GUATEMALA: ASSESSMENT OF PETROLEUM POTENTIAL

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01058R000405250001-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 23
• Document Creation Date: December 22, 2016
• Document Release Date: April 26, 2010
• Sequence Number: 1
• Publication Date: October 16, 1985
• Content Type: MEMO

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Central Intelligence Agency
Washington. D. C. 20505
DIRECTORATE OF INTELLIGENCE
16 OCT 1985
MEMORANDUM FOR: Ronald K. Lohrding
Assistant Director for Industrial
and International Initiatives
Los Alamos National Laboratories
David Wigg, Deputy Director
International Economic Affairs
National Security Council
Attached, per your request, is an economic and geologic
assessment of the petroleum potential of Guatemala. If you have
any questions, please call 25X1
Attachment:
Guatemala: Assessment of Pet
GI M 85-10258, October 1985,
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SUBJECT: Guatemala: Assessment of Petroleum Potential
OGI/SRD/PRB~ I (11 Oct 85)
- R. Lohrding, Los Alamos
D. Vance, State
K. Salcedo, State
R. Greco, State
C. Kilgore, DOE
SA/DDCI
ExDir
DDI
DDI/PES
NIO/LA
NIO/ECON
D/ALA
ALA/MCD/CAS
DD/OGI, D/OGI
CPAS/ISS
CPAS/ICB/
OGI/PG/Ch
OGI/EXS/PG
Ch/SRD
Ch/PRB
OGI/TNAD/TAB
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Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
11 October 1985
Guatemala: Assessment of Petroleum Potential
S r
Geological analysis indicates that Guatemala may have an undiscovered oil
resource base of about 500 million barrels, supplementing current proved
reserves of 30 million barrels. This would be more than adequate for
Guatemala to become energy self-sufficient if these resources could be
developed. In our judgment, however, commercial development of all but a
fraction of its resource base is in doubt during the next 10-15 years. Oil
reservoirs in Guatemala are small and relatively deep, making drilling
difficult and expensive. We estimate that to achieve self-sufficiency, an
annual oil company investment budget for exploration drilling alone-of at
least $150 million would be required. It is highly unlikely that such a level
will be achieved because of the current unfavorable investment climate in
Guatemala and the soft international oil market.
Although oil self-sufficiency will remain elusive, Guatemala has the
potential to increase oil production and reduce an oil import bill now
totalling more than $200 million annually. Since international oil companies
would have to foot the investment bill and share eventual production with the
Guatemalan government, oil production from new discoveries permits some
reduction in Guatemala's expenditures on oil imports. Unless these
investments are made, Guatemala's production out of current fields will
continue its rapid decline. With a return to even the modest foreign
investment levels reached in the early 1980s, however, output in the nineties
could be held in the 5,000-6,000 barrels per day range, not much below the
previous peak levels of about 7,000 barrels per day reached in the early
eighties. This could eventually result in annual hard currency savings of as
much as $20 million at present oil price levels. Under the current petroleum
law, however, foreign oil companies have little incentive to expand
exploration and development work.
Even though the current soft oil market has a dampening affect on
exploration activities in marginal areas, we believe activity in Guatemala
will accelerate if the investment climate is improved. In our judgment this
would require, at a minimum, revisions in several restrictive elements of the
1983 Petroleum Law in order to reduce government oversight and improve the
financial environment for foreign oil companies. Further reductions in the
maximum government share in production, relaxation of penalties for failing to
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meet drilling schedules, and improvements in the ability of companies to
recover costs would significantly brighten the outlook for faster development
of the reserve base especially when the international oil market begins to
show signs of finning. We believe Guatemala will eventually allow additional
incentives in order to boost domestic oil production and reduce pressures on
its hard currency balance.
This memorandum was prepared by
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Terrorism Analysis Branch, Office of Global Issues. The information contained 25X1
herein is updated to 11 October 1985. Conmments may be directed to 25X1
Chief, Strategic Resources Division,
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Guatemala: Assessment of Petroleum Potential
Introduction
Oil exploration in Guatemala started in the 1920s but high production
costs made cammercial development unattractive. Enthusiasm about Guatemala's
possible petroleum resources was rekindled in the 1970s both in response to
rapidly increasing world oil prices and on the hope that the country sat on
the same geologic trend that contains Mexico's large onshore oil fields
discovered in the early-1970s. When subsequent exploratory work indicated
that this did not appear to be the case, enthusiasm waned. Nevertheless, the
geological conditions in Guatemala still suggest the potential to reduce oil
import costs. An improved investment climate, however, must be established to
attract the necessary investment by..foreign companies.
Recent Developments
Guatemala's oil requirements are modest but drain a significant portion
of available foreign exchange. Domestic consumption peaked in 1979 at almost
32,000 barrels per day (b/d) falling steadily thereafter to about 23,000 b/d
in 1983. The reduction was due in part to lower economic growth, the rise in
domestic fuel prices to near world levels and the substitution of
hydroelectric power for oil-fired electricity generation. Moreover, the
Nickel Company--a major consumer of fuel oil--closed in 1980. Last year,
however, we estimate the Guatemalan economy grew slightly after two years of
decline. As a result, oil consumption edged up and is now averaging close to
25,000 b/d.
During the past five years Guatemala has relied on imports to cover about
95 percent of its domestic oil needs. The country receives all of its crude
oil imports from Mexico and Venezuela under terms of the San Jose Accord which
provides concessionary oil financing, somewhat lowering the oil import
burden. This accord--which was revised last August and is open to renewal
annually-currently provides for delivery of up to 15,000 b/d of crude oil,
with Mexico supplying 7,000 b/d and Venezuela providing the remainder.
Historically, however, Guatemala has purchased a total of only about 13,000
b/d from Mexico and Venezuela which it processes at the country's only active
refinery in Esquintla. Guatemala satisfies the remainder of its oil needs by
importing refined petroleum products from United States and various Caribbean
suppliers. Guatemala's net petroleum import bill reached about $355 million
in 1981; although net petroleum import costs fell to below US $200 million
last year, this still represented nearly 20 percent of total commodity export
earnings.
The oil imports bill is aggravating a fragile international balance of
payments situation. Recent figures from the Guatemalan Finance Ministry show
that government foreign exchange flaws are inadequate to cover both debt
service and essential imports. Indeed, Mexico and Venezuela have curtailed
crude oil deliveries until Guatemala initiates a repayment plan for an
estimated $34 million in overdue bills. Refined petroleum supplies from U.S.
exporters are inadequate to cover the crude shortfall. As a result, fuel
shortages are becoming widespread causing long gas lines and the imposition of
a strict rationing program.
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Looking Ahead
In our judgment, petroleum demand is likely to rise to a range of 30,000-
35,000 b/d by 1990 if Guatemala can maintain a moderate economic growth rate
averaging 2-4 percent per year. Although Guatemala's oil dependency could be
reduced if its hydroelectric resources are developed, high development costs
are likely to discourage investment. Guatemala's hydroelectric resources--the
largest in Central America, estimated by an industry source at 10,000
megawatts (PWW)--represent, in principle, the oil equivalent of about 70,000
b/d. Total installed hydroelectric capacity is currently less than five
percent of potential, but accounts for roughly one third of all electricity
generation. Thermal power plants produce the remainder and require nearl
4,500 b/d of oil or about 20 percent of total petroleum consumption.
We believe development of hydroelectric power will slow partly due to
Guatemala's bad experiences with the Chixoy hydroelectric plant. Construction
of the Chixoy plant--which could replace 1400 b/d of oil--began in 1978 but
architectural failures have caused delays in construction and cost overruns in
excess of $300 million. The final cost of this project, estimated to be over
$800 million, will be a financial drain on the Guatemalan economy for years.
Moreover, according to U.S. Embassy reporting, a U.S. power-generation team
has downgraded the actual maximum generation capacity from 300 MW to only 200
MW. The date of operation for the Chixoy plant remains uncertain. According
to government officials, repair work should be completed by this October when
the plant will begin testing before being put in operation in early 1986. If
problems are encountered during the testing phase, needed repairs may further
delay operation. As a result, electric power sector demand for oil is likely
to remain substantial over the near to medium term.
Current Oil Output
It was not until the late-1970s with the development of the Tortugas,
Rubelsanto, and West Chinaja fields in the Chapayal Basin that Guatemala
became an oil producer, albeit on a minor scale. Oil output peaked at about
7,000 b/d in 1983, falling to about 4,500 b/d in 1984 because of poor field
performance and a lack of investment. (Figure 1)
o The primary producing fields--Rubelsanto and ti,bst Chinaja--have not
lived up to early expectations, and are currently producing between
3,000-4,000 b/d.
o In 1982, the Caribe field came on-line with a production rate of only
900 b/d. Output dropped to about 500 b/d in 1984.
o For a short period the Tierra Blanca and Tortugas fields were
producing close to 400 b/d. Because of declining well flow rates,
production from these two fields was suspended in July 1984.
Guatemalan crude has a high sulfur content and is not refined
domestically. As a result, most of it is exported and the remainder is
limited to direct burning in electricity generation and cement production.
Exports began in 1980 upon canpletion of the Petronaya pipeline and peaked in
1983 at almost 6,000 b/d from which Guatemala earned about US $60 million.
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FIGURE 1
GUATEMALA: TRENDS IN THE OIL SECTOR
33000
25000
20000
C
v
U)
0
15000 -i
IF-
100001
I
5000 -i
0l-
1979
1980
1981
1982
1983
1984? 1985
aestlmated
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Because of the drop in output, however, exports have decreased by about 50
percent since 1983. 25X1
The Potential Resource Base
Modest oil discoveries in the late-1970s and early-1980s attracted
foreign interest and created an optimistic outlook for the oil sector.
Interest in Guatemala was spurred by industry and trade reports suggesting
that regions of the country could be geological extensions of the huge Reforma
area of southern Mexico, where reserves have been estimated by the Mexican
government at some 10 billion barrels. The expectation prevalent during that
period that world oil prices would remain bouyant, further stimulated oil
companies' interest in Guatemala. By 1983, four international consortia were
operating in five contract areas. Drilling activity peaked in 1982 with the
completion of 12 development and nine exploratory wells, but no major
discoveries were made. We estimate that during 1978-84 over $750 million was 25X1
spent on exploration and development in Guatemala.
The failure to find significant deposits has quickly depressed oil 25X1
we estimate the proved oil reserves in Guatemala
presently amount to only 20 to 40 million barrels (see Appendix 1). At the 25X1
mid-point of the range, this amount represents less than a four year oil
supply at the country's current rate of consumption. All of this oil is
located in the Chapayal Basin in the Peten lowlands. Despite the large
investment--at least by Guatemalan standards--that has been made in oil
exploration programs in recent years, the results have been generally
disappointing. We believe that one of the major factors contributing to the
limited success thus far has been that the amount of drilling carried out is
small compared to the fairly large area that needs to be explored. In
addition, the sharp turnaround in the world oil market between the late-1970s 25X1
premature end of exploration drilling by foreign oil companies.
tide still believe, however, that the potential reserve base is much
larger. Based on a geological analysis of the available data, we estimate
that proved and potential oil reserves in Guatemala amount to between 420 to
640 million barrels.' Our analysis indicates that upwards of 80 percent of
Guatemala's potential oil reserves lie in the Chapayal Basin. Other regions
of the country that may contain oil include the Amatique Subbasin, the Yucatan
Platform, and the Pacific Coastal Basin (see Appendix 2). 25X1
'Proved reserves are estimated quantities of crude oil that geological and
engineering data demonstrate with reasonable certainty to be recoverable from
known reservoirs under existing conditions. Potential reserves are estimated
amounts based on less conclusive geological and engineering data. These
reserves are on structures where production has not been established but where
potential might exist based on structure and productivity extrapolation from
developed areas.
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Development and Production Costs
Development of Guatemala's oil potential is likely to be expensive. The
cost of oil development and production varies widely on a worldwide basis.
Key considerations are the size and productivity of the deposits and the
quality of the crude oil itself. Drillings costs vary according to the depth
of the oil-bearing structure and the geology of the overlaying formation.
Difficult terrain or climatic conditions also increase costs. The
availability of processing facilities to remove corrosive contaminants and the
proximity of infrastructure--such as roads, pipelines feeding refineries and
export terminals--are major other factors affecting development costs.
Virtually all of the factors that push costs up are at play in Guatemala:
o The oil pools that have been found thus far are small and are fairly
deep.
o Most of this oil is high in sulfur, which must be removed before it
can be safely transported through pipelines.
o In most cases, pipelines do not extend into the producing areas.
After extraction and the removal of sulfur, the oil must now be moved
by truck to the pipeline.
Because of these factors, exploration and development of Guatemala's oil
reserves has proven more difficult and expensive than originally believed.
Average well depths in the Peten Basin, for example, are about 3,300 meters--
ranked as moderately deep wells by international standards--and most are
overlaid with limestone. Drilling in the Peten Basin takes, on average, three
to six months and the wells are estimated to cost $10-$20 million a piece. As
a rough comparison, in the Williston Basin of North Dakota, where
infrastructure is more developed, wells drilled to about the same depth as
those in the Peten Basin would cost between $700,000 and $1.5 million and
probably be completed in a month. Moreover, most of the reservoirs in the
Peten Basin are highly fractured, a factor that inCl-eases the likelihood of a
well blowout during drilling. Although complete data are not available, we
believe that average drilling costs in Guatemala are at least four times as
much as those in the nearby Reforma area of southern Mexico.
Because of the remote location of the oil deposits, their small size, and
poor quality, production costs in Guatemala rank among the highest in the
world. Elf Aquitaine was claiming costs of $7.00 per barrel at Rubelsanto and
$12.50 per barrel at Caribe in late 1983. These costs probably match those
posted by producers operating in stringent conditions such as the North Sea--
normally regarded by industry experts as one of the world's highest cost, oil
producing regions. Consequently there is little incentive for companies to
engage in these high cost operations--especially with the uncertainty
regarding future oil prices--when they could realize a heftier return on their
investment by operating elsewhere (see Appendix 3).
Government Policies as Constraints
In the case of Guatemala, government policies further increase costs.
The Guatemalan government is not directly involved in petroleum production and
marketing, but does tightly regulate oil exploration and development,
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Guatemala's stringent petroleum laws reflect 25X1
strong nationalism and an overly optimistic view of its oil potential. As a
result, Guatemala was slow to improve financial incentives and investment
activity declined during the early 1980s because of rising exploration costs
and limited potential. 25X1
In an effort to attract new foreign investment Guatemala revised its
petroleum law in 1983. Under the new law, the minimum government share in
production that the government keeps for its own use or for resale was reduced
from 55 percent to 30 percent. The government share, however, escalates as
output increases and can still rise to as much as 70 percent. Foreign oil
companies are now allowed to recover some exploration and development costs
before turning over the government's share--the exact costs that can be
deducted are not specified under the law and vary among contracts. Moreover,
contract fees have been reduced and, as a result of revisions that now allow
income taxes paid to the Guatemalan government to be creditable against US
taxes, the tax burden has been lessened. To attract small and medium size
firms, the maximum size of contract blocks has been reduced from 200,000
hectares (772 square miles) to 80,000 hectares (309 square miles) offshore and
50,000 hectares (193 square miles) onshore. 25X1
Despite Guatemala's attempts to improve the investment climate, contract
terms remain--in general--overly restrictive and financially burdensome,
o Government interference in oil operations remains pervasive. The
Secretariat of Energy & Mines is required to approve daily activities
of the foreign operators. Moreover, the Ministry is authorized to
inspect the company's budget before work programs are executed.
o The companies are required to buy back--at $2-$3 above market prices-
-that portion of the government's share of oil not used for internal
consumption.
o As a further disincentive, once the oil companies declare a discovery
as canmercial, contractors must pay the government $50,000 for each
area that will be developed.
Some industry analysts have speculated that Guatemalan officials have been
slow to reduce investment barriers in the hope of forming a national oil
company, possibly one similar to the Mexican state oil company. The new
petroleum law does not establish a state-owned oil company but it also does
not prevent the National Petroleum Commission--a government body which
oversees petroleum activities--from evolving into one. Although internal
rivalries have made such a venture virtually impossible, fear of potential
nationalization may further dampen foreign interest in Guatemala.
On balance, we believe the new petroleum law does not provide incentives
adequate to offset the substantial cost involved in exploration and
development. Indeed, in 1983, four contract areas were relinquished, despite
the passage of the new petroleum law:
o Texaco and Amoco relinquished their block D lease which was acquired
in 1978. This group was obligated to spend a minimum of $11.5
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million, including drilling two wells to at least 4000 meters.
(Figure 2) Although some oil was found, production would not have
covered the cost of development.
o Hispanoil and its partners relinquished Block E and their producing
areas in Block AA. The Hispanoil group was canmitted to a minimum
investment of $12 million over three years in Block AA, which
included drilling three wells to 3000 meters. They drilled two dry
holes and found two minor producers--including the Yalpemach field
which tested at 1,000 b/d--but subsequent drilling indicated that the
field was too small for canmercial development. 25X1
Remaining in the country are Hispanoil and Basic who are currently
seeking a replacement for Elf Acquitaine. Texaco and its partners in Block L
have also converted to the new petroleum law and have continued drilling
operations in the Northwest region. The Texaco consortium is required to
drill one well per year to at least 4,500 meters for an additional two
years.
Last fall, the government called for bids on the areas that Texaco and
Hispanoil had relinquished in 1983. So far only one major foreign oil company
has made a bid although several other conpanies have shown some interest in
these and other areas. According to Embassy reporting, Exxon has tentatively
signed a contract to explore in the Peten area. While this is a necessary
first step, Exxon's initial investment of $30 million over the next three
years, is only a portion of the total needed. In Mr judgment, additional
modification in the petroleum law will be necessary to yield significant new
contractual commitments. Indeed, Guatemala has requested US companies to
provide suggestions for possible revisions to its current Petroleum Law. We
believe that most oil companies probably are coming to the conclusion that
under current investment terms the potential in Guatemala is simply too small
to be economically worthwhile to them. In particular, smaller firms--which
are looking to diverisfy operations overseas--may lack the financial resources
needed to cover the hi h costs of operating in Guatemala under current
government policies.
Development Prospects and the Need for Improved Incentives
While we believe Guatemala has an oil resource base worth developing, the
near term situation is likely to show little improvement. Indeed, production
could drop even more if foreign companies continue to limit operations in
light of the soft international oil market and the Guatemalan government fails
to take necessary steps to improve the investment climate. Under the present
investment climate, we see little likelihood of any major step-up in oil
exploration and development programs in Guatemala for the foreseeable
future. Furthermore, the current soft oil market will encourage producers to
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Figure 2
Oil Concession Areas
Boundary representation is
not necessarily authoritative
705967 (547180) 9-85
li
El Salvador
refinery
OPERATORS
XN_ Amoco/Texaco
(relinquished)
Hispanoil (relinquished)
Hispanoil, Basic
Texaco
Selected oilfield
0 50 Kilometers
~-~
0 SO Mi l es
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cut back marginally profitable operations; those in Guatemala would certainly
rank high on the list. For the next few years at least, Guatemala will be
lucky to hold on to foreign companies that are still operating in the
country. Indeed, Texaco appears ready to follow the three companies who have
already suspended operations in Guatemala in the last 18 months
Even with an eventual firming of the oil market,
international oil companies are not likely to become more active in Guatemala
unless investment incentives are increased.
Without significant new investment, Guatemala's production will probably
decline by the early to mid nineties to about 2,000 b/d, according to our
analysis. In order to achieve self-sufficiency at around 30,000-35,000 b/d,
we estimate that annual exploration expenditures of at least $150 million
would be necessary. Development costs could add more than $500 million per
year to the required total. It is doubtful that these amounts would be
forthcoming under any reasonable scenario. For Guatemalan production to
return to near its previous output peak, however, would require an annual
average investment of only about $20 million for exploration and another $60-
$80 million for development--a level similar to historic expenditure rates
(Figure 3). With this more realistic investment level, only a small portion
of the potential reserves--perhaps only 15 million barrels of oil--could be
discovered and developed over the next 10-15 years. Since the investment bill
would be covered by the oil companies and the eventual production shared with
the Guatemalan government, even this small gain in output would provide some
savings in hard currency expenditures, perhaps as much as $20 million per year
at current oil prices.
If Guatemala is going to attract the capital necessary to reverse the
downward trend in oil output, additional improvements in the investment
climate are needed to balance the substantial risks and costs involved in oil
exploration and development. Even if Guatemala were to relax restrictive
provisions of the 1983 petroleum law and make it more attractive for foreign
companies to operate in the country, increased oil exploration and development
is by no means assured nor could any immediate results be expected. Three
major companies, however, have already expressed a willingness to invest the
needed capital if Guatemala eases restrictions. Because of the leadtimes
involved in bringing new fields into commercial production--5 to 10
years--a significant increase in Guatemalan oil production is unlikely until
the 1990s at the earliest, even if a major development push started
immediately.
We believe several amendments to the existing petroleum law could be
helpful in attracting additional foreign investment:
o Further reductions in the upper end of the range of the government's
share of production.
o Increases in the time period in which a company must fulfill its
drilling obligations and/or a relaxation of penalties for time
overruns. Under the current law, there are no allowances for delays
beyond a company's control and stiff penalties are exacted.
o Reduction in the amount of government control and supervision over a
company's activities.
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GUATEMALA PRODUCTION PROFILE w/
Investment = $20 Million per Tear
1976 1980 1984 1988 1992 1996 2000
Note: Annual Investments during 1986-96
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o A uniform definition of exactly what costs will be recoverable by the
companies, whereas now this matter is handled on a case-by-case
basis.
In our opinion, the soft oil market will also discourage more aggressive
exploration and development in high risk, high cost areas like Guatemala.
Without further improvements in the operating climate, however, it will be
difficult for Guatemala to attract additional investment, regardless of oil
The influence and control the Guatemalans would forego if these
modifications were carried-out would be offset by the economic benefits
achieved over the long run. The government would still receive almost 50
percent of all domestic production at no charge. Furthermore, although oil is
not a labor-intensive industry, some jobs would be created throughout the
country. Since Guatemala does not have to invest any of its own financial
resources, any oil exploration and development would improve its economic
outlook. The extent of that improvement , however, would depend on how much
the government share would have to be reduced in order to attract required
investment. In order to avoid short-term losses fran reduced government take
on current production, Guatemala could establish a two-tier system where
revised investment rules would only apply to new operations.
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Appendix 1
Estimating Oil Reserves
Estimates of possible Guatemalan oil reserves were derived through a
canbination of procedures. The estimate of proved reserves--roughly 20 to 40
million barrels--was derived from volumetric calculations of oil-in-place and
recovery factors of 25-50 percent for the producing fields and fran published
reports. The estimate of possible reserves in the major producing region of
Guatemala, the Chapayal Basin, was made by first selecting a sample area in
the deeper part of the basin in which prospective structures had been mapped
and projecting the productivity fran known fields to the mapped prospects in
the sample area. The potential of the entire basin was then estimated by
extrapolation from the sample area to other parts of the basin. Our best
estimate is that about 80 percent of the country's possible oil reserves--very
roughly between 335 and 510 million barrels--lie in the Chapayal Basin.
The estimates of possible reserves in other prospective areas of
Guatemala represent nominal amounts which were selectively attributed to the
various regions in which there are indications of the presence of petroleum
deposits, but in which there is insufficient actual data to support a more
positive evaluation. The estimate of possible reserves both in the Chapayal
Basin and other potential regions of the country is subject to a considerable
range of error in either direction.
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Appendix 2
The Geology of Guatemala
The three factors necessary for the accumulation of oil are source beds,
traps and seals. Source beds are usually organic-rich, black, marine shales
that will generate oil when subjected to sufficiently high temperatures caused
by the depth of burial for a period of time. As the oil is generated it is
ejected fran the source beds into traps or reservoirs which are formed by a
number of geological mechanisms such as folding and faulting. Reservoir seals
are impervious barriers of sediments which cover the reservoirs thus
preventing further oil migration either upward or laterally.
In Guatemala, the production of. oil, even on a small scale, has
established the general presence of source beds and migration routes to
reservoirs. By the same token, the presence of traps can be inferred by
various types of geological mapping and by photogeological interpretation. In
the Guatemalan fields, the reservoir rocks are not highly porous and therefore
cannot hold much oil. The seals are believed to be anhydrites and shales--
normally excellent sealing agents--but some of them are believed to have been
damaged or destroyed as a result of earth movements in this area.
Guatemala is situated bet een the Yucatan platform on the north and the
Central American platform on the south. The country can be divided into three
geological provinces: (a) the narrow Pacific coastal plain in the south; (b)
the Guatemalan highlands in the center; and (c) the Peten lowlands in the
north. The Northern and the Southern Central American mountain belts appear
to merge into a single belt in the Peten lowlands and the Guatemalan
highlands. The Peten lowlands, located between the Yucatan Peninsula and the
Sierra del Sur is a geologically canplex, active region which includes the
Chapayal Basin, Guatemala's most likely prospect for finding oil in the near
future. Even though the possibility of finding new fields in the basin is
good, our geological analysis indicates that the reservoirs probably will have
only limited storage capacity and hopes for finding "giant" fields are
remote. Despite the proximity of the huge Reforma fields in southern Mexico
to Guatemala's oil bearing regions, the characteristics of the oil reservoirs 25X1
in both areas are completely different. There is little reason to expect that
the oil potential of Guatemala could begin to approximate that of Reforma.
Regions in Guatemala considered favorable for generation and accumulation
of petroleum include the Chapayal basin, the Amatique subbasin, the Yucatan
platform north of the Libertad Arch and the Mayan Mountains, and the Pacific
Coastal Basin. (Figure 4)
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Chapayal Basin
There has been little or no exploration development in the past few years
to improve our evaluation of the prospective potential of the basin. In fact,
several of the discoveries have failed over time to sustain economic rates of
production, and a number of giant structures with significant potential have
been drilled but have failed to establish any production. Failure to find oil
in these large structures indicates that reservoir seals have been damaged
during earth movements in this region, allowing the oil to migrate to the
surface or another structure.
The Rubelsanto and %Jest Chinaja fields, which account for nearly all of
Guatemala's present production, prove the presence of adequate source beds and
depth of burial for the generation and accumulation of hydrocarbons in the
basin. The reservoir rocks thus far drilled in the basin, even in the
producing fields, have not had enough porosity to be conducive to the storage
of large volumes of oil. Matrix porosity is very low and the accumulations of
oil in sizeable quantities are therefore dependent on fracturing to create
adequate porosity and permeability for production. Fractured reservoirs in
Guatemala are excellent examples of those that have impressive initial
production rates but die rapidly, largely because of the limited storage
capacity of the reservoir.
Another type of potential prospect in this basin is under the folded
mountains which border the basin on the south. Such prospects could be a
continuation of the overthrust belt which extends from Canada, through the
United States and Mexico, and terminates in Guatemala. To date, there have
only been two exploration wells--both dry holes--drilled to confirm the
presence of such prospects, and it is not possible therefore to evaluate their
potential.
Amatique Subbasin
Small but very attractive prospects have been established in the Amatique
basin in the Gulf of Honduras. Although exploratory drilling has not been
successful to date, good oil shows have been reported in at least one
location. Based on stratigraphic data derived from other exploratory wells
drilled in the region, we believe a reef may lie across the Amatique basin.
As a result, we expect offshore drilling activity to become an attractive
Yucatan Platform
Prospects in this region lie on the shelf area off of the Yucatan
platform and north of the Libertad Arch in Guatemala and north of the Mayan
Fountains in Belize. The reservoirs are similar to those in the Chapayal
Basin. discoveries have been made
but have not yet been evaluated for production possibilities. The discoveries
might be comparable to finds in the Chapayal basin.
Pacific Coastal Basin
The Guatemalan Pacific Coastal Basin contains a large, seaward thickening
wedge of marine sediments. These sediments contain large amounts of volcanic
25X1
25X1
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? I I
material which would sharply limit their potential as source and reservoir
rocks. However, regardless of this limitation, the volume of sediments in the
basin when considered with the paucity of testing/drilling makes it impossible
to write the region off as having no potential.
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Appendix
Investment Requirements: Key Assumptions
In order to assess investment requirements for the Guatemalan petroleum
sector we made the following assumptions based on past exploration and
development trends:
o Drilling costs per well average $10 million.
o Discovery rates remain at the historic level of 1 oil strike for
every 4 wells drilled.
o Average field size per strike equals 2 million barrels with a 2,000
b/d peak capacity.
o Development costs total 3-4 times exploration expenditures.
In addition, we assumed that the production profile of any new oilfield will
resemble that of currently producing fields. These reservoirs peak relatively
early--within 1-2 years of development--and then decline very sharply over the
next several years before stabilizing at relatively low output levels.
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Appendix 4
Impact of The Guatemalan Insurgency on Oil Prospects
The major guerrilla groups in Guatemala, while uniformly anti-US, do not
pose a significant threat to the nation's petroleum sector. The groups
individually have only limited capability to inflict serious economic damage
and they have been unable to come together to constitute a unified
opposition. For its part, the government has mounted an effective counter-
insurgency program that has further inhibited the potential for terrorist
operations.
The four principal guerrilla groups--the Guerrilla Army of the Poor
(EGP), the Organization of the People in Arms (ORPA), the Rebel Armed Forces
(FAR), and the Guatemalan Labor Party/Dissident Faction (PGT/D)--ostensibly
operate under the official umbrella organization known as the Guatemalan
National Revolutionary Union (URNG). The URNG, established in 1982 under
Cuban tutelage, was to be the central coordinator for political and military
strategy. It has never acquired that status and, in fact, remains little more
than a propaganda shell. Competing personalities and a variety of ideological
differences have prevented the groups from achieving unity of organization or
command.
The capability to inflict damage also is limited by the Guatemalan
government's strong counter-insurgency program, which makes use of aggressive
patrolling techniques, a roughly 900,000 member Civilian Defense Force, and a
model villages/civic action program. In addition, the cutoff in 1977 of US
military assistance to the government and the minimal amount of American aid
received since then have reduced the insurgents' impetus for attacking us-
While the guerrillas could over the caning months redirect their
resources to the point where they might pose a threat to the nation's
petroleum facilities, they have not shown any significant inclination in this
direction. The only insurgent activity against the oil industry in recent
years resulted in the destruction of the powerlines to the oilfields in Alta
Verapaz and Quiche Departments in early-1985. This was the first such attacks
since 1981, when, in a series of incidents, the oil pipeline between
Rubelsanto and Puerto Barrios, a petroleum exploration facility in the
Rubelsanto region, and the Chevron oil depot in Guatemala City were hit and
sustained varying degrees of damage.
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