Oil finds shift focus on Latin America

April 1, 2010 at 4:04 PM
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BOGOTA, April 1 (UPI) -- A series of unrelated oil industry developments in Latin America are shifting focus from the Middle East to the South American continent as a major source of hydrocarbon energy in the coming decade.

After Brazil's gigantic offshore and undersea discoveries, the drilling in the Falklands Islands and Venezuela's recent oil finds, Colombia reported a major oil breakthrough at an exploration well located in the country's Llanos Orientales region.

Petrominerales Ltd., mostly owned by Canadian companies, said the well yielded 15,600 barrels a day of high-quality crude after strong results were recorded at two other wells. Analysts said the discovery has the potential to be very big.

Petrominerales is two-thirds owned by Calgary's Petrobank Energy and Resources Ltd.

Colombia's oil fortunes have risen on the back of an internationally approved fiscal regime and a welcoming investment climate that meant the country could attract more investors to the industry in the coming years, analysts said.

Investors who complained of inadequate infrastructure facilities to cope with the demands of a growing industry received government assurances that their requirements would be met.

Colombia has been more welcoming to foreign investors than its neighbors, particularly Venezuela, while Brazil has been more exacting in its screening of investors and has preferred to apply its own resources to develop offshore undersea oil resources.

Brazil says it is poised to become the largest oil producer in Latin America and hopes to exploit its economic power to take on the mantle of regional leadership.

Question marks remain over the Falklands oil deposits. Despite positive scientific reports the islands' northern basin may contain the largest oil reserves outside Saudi Arabia, initial reports from drilling disappointed markets. Analysts this week said the trader reaction was premature and more reliable results from drilling in the island waters wouldn't be known for another few months.

The pessimistic news from the Falklands exploration program had a positive effect for the Falklanders, analysts said, because it cooled Argentine rhetoric over sovereignty claims. Argentina and Britain went to war over the islands in 1982 after an Argentine military attempt to seize the islands.

One-in-10 of the Falklanders who invested in the exploration program have seen the value of their shares plummet after the initial reports from the drilling but investors were told to hold tight and wait for more detailed results from the data collected during the drilling.

If the Falklands yield oil in the quantities predicted by scientists -- almost equal to Saudi Arabia's reserves -- the resulting scenario will transform the Falklands and restore Britain's status as a major oil nation amid the depletion of its North Sea resource.

An oil-rich Falklands under British jurisdiction will also be an important counterweight to oil suppliers elsewhere in South America, who have courted partners either hostile to the West or outside the sphere of Western influence -- China, Iran and Russia.

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