His raised hands dirty with oil, the president of Brazil, Luiz Inácio Lula da Silva – then in his first term – stood in front of the cameras with a broad smile on his face during the inauguration of Platform P50, located in Campos, Rio de Janeiro. Petrobras, a state-controlled national company, had discovered immense oil and gas deposits in the Atlantic Ocean’s depths.
“Today we are celebrating another independence,” said Lula. “We are witnessing a milestone that will mark a new era to Brazil’s development.”
That was 21 April 2006. Eighteen years later, amid fears for the impact on the climate crisis, a new oil rush is underway in Latin America and the Caribbean as the region is heading for a boom in exports of “black gold”.
At least 16 of the 33 Latin American and Caribbean countries are involved in about 50 major new oil and gas onshore and offshore projects.
Two new powerhouses, Brazil and Guyana, are expected to register two of the three largest increases in fossil fuel exports by 2035.
According to the latest report from the International Energy Agency (IEA), production in Latin America and the Caribbean, which stood at 8m barrels a day (mb/d) in 2022, will grow by 5.8 mb/d by 2028. With increased production in countries such as Brazil and Guyana and new projects all over the region, non-Opec countries are strengthening their foothold in the oil and gas market, playing a crucial role in the shifting geopolitics of oil and gas worldwide.
Even if the world market for fossil fuels starts shrinking by the end of the decade, countries like Brazil, Guyana, Argentina, Ecuador, Mexico and Suriname are betting on oil as a source of wealth, economic growth and development – despite its impact on the planet and thanks to the international community’s inertia in “transitioning away” from the oil era.
According to the latest report from the International Energy Agency (IEA), production in Latin America and the Caribbean, which stood at 8m barrels a day (mb/d) in 2022, will continue to grow above demand, adding 2 mb/d destined for export by 2030. With increased production across the region, non-Opec countries are strengthening their foothold in the oil and gas market, playing a crucial role in the shifting geopolitics of oil and gas worldwide.
Brazil and Guyana, are expected to register two of the three largest increases in fossil fuel exports by 2035. The region currently accounts for 15% of the world’s oil and gas resources and could increase its share if other historical producers transition away from the oil market, reducing their production and exports.
Brazil, which used to be a modest oil producer until the discovery of its pre-salt deposits in 2006, has become one of the top ten largest oil producers. More than 100 wells have been drilled, with production increasing from 41,000 barrels a day in 2010 to 2.2m a day last year, according to Petrobras.
Petrobras has identified new fields in the “equatorial margin” region, which stretches from Rio Grande do Norte to Amapá. It is also considering the extraction of fossil fuels at the mouth of the Amazon River, which the Brazilian Institute of Environment and Renewable Natural Resources (Ibama) and environmental groups such as Greenpeace have spoken out against.
Petrobras plans to invest $6bn from its own budget in exploring new deposits over the next five years, adding another 10bn barrels to its reserves – almost doubling its current capacity.
“You have oil in one place. Guyana is exploring, Suriname is exploring and Trinidad and Tobago are exploring. Will you stop exploring yours?” asked Brazilian Lula at a recent event in Rio de Janeiro organised by the Future Investment Initiative Institute (FII Institute) from Saudi Arabia.
In neighbouring Guyana, one of the poorest countries in Latin America, the economy has grown quickly since ExxonMobil discovered oil in 2015. GDP per capita is soaring, growing by 33% in 2023. It is expected to increase by 34% in 2024.
Ashni Singh, Guyana’s finance minister, says: “We’re using this period [of oil exploitation] to ensure Guyana’s long-term competitiveness, to secure long-term economic growth, and to invest in the things that matter most to improving the quality of people’s lives – and in particular, the most vulnerable.”
Meanwhile, Suriname has become a “rising star” in the oil market with some big offshore discoveries, including new deposits in Block 58 by TotalEnergies and APA, estimated at 700m barrels, with the potential to transform the economy of South America’s smallest nation.
In addition to oil giants Venezuela, Mexico, Argentina, Ecuador, Peru, Trinidad and Tobago, Barbados and even the environmentally exemplary Costa Rica have ambitions to expand their oil and gas industry. “We must carefully assess these resources,” said Costa Rica’s president, Rodrigo Chaves. “This is a multibillion-dollar industry. And, as a nation, we should discuss its potential.”
However, there is a danger in Latin America and the Caribbean investing heavily in fossil fuels while the oil demand is declining. According to the International Energy Agency, if the international community fulfils its promises and goals of “transitioning away” from oil and gas by expanding the space for renewable energies – as established at Cop28 in Dubai in December 2023 – there is a good chance that the oil market will peak at the end of the decade and gradually decline. According to the IEA, oil use is expected to fall by half by 2050, thanks to efficiency gains, transportation electrification and the use of cleaner fuels.
“Any new projects would face major commercial risks if the world is on track to deliver net zero emissions by 2050, as oil demand declines rapidly,” says the IEA in a report.
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Marcelo Mena, Chile’s former environment minister and the former director of the Climate Action Center at Pontificia Universidad Católica de Valparaíso (PUCV), says that the strategy of investing in oil is a mistake.
“We have more than enough oil to destroy the climate many times over, and we have to reduce fossil fuel emissions,” he says. “Fossil fuel demand, including oil production, is peaking and decreasing. Coal demand is down. Breakthroughs in electromobility and battery storage costs are making many regions in Latin America, including Brazil and Chile, approach cost parity with electric mobility. It’s a risky business to explore business models with expiration dates.”
The problem is that Latin America and the Caribbean leaders seem to believe that betting on oil and gas will still enable them to grow and develop for some time to come. Thomas Singh, a lecturer in the Department of Economics at the University of Guyana, acknowledges that “the oil discovery has happened at a wrong time in our history … when there is serious discussion about global climate change and the need for decarbonisation”.
Singh says: “But should we not extract our fossil fuels? I think it would be naive to say that we shouldn’t. It is not for Guyana to champion the world’s environmental concerns when the US, for example, consumes far more energy per capita than a country like Guyana.”
This argument is the one most often repeated by Latin American public authorities to justify exploiting fossil fuels. In March, Guyana’s president, Mohamed Irfaan Ali, told the BBC that he refused to accept any blame for the emissions that may be generated by oil exploration. “I am going to lecture you on climate change,” Ali said. “We have the lowest deforestation rate in the world. And guess what? Even with our greatest exploration of the oil and gas resource we have now, we will still be net zero.”
Despite the climate crisis, the UN recognises less-developed countries’ legal right to continue increasing their emissions and exploiting fossil fuels such as oil and gas for longer. Since the Earth Summit in Rio de Janeiro in 1992, the UN framework convention on climate change has established “common but differentiated responsibilities”, a principle in which all countries must fight the climate crisis but are not equally responsible.
That means the UK, for example, which advanced because of the Industrial Revolution and from burning fossil fuels, must transition away from oil and gas and reduce its emissions before Guyana, its former colony, which has never had a positive carbon balance – meaning that the country has always captured more carbon than it has emitted.
In addition, most countries with significant oil and gas reserves are not “transitioning away from fossil fuels”, as agreed at Cop28. Although demand for fossil fuel oil is approaching a peak – 81.6 mb/d in 2028 – according to the IEA, global oil demand is steadily increasing and predicted to reach 105.7 mb/d in 2028, up 5.9 mb/d compared with 2022 levels.
According to Carlos Nobre, a Brazilian scientist, meteorologist, and member of the UK’s Royal Society who warned the world about the risk of a tipping point and the “savannisation of the Amazon”, investing money and technology in oil prospecting and exploration today could be a decisive mistake for humanity’s future. For Nobre, it’s time to question the very principle of common but differentiated responsibilities.
“The difference should not be between who will reduce emissions now – because everyone needs to reduce,” he says. “The difference is that rich countries have to support poor countries in doing more, reducing their emissions, and adapting.
“Almost 70% of all greenhouse gas emissions come from burning fossil fuels. If we continue using the existing oil wells, natural gas and coalmines, with our consumption forecast, we will have about 30% of today’s total emissions in 2050. But to prevent the temperature from rising by 1.5C, we almost have to zero all emissions by 2040 – not even by 2050,” he says.
“Exploring what already exists and making new wells, there’s no way.”