A New Era of Fossil Fuels?

Items

• Introduction

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  Latin America is home to vast reserves of oil and gas, with a long history of exploiting these resources both in partnership with foreign firms and through national oil companies (NOCs), which have become inextricably linked to fiscal stability, national sovereignty, and energy security in producing nations. 

  The region is also endowed with abundant renewable energy sources, meaning that it was well-placed to benefit from the global drive towards decarbonising electricity generation as part of climate commitments in the late 2010s, with fossil fuel investments dipping concurrently.

  But despite the rapid proliferation of wind and solar plants in recent years, a shortfall in investment in transmission and distribution has hamstrung efforts to drive the energy transition in other economic sectors, leaving it only partially complete and disappointing those who had thought that more renewable generation would inevitably lead to economy-wide decarbonisation.

  At the same time, a persistent economic and political reliance on NOCs encouraged continued production of fossil fuels, even as international pressure mounted to move towards clean energy alternatives. More recently, shifts in the external environment have made a new drive to explore and develop new fossil fuel projects more politically palatable and economically lucrative, and a rightward political shift in the region has removed any ideological barriers to such moves. 

  This report examines how these developments have resulted in a dual-track energy policy in many Latin American nations, a model which aims for domestic decarbonisation while expanding oil and gas exports. This is true even in Colombia, the only country where a national government has made a concerted attempt to end new fossil fuel development, illustrating the difficulties in untangling regional economies from fossil fuels.

• Historical role of fossil fuels in the region

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  Latin America’s fossil fuels sector has become deeply embedded in states throughout the region in the last century or so, playing a dual role as both significant contributors to the public purse and symbols of national sovereignty.   

  During the first few decades of the 20th century the discovery of significant reserves led to a wave of investments from foreign oil companies. However, keen to harness hydrocarbons to support state-building efforts, governments including those of Mexico, Brazil, and Venezuela created national oil companies that connected fiscal policy and questions of national identity.

  Mexico’s public finances have historically relied heavily on contributions from the state oil company Pemex, which was created in 1938 after the government expropriated foreign oil companies. The firm continues to play a symbolic role for many Mexicans, echoing a broader regional belief that fossil fuel revenues should be used to finance development projects and social programmes rather than benefit foreign investors. 

  Nowhere was this more apparent than in Venezuela, where the 1976 nationalisation of Pdvsa integrated oil revenues into the country’s development model, reinforcing public perceptions that hydrocarbons should drive social progress rather than benefit foreign shareholders. 

  A neoliberal wave during the 1990s loosened this connection between fiscal contributions and sovereignty, with the privatisation of Argentina’s YPF and the increasing involvement of foreign investors in Venezuela’s oil sector during what is known as the Apertura period. Even so, regional producers remained highly reliant on fossil fuel revenues.

  Then a renewed wave of resource nationalism took hold in the early 21st century, a period which exposed a number of tensions in the dual role of NOCs. For example, increasing politicisation at Pdvsa led to a decline in operational capacity, while Pemex became increasingly indebted as successive governments continued to extract revenues from the company to support public spending. 

  More recently, this relationship has inverted, with the Mexican government spending heavily to support Pemex’s worsening balance sheet — the company’s debt burden now exceeding 5% of GDP — in order to maintain employment, political legitimacy, and energy sovereignty. This was demonstrated by credit rating agency S&P Global’s decision in May to revise the outlook for Mexico’s long-term foreign currency rating to negative, citing "expected continued substantial fiscal support for Pemex” that “would continue to aggravate Mexico’s fiscal rigidities”.

  As a result, the global consensus on transitioning away from fossil fuels embodied in the 2015 Paris Agreement confronted not only environmental and technical challenges but fiscal and political ones that had become embedded in Latin America’s oil producing economies over generations.

• 2010s drive towards energy transition

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  Despite these complexities, the Paris Agreement created momentum throughout the region, with widespread commitment to cutting greenhouse gas emissions and adopting clean energy technologies. 

  While Latin America had long been home to significant hydroelectric dams, various countries doubled down on hydropower, as well as committing to large scale wind and solar buildouts as part of efforts to reduce reliance on thermoelectric power plants and decarbonise the electricity supply. Government initiatives such as Costa Rica’s 2018 decarbonisation plan and Chile’s 2019 equivalent have been supported by multilateral organisations such as the Inter-American Development Bank, which has financed projects and supported the development of updated regulatory frameworks to encourage private investment in renewable energy.

  Financial markets also responded well, with the use of innovative climate finance instruments such as green, social, sustainability, and sustainability-linked (GSSS) bonds increasing significantly, with more than US$164bn raised on international markets from 2014, when the first such bond was issued, to 2024. Investment rose, with annual clean energy investment reaching US$70bn in 2025, up 25% compared to 2015, with Chile, Colombia and Costa Rica accounting for the largest increase. These developments drove a 51% increase in the region’s renewable generation capacity from 2015-2022, at which point they accounted for 64% of total capacity, and Costa Rica, Paraguay, and Uruguay now generate nearly all of their electricity using renewables.

  Overall, governments from across the ideological spectrum have worked to advance the energy transition: a group of 16 countries have committed to generating at least 80% of electricity needs from renewable sources by 2030 as part of the Renewables in Latin America and the Caribbean (RELAC) initiative. The case for renewables has been helped by the fact that the price of electricity generated by wind and solar fell significantly in many countries, strengthening the economic case for building more renewables.

  One notable example is Chile, where record-low wind and solar costs have encouraged a rapid buildout in generating capacity, with more than 40% of its electricity coming from these two sources for the first time in December 2024. This has facilitated decarbonisation efforts in sectors such as public transport in the capital, Santiago, which had 4,088 electric buses as of February this year, equivalent to almost two-thirds of the total fleet. Plus the decarbonisation plan remains intact even after the inauguration of right-wing President José Antonio Kast, a pro-business climate sceptic who has rolled back environmental protections in a bid to encourage investment and economic growth. 

  Nonetheless, he has also approved major new renewables projects worth a total US$1bn at the end of March and unveiled plans to accelerate investment in battery storage and green hydrogen. This is due to the fact that the price of wind and solar additions has fallen below that of new thermal powerplants, allowing economic logic to prevail over ideological questions.

• Limits of clean energy drive in the region (difficulties financing decarbonisation efforts)

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  However, despite rapid progress in deploying renewable projects and adding to renewable generating capacity thanks to an uptick in investment, fossil fuels were not displaced from the overall energy mix at a comparable rate due to a number of structural constraints.

  Overall investment has fallen short of what is required, with the World Economic Forum estimating that the region needs to secure USD$150bn in clean energy investment per year by 2030, more than double the 2025 total of US$70bn. And an Eclac analysis of GSSS bonds issued by Brazil, Chile, Colombia, Mexico, and Peru found that dedicated sustainable finance had no discernible effect on the share of renewables in total energy consumption in these countries, underlining the fact that clean energy projects have added to overall generating capacity without replacing fossil fuels in the energy mix. 

  A major reason for this is that investment in fossil fuels remains higher than in renewables, at US$90bn compared to US$70bn in 2025, although fossil fuel investment was 20% lower than in 2015. As shown in Chart 1 (below), investment in fossil fuels declined from 2015 and almost converged with renewables in 2020 but then rebounded.

  Chart 1: Annual Investment in Clean Energy and Fossil Fuels (2015–2025)

  

  Source: International Energy Agency (IEA), World Energy Investment 2025.

  Continued investment in fossil fuels is driven in part by concerns over the sovereignty cost of winding down extraction in producing countries, with Brazil’s President Luiz Inacio Lula da Silva one of various regional leaders staking out the position that nations have a right to use their natural resources to drive development (see Case Study). Even when political leaders are committed to phasing out fossil fuels, such as Colombia’s President Gustavo Petro (see Case Study), the economic cost is difficult to countenance: fossil fuels represent 10% of the country’s fiscal revenues and 35% of exports, according to the International Monetary Fund. In addition, energy security and political concerns remain powerful. This is illustrated by Mexico’s President Claudia Sheinbaum, herself a climate scientist, reversing the country’s ban on fracking in order to reduce reliance on natural gas imports from the US.

  Another contributing factor is that the incomplete energy transition means that even those nations with near-total renewable energy generation are still highly dependent on oil and gas in some sectors. This is due in large part to the fact that generating capacity can be deployed more quickly than the systems needed to make use of the power that they produce. For example, there are serious shortfalls in electricity transmission and distribution infrastructure, constituting a major grid bottleneck that means energy losses via curtailment have increased significantly.

  Transmission investment in fact fell by around 40% from 2015-2021, a period of significant expansion in generating capacity, and total energy losses have averaged 17% per year over the past three decades, according to the IADB. This is around three times the level seen in developed countries, it adds. At the same time, electricity demand is growing rapidly and increased 87% from 2020-2025, meaning that new generating capacity is partly fulfilling growing demand rather than waiting ready to displace fossil fuels. Another factor is rapid urbanisation, which is placing extra strain on the existing grid infrastructure: LAC has an urbanisation rate of 79%, higher than Europe and North America, but much of this was unplanned and lacks electricity infrastructure.

  Electrifying transport has also proven difficult and slow. Chile provides a striking example: despite important progress in replacing diesel buses with electric alternatives in Santiago, only around 2% of private vehicles are electric. Consequently, the country has access to cheap electricity from renewables but remains highly dependent on imported oil, meaning it is highly exposed to price movements on the global market.

  Finally, the region’s significant investments in hydropower have been impacted by changing weather patterns due to climate change. In Ecuador, where hydroelectric dams provide more than 90% of electricity, prolonged periods of drought have reduced operating capacity and led to blackouts, with the government falling back on emergency thermoelectric generation in an attempt to keep the lights on. Brazil is another example of fossil fuel plants being brought back online when climate stress exposes dependence on hydropower.

• Colombia case study: Petro pushing to phase out fossil fuels but failing

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  Colombia provides a unique example, with former-president Gustavo Petro (2022-2026) the only regional leader who actively tried to advance a fossil fuel phase out.

  Petro announced a moratorium on new contracts for the exploration and extraction of coal, gas, and oil in January 2023, delivering on a campaign promise, and published a national development plan that provided a framework for advancing the energy transition. Although the government did promise to honour existing contracts, this was a bold gambit in a country in which fossil fuels make up 35% of total exports and contribute 10% of fiscal revenues. 

  There were some signs of progress, including the fact that non-hydroelectric renewables’ share of electricity generation increased from around 2% of the total to 16% during his term, largely thanks to new solar projects, and state run oil firm Ecopetrol dedicated more resources to the energy transition, hitting 40% of the budget in 2024. Petro was also able to advance the conversation around phasing out fossil fuels at the First Conference on the Transition Away from Fossil Fuels conference in Santa Marta in April, setting out his stall as a thought leader on the matter, but ultimately his plan ran into a number of issues. 

  First, his lack of a congressional majority and cabinet instability meant that further efforts to advance the phase out, such as by banning fracking or new open-pit coal mining, were unsuccessful. The government also defended the exploitation of natural gas as a transition fuel, and granted exemptions for the development of the Sirius offshore gas fields due to concerns over energy security, with supply from existing fields dwindling and forecast to run out in around six years.

  Much like Pemex and other NOCs, Ecopetrol is a source of pride for many Colombians. The company also supports more than 100,000 jobs, according to oil workers union Unión Sindical Obrera (USO), as well as tens of thousands more indirect jobs, underlining the political and economic risks of attempting to bring change to the sector. Petro’s cause was not helped by a governance scandal involving Ecopetrol President Ricardo Roa, who managed Petro’s campaign finances for the 2022 election, which affected operations at the company, nor the fact that other significant contributors to the Colombian economy, such as mining, are still highly reliant on fossil fuels. 

  But perhaps the most significant factor was the finances. Modelling carried out by the IMF revealed that a steep decline in oil production alone would reduce Colombia’s royalties and income tax revenues by 0.9-1.2 ppts of GDP per year through 2030, with lower dividends from Ecopetrol adding a further reduction and resulting in “serious fiscal implications”. 

  At the same time, securing the level of investment needed to advance the energy transition quickly enough to replace this steep decline in fossil fuel output would have been an incredibly difficult task. According to a peer-reviewed paper published in the journal MDPI, supporting projected energy demand in 2035 solely using renewables would require US$123bn-$267bn in investment, equivalent to 36%-77% of the nation’s 2022 GDP. “This immense capital requirement demonstrates that the current roadmap is not only overly ambitious but economically untenable, posing significant risks to the country’s fiscal stability and energy security,” wrote the authors.

  And it appears that these fears were shared by Colombian voters too, with right-wing populist Abelardo de la Espriella beating the Petro-backed candidate in June’s presidential election run-off. Colombia’s next leader has promised to push ahead with fracking and restart fossil fuel exploration, setting the scene for a rapid rollback of the region’s only serious attempt to make the energy transition national policy. 

  De la Espriella is therefore set to put an end to Petro’s failed attempts to override the structural constraints of the energy transition with concerted political will. And good relations with fossil fuel-advocating US President Donald Trump, who endorsed his candidacy, could make Colombia an attractive bet for US energy companies looking for opportunities to take advantage of the policy reversal.

• Continued global demand for fossil fuels driving exploitation in producing countries

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  One significant factor in the failure of attempts to phase out fossil fuels is the fact that global conditions have changed markedly since the heady days of the Paris Agreement, making continued investments in hydrocarbons economically and politically rational.

  The evolution of the International Energy Agency (IEA)’s position on fossil fuels illustrates this perfectly. In 2023, the agency predicted that oil demand would peak in 2030 and slowly decline, leading director Fatih Birol to claim that "we are witnessing the beginning of the end of the fossil fuel era”. But by late 2025, the IEA was forecasting that oil demand would continue to grow until 2050, and Birol was calling for more investment in oil and gas to support global energy security, leading the Organization of the Petroleum Exporting Countries (Opec) to claim that “the IEA’s bold assertions have had a rendezvous with reality.”

  If this shift in the IEA position removed some multilateral impetus towards phasing out fossil fuels, then the Iran war confirmed that the window for exploiting fossil fuels is very much still open. The closure of the Strait of Hormuz following US-Israeli airstrikes on Iran on 28 February led to the “largest supply disruption in the history of the global oil market”. Higher production and exports from the Atlantic Basin, which includes Venezuela and Brazil, where production hit a record high in April, have helped to fill some of the gap, and higher oil prices provided a further boost to revenues.

  While global oil demand is forecast to remain higher for longer, under the surface the picture is changing, with Chinese demand falling while India and Southeast Asia grow. And the idea of an incomplete energy transition comes to the fore once more, with aviation, shipping, petrochemicals, and heavy industry still dependent on fossil fuels around the world. Plus the IEA has forecast that demand for liquefied natural gas (LNG) will grow by almost 1.5% per year from 2024-2030, and infrastructure damage to major export hubs in the Gulf states from Iranian air strikes will increase demand for alternative suppliers.

  A longer runway for fossil fuel exploitation and an ongoing reordering of global energy markets means that producing nations are facing fundamentally different calculations than they were a year or two ago. There are other global tailwinds too, including a rollback in US climate policy under President Donald Trump and the fact that COP30 failed to produce a roadmap for phasing out fossil fuels (See Section 7). 

  The decision is now which reserves to exploit, rather than whether to exploit them, as concerns over developing assets that would need to be decommissioned before the end of their useful life to meet climate commitments have given way to worries over missing out on a chance to harness the economic benefits of fossil fuels. This is true even in those countries that are pursuing decarbonisation goals domestically, such as Brazil, as governments simultaneously invest in renewables while accelerating oil and gas development.

• Brazil case study: squaring conservation commitments with more exploration

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  Brazil illustrates this tension: it is a renewable energy powerhouse that has made serious commitments to decarbonisation and conservation efforts, while also developing a large and growing oil sector.

  These tensions were demonstrated in October 2025, when drilling started on the first well at a new offshore oil field known as the Equatorial Margin, near the mouth of the Amazon river. A few weeks later, Brazil hosted the COP30 climate summit in the nearby city of Belém, providing a geographical reminder of the contradictions in its approach. Brazilian officials pushed for an agreement on phasing out fossil fuels, which ultimately failed, before announcing that the government would produce its own fossil fuel transition roadmap.

  President Lula da Silva of the centre-left Workers Party had pushed for the project to go ahead despite domestic and international opposition and laid out his reasoning during a trip to Indonesia. “As long as the world needs it, Brazil is not going to throw away wealth which could improve the lives of the Brazilian people,” he said. “We will use this money to increasingly create the conditions for Brazil to free itself from fossil fuels.” 

  Juliano Bueno de Araujo, technical director of Brazil's Arayara International Institute, has pushed back against this framing, highlighting the fact that the country doesn’t have any direct mechanisms through which oil revenues are used to fund green energy projects, such as a national climate fund. “Instead of strengthening the transition, this model increases dependence on fossil fuels,” he warned. 

  Brazil’s renewable energy projects are financed separately, but state oil firm Petrobras is a huge contributor to the public purse, paying BRL$277.6bn (US$53.1bn) in taxes and royalties in 2025. The success of the company is therefore a key factor in Brazil’s fiscal stability, and its contributions enable government spending in areas such as social programmes. 

  With Brazil’s oil destined largely for export, the sector is benefiting from the reordering of global markets brought on by conflict in the Middle East. It saw record national monthly oil production of 5.53m bpd in March, a 4.6% month-on-month increase and a 17.3% year-on-year increase, and the International Energy Agency said that Brazil is offsetting Gulf losses. This signals that Da Silva’s bet is paying off in the short-term. 

  Petrobras is also poised to double down on oil despite suggesting that it would become an energy company with more renewables exposure. Its 2026-2030 investment plan, worth a total US$109bn, focuses heavily on expanding fossil fuel production, including 15 new wells in the Equatorial Margin field alone.

  Higher oil prices and a search for alternative suppliers due to disruption in the Gulf states strengthens the economic case for this strategy, but the investment plan has also deprioritised renewables investments. As shown in Chart 2 (below), more than 75% of the US$91bn in capex under implementation is allocated to oil exploration and production, with spending on the gas and low carbon energies category growing slightly from US$1.0bn in 2026 to US$1.3bn in 2028 before falling to US$0.3bn in 2030.

  Although clean energy projects are generally funded by private auctions and development banks, the shift at Petrobras shows oil dependence crowding out investment in the energy transition, undercutting da Silva’s assertion that expanding fossil fuel production can ultimately help to reduce their use. 

  Chart 2: Petrobras capital expenditure under implementation by business segment (US$bn), 2026–2030

  

  Source: Petrobras, Business Plan 2026–2030.

  The underlying political calculation, that fossil fuel revenues facilitate public spending that benefits voters and builds electoral coalitions, is also facing a significant test in the run up to general elections scheduled for 4 October. For example, the Articulação dos Povos Indígenas do Brasil (Apib), which provided significant support for da Silva during the last election, has criticised the Equatorial Margin project and called for a halt to oil and gas exploration, underlining how the dual-track energy strategy can have a negative impact on political coalitions. The issue is unlikely to decide the presidential election this time around, with da Silva’s main rival Flavio Bolsonaro likely to deepen fossil fuel expansion to an even greater extent than the incumbent, but it could affect the future of the PT in Brazil and provide valuable lessons for politicians around the region.       

• New capacity coming online: Guyana, Suriname, Argentina Vaca Muerta + more

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  There are a number of other projects that are bringing additional fossil fuel capacity online, including in new producing countries Guyana and Suriname, and efforts to boost production in others such as Argentina have been stepped up in response to recent changes in political and economic conditions, both internally and externally.

  Guyana has seen remarkable development in oil production since US firm ExxonMobil found a huge offshore reservoir in the Stabroek block in 2015.  The potential for these reserves to transform the country’s economy meant that there was an overwhelming domestic political consensus to exploit them, even as international climate efforts were ramping up.

  Production started in 2019 and set a new quarterly production record of more than 900,000 barrels per day (bpd) in the first quarter of this year. Combined with higher oil prices, this meant that Guyana received a record US$761m in oil revenues for the quarter. And oil revenues have driven a remarkable increase in the country’s GDP per capita, which increased from US$3,840 in 2010 to US$26,990 in 2025, with further growth expected.

  There are now four floating production, storage and offloading (FPSO) vessels in operation, with a further US$60bn in investment announced in November 2025 expected to push daily production capacity to 1.7m bpd by 2030. Given the fact that decisions to invest in further capacity were made when the Brent crude price was hovering around US$60 per barrel, these plans are unlikely to be affected even if the end of the Iran war brings prices down from their recent highs. 

  The price spike caused by the Middle East conflict will in fact bring further benefits to Guyana’s public purse, as it has brought forward the date by which the Stabroek Block will recover its exploration and development costs. Once cost recovery is achieved, a milestone that is expected to be reached around the middle of this year, Guyana’s share of oil profits will increase from 12.5% to 50%, a significant boost to state revenues and a significant change from initial contract terms that critics had argued were tilted too far in ExxonMobil’s favour. The country is also exploring LNG projects, including the Wales Gas Vision, both for domestic use and for export from a planned offshore facility to be built by US firm Fulcrum LNG, although progress has stalled. 

  For Guyana the incentives are clear, with the IMF highlighting that the country has recorded the highest real gross domestic product (GDP) growth rate in the world in recent years and underlining that the outlook is “highly favourable”. Combined with the fact that the country boasts the world’s largest per capita oil reserves, the conditions are in place for continued strong growth in production capacity. 

  Although Guyana’s progress from first discovery to first oil was remarkably quick, neighbouring Suriname has faced more challenges in exploiting its own offshore oil fields, in part due to the differing geology of its deposits, which make extracting oil more difficult and expensive. 

  This has slowed the pace of development, although more than 750m barrels in recoverable reserves have been confirmed in the Block 58 field. The first planned project in this field is GranMorgu, a joint venture between TotalEnergies (40% stake), APA Corporation (40%), and Surinamese state oil firm Staatsolie (20%), with a final investment decision (FID) worth US$10.5bn confirmed in October 2024. In April this year the project’s first FPSO was reported to be 60% complete at a shipyard in China, and production is expected to begin in 2028, with a maximum production capacity of 220,000bpd.

  At the same time, Suriname’s first gas development, the Sloanea field, was confirmed to be commercially viable in November 2025. This means that the project, operated by Malaysian energy company Petronas and Staatsolie, can now move towards development. Current forecasts project an FID later this year, and a target of 2030 for first gas production. Petronas has also expanded its interests in the country’s offshore gas fields, signing another agreement with Staatsolie in June 2025 that means it is active in six Surinamese blocks.

  These developments signal growing confidence that Suriname will enter global markets for both oil and gas in the coming years, adding to the growing slate of extra capacity that is set to come online. Another key contributor to South America’s fossil fuel frontier is Argentina, where investment in fossil fuels projects has surged since President Javier Milei enacted a programme known as the Régimen de Incentivos a las Grandes Inversiones (Rigi), which offers a range of incentives, legal protections, and stability measures for large projects, in 2024. 

  While the country’s oil and gas potential has long been known, Rigi has improved the business environment and encouraged a wave of investments in fossil fuels projects, primarily in the Vaca Muerta shale fields in northern Patagonia, which contain a colossal 16bn barrels of recoverable oil reserves and 308 trillion cubic feet of recoverable gas resources. Rigi also covers renewable energy projects, as well as other sectors such as mining, supporting the idea that clean energy and fossil fuels are being developed at the same time.

  Oil production at Vaca Muerta surged 32% year-on-year from January 2025-January 2026, pushing Argentina’s overall oil output to 874,000 bpd in February. And international oil companies such as Chevron, Pluspetrol, and Continental Resources have announced a slew of significant investments, meaning that production is expected to see further significant increases. 

  There are also significant pipeline projects underway, including Vaca Muerta Oil Sur (VMOS), a US$3bn project led by state-run firm YPF to transport oil to a shipping terminal in Punta Colorada, Rio Negro province. This kind of infrastructure will be vital in ensuring that Argentina benefits from a forecast increase in oil production to 1.5m bpd by 2030, according to the Argentine Chamber of Hydrocarbons Exploration and Production. YPF has also published the Argentina LNG project, which aims to boost exports of liquified natural gas, and has agreed to develop an LNG export facility in Patagonia in conjunction with Italian energy company Eni. 

  Across South America as a whole, energy consultancy Rystad’s analysis of oilfield investment shows some interesting patterns, as illustrated by Chart 3 (below). Investment in Argentina has spiked since 2023, coinciding with the introduction of the Rigi framework, and Guyana has also seen rapid growth since 2019. Looking ahead, Brazil is set to maintain its position as the largest single recipient of oilfield investment in South America, followed by Argentina and Guyana.

  Chart 3: Total investment in South American oilfields (US$bn), 2019–2030

  

  Source: Rystad Energy Upstream Solution.

  Chart 4 (below) reveals further detail on oilfields investments in the whole of Latin America over a longer time period, rising from 2010 to a peak of US$90bn in 2013 before falling sharply to a recent low in 2020. A strong recovery post-pandemic is expected to continue, with a peak in 2027 before decreasing slightly to 2030. The chart also shows how onshore investment has fallen away, with offshore deepwater now taking the largest share and shale attracting a significant proportion of investment.

  Chart 4: Annual Latin America spend by supply segment (US$bn), 2010–2030

  

  Source: Rystad Energy Upstream Solution.

  Chart 5 (below) illustrates Rystad’s forecast that more than US$400bn will be invested in the oil sector from 2026-2030. It breaks that figure down by country, with several standout elements to highlight. First, Brazil, Guyana, and Suriname will dedicate almost all of their investment for the period to offshore deepwater, with Argentina accounting for all of these countries’ shale investments.

  Chart 5: Latin America spending (US$bn), 2026–2030

  

  Source: Rystad Energy Upstream Solution.

  Another thing to note is that Venezuela’s bar is mostly greyed out, reflecting the fact that investment is contingent on political and economic developments in that country discussed in the next case study. 

  In the gas sector, Guyana, Suriname, and Argentina all feature among the top Latin American candidates to benefit from growing demand for LNG identified by the International Gas Union (IGU) in a report published at the beginning of June. The IGU highlights the fact that the region accounts for only 5% of global natural gas production, despite its vast reserves, and the IGU argues that gas projects can be a key contributor to the energy transition due to the fact that emissions are lower than oil. 

  Securing natural gas supplies has become a strategic priority for many countries around the world, particularly in Europe, given the recent ban on purchases from Russia in the wake of the country’s invasion of Ukraine and the ongoing disruption to supplies from the Middle East due to the war with Iran. This increases the likelihood of further investments in LNG projects in Latin America, with the IGU also highlighting Peru and Venezuela as potential beneficiaries, although significant uncertainty remains around Venezuela’s ability to realise this potential. 

• Venezuela case study: to what extent will the oil industry recover its former glory?

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  Venezuela’s oil industry is a shadow of its former self after years of mismanagement and corruption, but the removal of former President Nicolas Maduro in January, followed by the rapid rapprochement with Washington under his successor President Delcy Rodriguez, has increased expectations in some quarters that the country will once again become a significant oil exporter.

  With proven oil reserves estimated at 303bn barrels, Venezuela has the largest oil reserves of any country in the world. However production fell from a peak of more than 3m bpd in the late 1990s to just 800,000bpd in January, when Maduro was captured by US troops.

  Less than a month later, the Rodriguez government pushed through a significant reform to Venezuela’s Hydrocarbon Law designed to encourage investment in energy projects, and the world’s biggest oil companies quickly moved to explore their options. 

  For example, Chevron has signed agreements to expand its presence in the country, and Shell has also signed five deals with the government. BP has signed a memorandum of understanding for two projects, while Eni has struck a deal to relaunch production at the Junín-5 field and Repsol signed an agreement to expand production at the Petroquiriquire joint venture it operates alongside Venezuela’s state-oil company Pdvsa. Some of these agreements aim to boost gas production as well as oil, with Shell granted a licence to explore the Loran gas field, which Venezuela shares with Trinidad and Tobago, on 11 June. 

  Venezuela’s oil exports hit 1.25m bpd in May, a 61% year-on-year increase and a seven-year high, and officials reactivated a pipeline that enables LPG exports to neighbouring Colombia. US control of the country’s oil exports has been key, with Washington easing sanctions on Venezuela’s oil sector and removing sales restrictions. The US reopened its embassy in Caracas at the end of March, and Jarrod Agen, Executive Director of the White House's National Energy Dominance Council, has said that officials are talking to their Venezuelan counterparts “multiple times a day” to advance business-friendly reforms and convert MoUs into contracts. Further evidence of Venezuela’s volte-face under Rodriguez came in April, when the IMF and the World Bank announced that they would restart engagement with the country after a seven-year pause.

  However, despite this flurry of activity, some are still sceptical about the prospects for Venezuela’s energy sector. Many energy companies left Venezuela in recent years, meaning it will take time to staff operations again, and the fact that the country’s crude is very heavy adds to production costs and technical difficulties. These companies will also need to feel confident that the current political situation will hold before they commit to long-term projects, and even then the sums are eyewatering, with consulting firm Rystad Energy estimating that US$183bn in capital spending by 2040 would be needed to boost production back to 3m bpd.

  However significant investment outside of specific joint ventures is unlikely to materialise without credible progress on a debt restructuring programme announced in May, when the government announced plans to restructure an estimated US$150bn-200bn in sovereign and Pdvsa debt. 

  With the country in default since 2017 and still subject to some US sanctions, this is expected to be one of the largest and most complex debt restructuring operations in recent history. Its success is itself dependent on increasing oil production, as creditors will want reassurances that oil revenues will be sufficient to cover repayments on any new agreements, which will already likely involve a significant haircut. “A credible economic plan tied to oil output recovery, combined with sound fiscal and monetary policies, is key for successful debt restructuring,” wrote credit rating agency S&P Global in a statement published 27 April.

  Venezuela finds itself in something of a trap, with oil recovery and debt restructuring mutually dependent: Venezuela could increase production to around 1.5m bpd if current dynamics persist, but securing the level of investment required to rebuild upstream infrastructure necessary to go beyond that will require debt restructuring. But with most of Venezuela’s debt made up of bonds issued in New York, it is technically impossible to restructure the debt without sanctions relief, which may require progress on difficult questions such as political reform in Venezuela.

  As a result, there is a ceiling on the extent to which fossil fuel production can regain previous levels without simultaneous progress along parallel tracks, in a risky process that is likely to take years.

• Future plans - how is rightward political shift changing energy policies?

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  A string of electoral victories for right-wing politicians has given Latin America its most pronounced rightward tilt since the 1990s, with conservative leaders coming to power in a slew of countries including Argentina, Bolivia, Chile, Colombia, Honduras, and Peru, in addition to right-leaning parties retaining power in Ecuador and Costa Rica.

  In general terms, these leaders are enacting or aiming to enact pro-business reforms to improve investor confidence and attract private sector support for all kinds of projects, rather than using state resources. For example, in Argentina, President Javier Milei’s Rigi investment framework covers both sectors, but it can only approve projects proposed by companies, not deploy capital of its own. 

  Keiko Fujimori is set to become Peru’s next president at the fourth attempt after winning an incredibly tight election in June. She has outlined plans to promote hydrocarbons exploration, with new blocks proposed in the Amazon and on the country’s northern coast, as well as implementing stable rules to encourage investment. As things stand the sector is in decline, with only five active exploration contracts and 146 areas uncontracted, according to Patricia Figueroa, head of local hydrocarbons association SPH. Industry leaders are hoping that Fujimori’s pro-business policies will spur a recovery, as are those in the renewables sector, who have called for Fujimori to develop the vague plans to boost clean energy adoption included in her manifesto into a national strategy for the energy transition.

  Chile’s President José Antonio Kast has also demonstrated a willingness to follow the logic of the market rather than ideology. On the one hand, he continues to pursue the energy transition, approving  new renewables projects and unveiling plans to boost battery storage and green hydrogen, showing that the economic impact of renewables has trumped any ideological resistance to projects linked to climate targets. On the other hand, he has weakened environmental protections and shelved the planned nationalisation of the country’s lithium reserves, which can be interpreted as pro-business moves designed to attract more private investment. Kast is therefore effectively removing political impediments to energy investments, leaving the future evolution of Chile’s energy matrix to be decided by the private sector. 

  Colombia’s president-elect Abelardo de la Espriella has vowed to reverse his predecessor Gustavo Petro’s moratorium on new oil and gas contracts after winning the election in June. He has promised to restart exploration and development, and to open up the country to fracking. Backing from US President Donald Trump could potentially open the door to more energy cooperation with neighbouring Venezuela, another member of a growing Washington-aligned group of Latin American nations. 

  The next significant election in the region is in Brazil on 4 October, with leftist President Lula da Silva currently leading right-wing rival Flávio Bolsonaro in the polls. However the energy transition is not contested by either candidate, with both likely to continue pursuing both more oil and gas exploration and further investment in renewables and clean energy. Although Bolsonaro would be expected to roll back environmental protections, much like Kast he would be unlikely to try and kill projects linked to the energy transition, which attracted investment worth an estimated US$38bn in 2025. The main difference between a future da Silva or Bolsonaro government would more likely concern the amount of state control over resources, not whether to exploit them or not.

  In conclusion, the region’s rightward political shift is generally favouring investment in both fossil fuels and renewables, harnessing the economic benefits of resources while still encouraging the energy transition, albeit on the grounds of energy security and market realities rather than an explicit desire to pursue climate targets. There is also evidence that this political pragmatism cuts the other way: Mexico’s leftist President Claudia Sheinbaum has moved to relax restrictions on fracking, citing energy security concerns, reversing a previous ban.

• Geopolitical considerations/potential influence of multilateral climate commitments

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  Looking beyond the region itself, expectations that the multilateral climate framework would drive a fossil fuels phaseout have diminished, with the United Nations COP30 climate summit in November 2025 underlining the reasons why. 

  Hosted by Brazil’s President da Silva, world leaders failed to agree on a roadmap to transition away from fossil fuels due to opposition from Russia, India, and the OPEC+ nations. In contrast, the COP30 declaration pledged to quadruple the output of “sustainable fuels” such as biofuels, biogas, hydrogen, and e-methane by 2035, an admission that fossil fuels will remain an important part of the energy matrix even if in low-emissions forms.

  And while the European Union (EU) pushed for a fossil fuel transition roadmap at COP30, and was part of a bloc that lamented that the summit had “missed its appointment with history” in terms of climate commitments, it has not used all of the tools available to it to pressure Latin American nations to favour renewables over fossil fuels in its direct relations with the region. 

  For example, the EU’s Carbon Border Adjustment Mechanism (CBAM), which came into force on 1 January and aims “to encourage cleaner industrial production in non-EU countries,” notably does not cover oil and gas. Although European refiners are lobbying for this to change, the current exclusion underlines that the EU has decided not to place any barriers in the way of fossil fuel imports from Latin America, likely due to concerns around energy security. And the EU trade deal with South America’s Mercosur bloc, which provisionally came into force on 1 May, may facilitate investment in fossil fuels projects by providing greater legal certainty and eliminating tariffs on machinery and chemicals.

  If Europe is choosing not to actively disincentivise fossil fuels, the US has been aggressive in pushing for the continued exploitation of hydrocarbons. During Trump’s second term in office he has developed what has become known as the “Donroe Doctrine,” a foreign policy framework that aims to assert US dominance in the Western Hemisphere. 

  This rests in part on favourable access to energy and other resources, as illustrated by Trump’s pledge to “take back” Venezuela’s oil and his formation of the National Energy Dominance Council, which has reportedly been liaising closely with the country’s new government in a bid to boost oil production.

  While the seizure and imprisonment of Maduro is the most extreme example, US relations with Latin America have become increasingly violent and coercive. Washington has also shown a growing disregard for multilateral frameworks, notably not sending a delegation to the COP30 summit, and has preferred to negotiate bilateral agreements. The approach has relied far more on the metaphorical stick than the carrot, with a lack of financing and infrastructure investment on offer even to those nations that acquiesce in his demands. 

  This means that China continues to be the only viable solution for Latin American governments looking to advance the energy transition, and the country’s firms have slowly built up significant positions in strategic infrastructure throughout the region.

  In Brazil, Chinese companies own 304 power plants that contribute 10% of total generating capacity and the State Grid Corporation of China operates around 12% of the country’s transmission infrastructure. In total, China has invested US$60bn in public energy finance in Brazil, compared to just US$472m for the US. State Grid also controls more than 57% of Chile’s energy distribution system, and in Peru, Chinese firms control 100% of electricity distribution in the capital, Lima.  

  In addition, the conflict in the Middle East is accelerating this process, with concerns over energy security driving investments in renewables as a hedge against oil price shocks, as even oil producing countries in the region lack the refining capacity to meet domestic demand and are therefore still exposed to fluctuations in the global market: Chinese suppliers are the only ones that can provide the necessary equipment at a price point Latin American governments can afford, with the US unwilling or unable to offer an alternative.

  But it is not all good news for Beijing, with Washington’s aggressive move to secure access to Venezuela’s oil bringing an end to China’s previous advantages. Nonetheless, it has built up considerable leverage by embedding Chinese firms in physical infrastructure following a sustained investment drive that hasn’t been matched by successive US governments. China has also become the top trading partner for many countries in the region, increasing its leverage over governments that may try to limit its investments or commercial activities due to US pressure.

  As a result, there is currently no geopolitical impediment to Latin American nations pursuing both fossil fuels and renewables development. The EU is, at least for now, not working to discourage fossil fuel exports, and the US is actively encouraging new oil and gas exploration. As for China, it remains a willing importer of fossil fuels, while its vast renewables industry supplies clean energy tech at affordable prices to anyone who wants it. The current system in fact rewards a hybrid approach: exploit oil and gas reserves for export to capture the economic benefits, while continuing the energy transition at home to reduce exposure to energy price shocks. Of course, this may change in future if the EU tightens restrictions or a future US administration pivots back to clean energy.

• Is the energy transition stalled? Can the transition continue domestically in fossil fuel-producing nations even as they maintain or grow exports?

  Abbi Dicker 09 July 2026 Hits: 558

  Taken together, these constraints have limited progress in shifting the region’s energy mix, meaning that decarbonisation and hydrocarbon dependence continue to coexist at a time when the advance of climate change and shifting political coalitions have made the path forward even more complex. In this light, it becomes clearer that the energy transition has not stalled but rather been reconfigured.

  As things stand, fossil fuel exports continue and are growing in many producing countries, while these same countries continue to pursue decarbonisation domestically. However while the electricity sector has seen significant progress in this regard, many other parts of the economy remain reliant on fossil fuels, holding back a wider phase out that many had hoped would be possible.

  Although the ambition remains, there are considerable structural constraints, including a shortfall in investment in transmission and distribution infrastructure, which has held back the energy transition in transport and other economic sectors. According to the IEA, annual grid investment in the region needs to double to US$30bn in 2035 under the stated policies scenario (STEPS), which is “designed to reflect the prevailing direction of travel for the energy system,” and reach US$47bn under the Announced Pledges Scenario (APS), which forecasts the trajectory “if all national climate and energy commitments…are implemented fully and on time.”

  Even $164bn in dedicated sustainable finance has barely shifted the overall energy mix, demonstrating that increased renewable generating capacity has been additive rather than replacing fossil fuels. 

  Then there are domestic political concerns. In Mexico, for example, the government is spending considerable public funds to support Pemex despite warnings about the effects on public finances. 

  At the same time, the global demand curve for fossil fuels has shifted, with the IEA revising its forecast for peak oil, and the conflict in the Middle East disrupting existing supply chains, making continued investments more viable. Multilateral pressure to advance the energy transition on climate grounds has receded, and the geopolitical environment rewards a hybrid approach.

  This enables fossil fuel producers to continue exploiting oil and gas reserves for export while working to boost decarbonisation domestically, as the two systems don’t compete for physical inputs. For example, Brazil continues to develop its large and growing fossil fuel industry while having one of the cleanest electricity mixes in the world. Countries like Chile are also on a hybrid track, but from the opposite angle. Its geographical advantages mean it has some of the cheapest wind and solar power on the planet, but it still relies on imported oil to power almost all of its transportation.

  There are, however, various tensions in this relationship. Bueno de Araujo, of the Arayara Foundation, has argued that the hybrid model increases dependence on fossil fuels instead of strengthening the transition, as the two sectors compete for a limited pool of capital. The fact that Petrobras has deprioritised investment in renewables while boosting fossil fuel exploration is a clear example of this dynamic, with a desire to grow exports crowding out much needed investment in the transition. 

  As mentioned, De Araujo has also questioned Brazil’s President da Silva’s assertion that fossil fuel exports are used to finance investments in decarbonisation, pointing out that this entrenches a fiscal dependence on oil and gas, making it more difficult to wind down these industries in favour of clean energy alternatives. While the logic follows, at this stage it is impossible to draw a firm conclusion as regional governments may still find ways to resolve these tensions, such as setting up dedicated funds, working on mechanisms to shift capital away from hydrocarbons or forming political coalitions that acknowledge and are willing to absorb some short-term fiscal pain in order to phase out fossil fuels. 

  One intriguing existing system is Argentina’s Rigi framework, which covers both hydrocarbons and renewables and is therefore the only formal embodiment of this dual-track approach. Given the fact that projects must be approved by the government before they can receive the benefits of the framework, officials could technically influence the direction of travel in the country’s energy sector. Nonetheless, President Milei’s libertarian ideology means that these approvals will likely be made on technical and economic grounds, rather than a desire to advance any particular policy. On the other hand, the framework could provide an inspiration to other governments more interested in pursuing the energy transition in a more active way.

  In summary, significant investment will be necessary to progress the energy transition beyond the electricity sector, where the economic incentives are clear and the funding requirements are most commercially self-funding, but in many countries this low hanging fruit has already been picked. Whether or not the political will exists to try and resolve the tensions around capital allocation and fiscal constraints depends on the specific conditions in each country: the election of a swathe of right-leaning governments in the region makes this less likely on ideological grounds, but economic logic could drive the transition to a certain extent.

• Conclusion: to what extent did the previous fossil fuel era end?

  Abbi Dicker 09 July 2026 Hits: 481

  In conclusion, fossil fuels never stopped being a vital part of Latin America’s energy landscape. Regional commitments to the energy transition were real and in many cases ambitious, and renewables have become a key contributor to electricity generation. Further growth is likely in this regard, as conditions in many countries are advantageous and the costs of adding new renewable capacity are lower than the equivalent thermal generation plants. But decarbonising other areas of the economy has been held back by a shortfall in investment, particularly in transmission and distribution. The domestic energy transition therefore remains incomplete, which is true around the world, not only in Latin America.

  The need for investment is only increasing, as electricity demand continues to grow and rapid urbanisation is placing additional strain on ageing infrastructure, while changing weather patterns linked to climate change are making the region’s many hydroelectric plants less reliable at the very moment they are most needed.

  At the same time, attempts to reduce the role of fossil fuels in national economies quickly collided with political and economic realities in the region. NOCs are inextricably linked to questions of national sovereignty and are key factors in the fiscal stability of many producing countries, making winding them down unpopular with voters and difficult for the public purse, particularly at a time of strained national budgets. And although investments in fossil fuels declined, they have remained above those dedicated to renewables, even as the latter have increased rapidly. 

  Changing external conditions mean that demand for oil and gas has held up, particularly in the wake of supply chain disruptions caused by Russia’s invasion of Ukraine and the US-Israel war on Iran, which have brought worries around energy security into sharp focus around the world. 

  And while some proposed new exploration has become unviable now that oil prices have plunged from the highs seen during the Iran war, much of the new capacity that is slated to come online was evaluated during the previous period of much lower prices and will remain profitable at around US$60 per barrel. 

  Combined with a geopolitical environment in which there is no external pressure to rein in fossil fuel exploitation, which is in fact being actively encouraged by the Trump administration, this has resulted in a hybrid model in which the energy transition is reconfigured, rather than stalled. 

  Producing countries that are either fiscally dependent on fossil fuel revenues, or perceive the cost of winding down production to be too high politically, continue to ramp up exports in order to extract the maximum economic benefits from their reserves before the world reaches peak oil. 

  Alfonso Blanco, director of the energy transition programme at Washington-based thinktank the Inter-American Dialogue, summarised the situation succinctly: “If I commit to stop producing [oil and gas] voluntarily, I lose the chance to monetise my reserves while others are making use of their resources. I am losing my chance for development.” This development may also include the pursuit of decarbonisation in the domestic economy, according to figures such as Brazil’s da Silva, whether to fund social programmes, develop new productive sectors or advance energy security.

  Of course, an oil price crash due to a supply glut combined with falling demand, renewed multilateral pressure on climate grounds, or a reversal in US policy under a future administration could change these calculations again. But for now, regional governments will likely continue to try and reap both the benefits of the energy transition and their vast fossil fuel reserves before the window closes.