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Matthew Smith

Matthew Smith

Matthew Smith is Oilprice.com's Latin-America correspondent. Matthew is a veteran investor and investment management professional. He obtained a Master of Law degree and is currently located…

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A Look At South America's Top 5 Economies And Their Oil Potential

  • Peru's oil production is hampered by political and social instability, whereas Chile, with minimal oil reserves, heavily relies on copper and lithium production.
  • Colombia faces decreasing oil production due to a lack of exploration success and political shifts, while Argentina's Vaca Muerta shale formation is driving an increase in petroleum and natural gas production.
  • Brazil, the largest economy and oil producer in South America, is aiming to become the world's fourth-largest oil producer, banking on significant investments in the sector.

Recent discoveries in offshore Guyana and Suriname have brought the spotlight firmly back on South America’s hydrocarbon sector, with analysts calling the Guyana Suriname Basin as the world’s most exciting frontier oil play. Exxon’s more than 35 oil discoveries in offshore Guyana have delivered a tremendous economic dividend for the impoverished country, which emerged as the world’s fastest-growing economy. Despite these events, Guyana, in comparison to South America’s leading economies and oil-producing countries, is still a relative minnow. It is the continent’s largest economy Brazil which is leading the charge and is tipped to become the world’s fourth-largest oil producer by 2029. With the exception of Chile, where metal mining reigns supreme, petroleum production is a key driver for the continent’s five largest economies.

#5 Peru

The Andean country of Peru reported a 2022 gross domestic product of $242 billion, which ranks it as South America’s fifth-largest economy. While the country is believed to possess considerable oil potential, a combination of factors, including a long-running political crisis, anti-petroleum industry protests and a deteriorating social license, have made it near impossible to effectively exploit that hydrocarbon wealth.

At the end of 2021, Peru had proven oil reserves of 244 million barrels which represents a 19% decline compared to a year earlier. Those are also some of the lowest reserves of any oil-producing nation in South America, including being significantly less than neighboring Ecuador, Colombia, Brazil and Venezuela. A combination of a sharp fall in investment because of the COVID-19 pandemic, the ongoing political crisis in Lima and frequent anti-oil industry protests, notably in Peru’s Amazon, are weighing on exploration as well as production.

For May 2023, Peru only lifted 41,652 barrels per day, which was 2% less than a month prior and 8% lower year over year. Anti-oil industry protects by indigenous communities in Peru’s Amazon remains a constant threat. At this time, The Indigenous Association for Development and Conservation of Bajo Puinahua, or AIDECOBAP, is manning a river blockade that saw tankers seized en route to or leaving the Bretana heavy oilfield in Block 95 onshore Peru.

The field, operated by Canadian oil producer PetroTal, has suffered frequent disruptions by indigenous protestors. This is not only due to river blockades but also because of roadblocks, oilfield invasions and the seizure of pumphouses for the Northern Peruvian oil pipeline or ONP. Those events continue to have a marked impact on Peru’s oil industry and production because Bretana is the country’s most productive oil field. Frequent oil spills in Peru’s Amazon, which according to local communities, are not effectively cleaned up, and a lack of investment by the central government in remote regions where the oil industry operates are driving the constant strife.  Related: India’s Oil Demand Set For Record High Despite Dipping In April

These events act as a considerable deterrent to urgently needed foreign energy investment in Peru, which is required to expand petroleum production and reserves. President Dina Boluarte, who took office after President Pedro Castillo’s 2022 impeachment, issued a call for investment in Peru’s oil industry, offering 31 blocks for exploration and eased participation conditions in an attempt to drum up interest. This forms part of a long-running effort to reactivate oil blocks that had fallen dormant after being abandoned by their operators because of the ongoing difficulties associated with operating in Peru.

#4 Chile

Chile, with a 2022 GDP of $300 billion, is South America’s fourth-largest economy, with it being a country not normally associated with oil production. Copper mining is the Andean country’s primary economic driver, with red metal generating more than 55% of export income and 11% of GDP. Chile is fast emerging as a key global lithium producer, responsible for 30% of all of the metal’s production during 2022. For these reasons, Chile is a crucial participant in the energy transition, with copper and lithium being crucial materials for the clean energy transition.

Chile does have a minor oil industry with an estimated 150 million barrels of proven oil reserves. The Andean country pumped an average of 1,750 barrels per day during February 2023, which is significantly lower than any of South America’s key oil-producing nations. The Vaca Muerta shale formation in neighboring Argentina is set to become an important source of energy for Chile which, as a minor hydrocarbon producer, is heavily dependent on energy imports. In May 2023, Chile’s national oil company ENAP signed an agreement with Argentina’s state-controlled YPF to import oil through the Transandino pipeline, which connects the Vaca Muerta to Chile’s port of Concepción.

#3 Colombia

The crisis-riven country of Colombia is South America’s third-largest economy reporting a GDP of $344 billion. While the Andean country experienced strong economic growth after being sharply impacted by the 2020 COVID-19 pandemic, with GDP expanding by a stunning 11% during 2021 and then a notable 7.5% for 2022, it has not yet fully recovered. Colombia’s oil industry has long been punching above its weight, with the country being South America’s second-largest petroleum producer behind Brazil and ahead of Venezuela.

During 2013 Colombia, for the first time in its history, was lifting a record one million barrels of oil per day despite only possessing meager proven reserves of 2.4 billion barrels, well below those of nearby Venezuela, Ecuador and Brazil. Since then, production has been locked in a steady decline, starting with the late-2014 oil price collapse and then the 2020 pandemic when prices, for a brief moment, plunged into negative territory. 

Colombia’s economically crucial industry has not returned to a pre-pandemic tempo of operations. While April 2023 production of 782,277 was the highest since December 2022 and 30,955 barrels per day more than for the same month a year earlier, it was still 12% lower than the 891,011 barrels per day lifted during April 2019. Industry investment is also falling, with the Colombian Petroleum Association expecting private-sector oil spending to fall by a third compared to a year earlier as tax hikes and plans to ban hydrocarbon exploration spark trepidation.

Indeed, Colombia’s oil industry is facing a crisis with a multitude of grave geopolitical headwinds challenging its very survival. A dire lack of exploration success with no world-class oil discoveries since the 1990s leaves the Andean country with scant proven reserves of around 2 billion barrels which are enough to support another 7.5 years of production. The risks this poses to Colombia’s petroleum-dependent economy, where oil is the single largest export responsible, is magnified by the country’s first leftist President Gustavo Petro’s plans to ban oil exploration and fracking.

#2 Argentina

Argentina, which was once one of the wealthiest countries in the world, with a 2022 GDP of $632 billion, is South America’s second-largest economy. The country for decades, has been embroiled in a series of economic crises that forced it to default nine times on its sovereign debt since its independence from Spain. As yet another economic crisis engulfs Argentina, inflation has spiraled into triple digits and is expected to end 2023 at over 150%.

For more than a decade, Argentina’s central government in Buenos Aires has viewed the Vaca Muerta shale formation, which has been compared to the U.S. Permian shale, as a silver bullet for the country’s economic woes. The 7.5-million-acre geological formation is believed to contain 16 billion barrels of shale oil and 308 trillion cubic feet of shale gas resources. 

The development of the Vaca Muerta, where national oil company YPF will spend $2.3 billion during 2023, is responsible for soaring petroleum and natural gas production in Argentina. For March 2023, petroleum production hit an all-time high of 631,103 barrels per day, which was 45% weighted to shale oil. It is the strong growth of shale oil and gas which is driving hydrocarbon output ever higher. There is every possibility that Argentina will become a leading regional producer as well as an exporter of oil and natural gas.

#1 Brazil

Brazil with 2022 GDP of $1.92 trillion is South America’s largest economy. The country is also the continent’s largest oil producer pumping 3.1 million barrels of oil per day during April 2023. After Venezuela, Brazil possesses South America’s largest oil reserves totaling 14.9 billion barrels of proven or 1P reserves and 21.9 billion barrels of 2P reserves.


Brazil’s energy ministry is committed to attracting further investment and increasing the efficiency of oil industry operations with a view to the country becoming the world’s fourth largest oil producer. This will require significant investment not only from national oil company Petrobras, which from 2023 to 2027 is committed to spending nearly $65 billion on exploration and production activities but also from foreign energy majors. Global supermajors such as Equinor, Shell and TotalEnergies have greenlighted a series of oil and gas developments as well as infrastructure projects in offshore Brazil since the start of 2023.

While lifting Brazil’s oil production to the targeted 5.4 million barrels per day from 3.1 million barrels daily will be a challenge, it does appear achievable despite the fears of increased government intervention from the leftist Lula administration. That will deliver a tremendous economic windfall for South America’s largest economy which has become dependent on the considerable revenue generated by the pre-salt offshore oil boom.

By Matthew Smith for Oilprice.com

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