Chevron Corporation (CVX), YPF SA (ADR) (YPF): Cashing In on South America’s Unconventional Oil Boom

Ecopetrol S.A. (ADR) (NYSE:EC), the Colombian-government-controlled integrated oil major, has commenced unconventional oil exploration in central Colombia. It is hoped that this will boost the company’s waning proved reserves, which at 1.8 billion barrels of oil are far lower than any of the other oil majors’, including Argentina’s YPF SA (ADR) (NYSE:YPF). The big fear: Should Ecopetrol S.A. (ADR) (NYSE:EC) not locate any credible oil discoveries, it will become dependent upon its low-margin upstream operations and gas production partnerships with Chevron Corporation (NYSE:CVX) to generate sales. This will effectively cripple the company.

Canadian oil junior Canacol Energy Ltd. (TSE:CNE), has entered into three partnerships with Conoco Philips, Exxon Mobil, and Royal Dutch Shell to explore for and exploit unconventional oil reserves in central Colombia. At this time, it is essentially a play for oil juniors, with no major discoveries made — but the geological potential indicates that it should only be a matter of time.

All of these agreements offer Canacol Energy Ltd. (TSE:CNE) — which is already the fifth-largest oil producer in Colombia — considerable opportunity to boost its production and proved reserves. It also gives Canacol Energy Ltd. (TSE:CNE) the lead in unconventional oil exploration in Colombia, and gives the company’s big oil partners the opportunity to test the waters in Colombia’s as-yet-unproven unconventional oil sector, while mitigating the risks and costs involved.

Foolish Bottom Line

It is clear that an unconventional oil boom is in full swing in South America, with big oil clearly attracted by the opportunities that exist. But Chevron Corporation (NYSE:CVX), through its partnership with YPF SA (ADR) (NYSE:YPF) – which at the time was derided by investors – certainly has the lead at this time.

Colombia is also shaping up as the next opportunity. With an improving internal security environment and growing unconventional exploration it is only a matter of time before a major discovery is made. As such, it would make sense for investors to consider those companies that have already invested in the ground floor in Colombia’s unconventional oil industry.

The article Cashing In on South America’s Unconventional Oil Boom originally appeared on Fool.com and is written by Matt Smith.

Matt Smith has no position in any stocks mentioned. The Motley Fool recommends Chevron. Matt is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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