called the equatorial margin a "passport to the future".
In Argentina, even with triple-digit inflation and strict capital controls, oil and gas production increased. Sanctions on Russian oil have benefited Argentina's production growth. It holds the second largest shale gas reserves and fourth largest shale oil reserves in the world, and is now seeking Brazilian government support for investment in this sector.
Latin America has the second largest proven oil reserves after the Middle East. According to the Inter-American Development Bank (IDB), if the region's reserves are well exploited, revenues would be between $2.7 trillion and $6.8 trillion. But mismanagement and political instability are the norm in Latin America. According to Francisco Maonaldi of the University of Houston, if all the oil in the region were exploited with the same expertise and in a regulatory environment similar to Texas, Latin America would be producing more oil than the United States. Today it produces half as much.
If the region is rich in oil and can leverage large long-term investments, why are Brazilian companies not benefiting from these investments? I'm not just talking about oil extraction companies, but infrastructure companies. Brazil has expertise, curriculum, technology and proven engineering capacity, but there is no news of Brazilian companies in Guyana. Part of the explanation lies in the damage that Lava Jato has done to infrastructure companies, bringing them all down and leaving the sector's economy destroyed. Another explanation is the slowness with which the government is acting (if it is doing anything at all) on new investments in national infrastructure. It is unbelievable that Brazilian companies are dragging their feet to get new contracts in Brazil.
The government needs to do its part and urgently rescue infrastructure companies
I am not talking about subsidies, but about generating contracts - backlog, as they say in the sector - so that these companies can return to finance themselves. It also needs to reactivate export credit, an institute that has so far been poorly understood and a victim of fake news from the previous government. In addition to signing government partnerships with countries in the region to bring incentives for Brazilian companies to operate in these countries. Entering the Latin American oil market late can be fatal.
Brazilian companies, in turn, need to be faster and more efficient. Abroad, they should plant their flag in other countries such as Guyana. In Brazil, they need to be effective with a lean governance structure, less submissive to internal bureaucracies and more competitive in public tenders. The financial fragility and weak governance of the remaining companies, combined with the lack of government support, is gradually annihilating the country's infrastructure sector, a strong generator of jobs and taxes.
Oil as a primary energy source will be replaced, but until then Brazilian companies need to actively participate in the investments and revenues generated by the sector in Latin America. Letting North American and European companies ride this wave alone is a business crime.