Brazil has begun building its first nuclear submarine to protect its vast, new offshore oil discoveries. Colombia’s oil production is climbing so fast that it is closing in on Algeria’s and could hit Libya’s prewar levels in a few years. ExxonMobil is striking new deals in Argentina, which recently heralded its biggest oil discovery since the 1980s.
Up and down the Americas, it is a similar story: a
Chinese-built rig is preparing to drill in Cuban waters; a Canadian official
has suggested that unemployed Americans could move north to help fill
tens of thousands of new jobs in Canada’s expanding oil sands; and one of
the hemisphere’s hottest new oil pursuits is actually in the United States, at
a shale formation in North Dakota’s prairie that is producing 400,000 barrels
of oil a day and is part of a broader shift that could ease American dependence
on Middle Eastern oil.
For the first time in decades, the emerging prize of
global energy may be the Americas, where Western oil companies are refocusing
their gaze in a rush to explore clusters of coveted oil fields.
“This is an historic shift that’s occurring, recalling
the time before World War II when the U.S. and its neighbors in the hemisphere
were the world’s main source of oil,” said Daniel Yergin, an American oil
historian. “To some degree, we’re going to see a new rebalancing, with the
Western Hemisphere moving back to self-sufficiency.”
The hemisphere’s oil boom is all the more remarkable
given that two of its traditional energy powerhouses, Venezuela and Mexico,
have largely been left out, held in check by entrenched resource nationalism.
Venezuela is now considered to have bigger oil reserves than Saudi Arabia,
putting it at the top of OPEC’s rankings. If it opened up more to foreign
investment, it could tip the scales further in the hemisphere’s direction.
Exactly how the Americas’ growing oil clout might
rebalance energy geopolitics remains an open question. The Middle East can still
influence oil prices greatly, its oil fields are generally cheaper to
develop, and some countries in the region are endowed with great reserves.
Moreover, the Americas still vie for investment with
other oil-rich regions, like Russia’s portion of the Arctic Ocean and
West African waters. Security concerns like the abduction of oil workers could,
as they have in the past, prevent Colombia from continuing to raise output. And
environmental and financing questions pose persistent challenges to the rapid growth
of the hemisphere’s oil production.
Still, the new oil exploits in the Americas suggest that
technology may be trumping geology, especially in the region’s two largest
economies, the United States and Brazil. The rock formations in Texas and North
Dakota were thought to be largely fruitless propositions before contentious
exploration methods involving horizontal drilling and hydraulic fracturing —
the blasting of water, chemicals and sand through rock to free oil inside,
known as fracking — gained momentum.
While the contamination of water supplies by fracking is
a matter of fierce environmental debate, the technology is already reversing
long-declining oil production in the United States, with overall output from
locations where oil is contained in shale and other rocks projected to exceed
two million barrels a day by 2020, according to some estimates. The United
States already produces about half of its own oil needs, so the increase could
help it further peel away dependence on foreign oil.
The challenges of tapping Brazil’s new offshore fields,
located beneath 6,000 feet of water and salt beds formed by the evaporation of
ancient oceans, are even greater. Petrobras, which has ambitions of
surpassing ExxonMobil as the world’s largest publicly traded oil company, is
investing more than $200 billion to meet its goals.
“Brazil will become an oil power by the end of the
decade, with production in line with that of Iran,” said Pedro Cordeiro, an
energy consultant here for Bain & Company, who sees the country’s oil
production climbing to 5.5 million barrels a day by 2020.
Construction backlogs could slow Brazil’s offshore
expansion. But resurgent industries related to the oil boom, like shipbuilding,
and strategic efforts like nuclear submarine construction to defend oil wells,
underscore Brazil’s plan of using its energy resources to project global power
from this hemisphere.
“No other place on the planet is seeing this kind of
investment,” said Márcio Mello, a former Petrobras geologist who is now the
chief executive of HRT, a new oil company based here. “This decade is our
chance to rise.”
Optimism is plentiful here, and even a bit of hubris can
creep into conversation. Still, oil analysts say the hemisphere’s new energy
profile is already challenging the sway OPEC has long held.
Canada, for instance, is already the top petroleum
exporter to the United States, followed by Mexico. Beyond that, output from
Canada’s oil sands may almost double to three million barrels a day by 2020,
and there is an effort under way to build a pipeline to the Gulf Coast,
stirring an environmental debate.
Investors from other regions, notably Chinese oil
companies, are also wading into the hemisphere’s oil plays, whether in Brazil’s
“pre salt” fields or the tight oil areas in the United States. They are looking
to secure new oil supplies or gain expertise that would help them explore
similar rock formations within their own borders.
The United States and Brazil do not see eye to eye on
every issue — the Obama administration is still hesitant about endorsing the
country’s ambition for a permanent seat on the United Nations Security Council
— but the hemisphere’s two largest economies are strengthening energy ties,
further cementing an already expansive economic relationship.
As the United States has cut OPEC imports by more than a
million barrels a day since 2007, Brazil and Colombia have emerged as leading
suppliers to the American market, surpassing Kuwait.
President Obama visited Brazil in March, refusing to
delay the trip even as war was raging in Libya, emphasizing while here that he
wanted the United States to be a “major customer” for Brazil’s oil once
production climbed at new fields.
American officials came again for talks in August,
focusing on offshore exploration and biofuels cooperation. The United
States is close to overtaking Brazil as the world’s largest ethanol exporter, a
significant turn, and American producers may actually increase their corn
ethanol exports to Brazil. The shift stems from factors including weak harvests
of sugar, which is used in Brazil to produce ethanol, and rising costs for land
and labor.
The hemisphere’s capacity to meet demand for fuels from
sources of new importance, whether agriculture or shale formations, is arguably
what makes it competitive with countries like Iraq and Libya, which have
abundant conventional reserves but face hurdles getting the oil out of the
ground.
“Middle East turmoil is almost always bad for oil
production,” said Amy Myers Jaffe, associate director of Rice University’s
Energy Program. “This should make the world’s megasuppliers nervous, since the
pendulum has already begun to move in this direction.”