Latin America’s upstream oil and gas sector is no longer defined solely by its marquee deepwater and shale plays. A broader set of opportunities – ranging from mature fields to emerging shale basins – is beginning to register on the radar of stakeholders. Carlos Garibaldi, executive secretary of regional industry group Arpel, told BNamericas that long-term investment hinges on policy clarity, competitive terms and credible regulatory frameworks.
BNamericas: Argentina has consolidated a shale industry with Vaca Muerta. Why haven’t other countries replicated that model and which areas in Latin America do you see as most promising for unconventional projects?
Garibaldi: Granted that Vaca Muerta is the most prolific shale outside of the US and the second best in the world. Very few countries, if any, may find something of that areal extent, thickness, and richness. But there is indeed shale potential in the Magdalena Valley of Colombia, the Madre de Dios basin in Peru and Bolivia, in Tampico-Misantla and Burgos basins in Mexico, and in the Paraná, Parnaiba and Amazonas regions in Brazil.
But another characteristic is that Argentine society has been able to shake-off its anti-fracking unfounded prejudices. The country is polarized along many issues, but there seems to be an unwritten or tacit policy of State, indifferent to electoral cycles and ideological pendular swings, that it is important for Argentina to fully develop and monetize Vaca Muerta as well as exploring its offshore.
BNamericas: With Mexico signaling energy reforms and Argentina rolling out the Large Investment Incentive Regime (RIGI), how do you expect these shifts to affect upstream and midstream capital allocation in both countries?
Garibaldi: Here I elaborate on the “eye of the beholder”. Hydrocarbon and energy investments of any kind usually have the same requirements: a favorable present conjuncture (government attitude, contractual and fiscal terms and resulting “take”) and, because of exposure due to considerable lead times to first revenue and to payout, the expectation of a long-term healthy investment climate (contractual stability, unencumbered capital flows, fiscal predictability, governability, and institutional quality). In brief, investments prefer legislative, fiscal, regulatory, and judicial ecosystems that are solid, aligned, efficient, transparent, and stable. There is a reason behind the US four million well history and why it is currently utilizing over 60% of the global drilling rig fleet.
In our region Brazil, Guyana and Suriname offer spectacular subsurface prospectivity. Keep in mind that Latin America and the Caribbean contributed 38% of global hydrocarbon resources discovered in 2020-24, but that 83% of these are in those three countries.
But, according to a benchmark also made by S&P Global in 2024, they also enjoy the best perception of investment ecosystem attractiveness. México, Argentina, Colombia, Perú, Bolivia, Ecuador and Venezuela must compete for exploration investment against those top three, in an environment of less capital being available to our sector.
BNamericas: Global lenders and institutional investors are prioritizing clean energy, tightening financial conditions for hydrocarbons. How severe has this financing squeeze become in Latin America, and what strategies are companies using to secure funding for new oil and gas projects?
Garibaldi: Such squeeze, first promoted by the United Nations and the Glasgow Financial Alliance for Net Zero (2021), has lost its steam. It has confronted the same reality-check as everyone else. Also, a few global companies that had pledged to only harvest their existing oil and gas fields and rapidly evolve into selling electrons, confronted shareholder unrest due to lower returns and had to reconsider their hydrocarbon portfolio opportunities. Governments that plan to incentivize renewables by barring our sector from its natural growth opportunities (no more exploration acreage, no fracking) or by eroding its relative profitability by increasing “take,” may want to reconsider also.
It just happens that systems as complex, multivariate and interdependent as the ones involving energy, socioeconomic development and climate do not respond well to reductionist solutions, such as cancelling or choking our industry. In fact, due to the “law of unforeseen consequences,” these usually generate costly externalities and affect energy security, domestic energy prices, fiscal accounts, and trade balances.
BNamericas: The Guyana-Suriname basin continues to attract major investment, with ExxonMobil’s consortium preparing to drill up to 30 wells for the US$6.8bn Hammerhead project in Guyana’s Stabroek block and Suriname advancing new offshore areas. At a macro level, what does the emergence of this basin mean for Latin America’s long-term energy landscape, and how should oil and gas stakeholders interpret its significance alongside more mature producers like Brazil, Mexico, and Argentina?
Garibaldi: Again, I would list Brazil and its spectacular pre-salt alongside its neighbors from the north and their new golden fairway. These two plays have been a game-changer for the region. Like I said, they contributed 83% of 39% of hydrocarbon resources discovered worldwide in 2020-24. Those three countries offer the best perceptions of subsurface prospectivity and the best perceptions of top-side appeal. It is hard to beat that combo.
But there is more opportunity in the region aside from those two deepwater plays. They are technologically challenged and capital intensive, thus the realm of major players. Our region also offers scalable opportunities onshore in conventional exploration, minor-marginal- mature field rehabilitation, and of course, shales, to any size of companies.
But governments seriously interested in attracting capital should calibrate their contractual and fiscal systems to the prospectivity perceptions of their plays and the scale of their opportunities. Rent captured at 60% of a lot will be more than at 90% of a little. And, because hydrocarbon projects cover decades and have significant lead times to first oil and to pay-out, they should also work on demonstrating contractual stability, regulatory predictability, and institutional quality for the long term.
(The original version of this content was written in English)