LARTC 2026
Latin America downstream: Structural advantage and the investment window
Alan Gelder and Rodrigo Jacob wood mackenzie
Even as the global refinery system faces headwinds in the early 2030s from the energy transition delivering peak oil demand, Latin American refineries con- tinue to benefit from a structurally advan- taged market position. Refiners across the region typically access domestically pro- duced crude at export parity prices, while refined product markets – where most countries remain net importers – are priced at import parity. This pricing dynamic cre- ates a structural margin premium, allowing the most competitive Latin American refin- eries to achieve margins broadly compara- ble with those of top-tier global benchmark refineries, as shown in Figure 1 from Wood Mackenzie’s Refinery Evaluation Model. Looking to the future, both sides of this structural equation face pressures that will increasingly shape refinery financial performance. On the crude supply side, declining domestic production represents a growing challenge. Colombia, Ecuador, and Chile face the most acute exposure, where mature field decline could erode the crude cost advantage. Brazil’s production is expected to expand over the next dec- ade before entering decline, with the more immediate concern centred on manag- ing Brazilian export volumes. In Argentina, Vaca Muerta is expected to drive signifi- cant light tight oil production growth, chal- lenging the refining system, which typically processes medium-quality crudes. On the product side, import parity pric- ing support is expected to remain broadly intact through the medium term. While vehicle electrification and efficiency improvements are reshaping fuel demand globally, Latin America’s adoption curve significantly lags developed markets. Biofuel mandates will increasingly displace conventional fuel volumes in select mar- kets – most notably Brazil. Limited capac- ity additions are anticipated, so the region is not expected to shift from a net refined product importing position before 2040, as illustrated in Figure 2 . Brazil Brazil remains the region’s most active market for refining, biofuels, and energy transition investment. Petrobras is advanc- ing a broad portfolio of projects to expand domestic refining capacity and improve product quality, including the restart of Abreu e Lima Refinery’s (RNEST) sec- ond train, system-wide upgrades, and the development of the Boaventura Energy Complex to capture value from Brazil’s growing oil products demand. The refining industry is also positioning itself to exploit Brazil’s structural advan- tage as one of the world’s largest sup- pliers of agricultural commodities and biofeedstocks. While the Fuel of the Future programme reinforces the country’s estab- lished biofuels framework, direct benefits to oil refining remain limited. Investment opportunities are therefore also oriented
may ultimately need to source medium and heavy crude imports to maintain optimal operations, marking a structural shift for a market that has historically been self- sufficient in crude supply. Domestic crude pricing policies will have a critical bearing on refinery investments. Venezuela Venezuela was once among Latin America’s most significant refining hubs. Today, its three remaining active facilities – Amuay, Cardon, and Puerto La Cruz – operate at persistently low utilisation rates, reflect- ing years of underinvestment and infra- structure deterioration. Despite ongoing geopolitical uncertainty, our base case anticipates that these assets could undergo operational revamps and a phased ramp-up in crude throughput, con- ditional on gaining access to spare parts and technical toolkits. With naphtha and diluents supply restored, crude producers would no longer need to use domestically produced light crude as a diluent, allowing those barrels to be redirected to refinery feedstock and supporting higher through- put and improved product yields. Conclusion This combination of sustained structural margin support and a lagging energy tran- sition creates a window of investment opportunity for regional refineries – one that exists before global margins begin to move structurally lower as the transi- tion accelerates globally. Refineries posi- tioned to capture incremental throughput, upgrade crude processing flexibility, and lock in cost-advantaged feedstock access stand to derive the greatest benefit from this window. Refiners are evaluating measures to reduce Scope 1 and Scope 2 emissions through the electrification of process units and utilities, and the replacement of natural gas with biomethane for steam generation, process heating, and hydrogen production
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North America Latin America
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15
10
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Figure 1 Individual refinery net cash margin benchmark across Americas from WM Refinery Evaluation Model (2024)
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2010 2015 2020 2025 2030 2035 2040
Brazil
Colombia
Other Latin America
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Chile
Equador
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Figure 2 Country gasoline, jet, and diesel/gasoil combined balances from Product Market Service Strategic Outlook 2026
emerge as one of the most attractive export destinations for Brazilian low-carbon fuels, alongside the marine fuels sector. By con- trast, recent US policy developments have been increasingly designed to support domestic production and limit reliance on imported feedstocks and fuels. Argentina The ongoing expansion of light tight oil pro- duction from Vaca Muerta will have direct implications for Argentina’s downstream sector. As volumes grow, investment deci- sions are likely to consolidate around securing access to lighter crude streams, alongside targeted refinery upgrades – including condensate splitters and addi- tional crude distillation units – to optimise processing of the evolving crude slate. On the demand side, broader economic recovery could support a gradual increase in domestic fuel consumption. Argentina’s vehicle fleet remains one of the least elec- trified in the region, underpinning contin- ued reliance on conventional transport fuels. The primary downside risk centres on the natural decline of heavy crude pro- duction from mature fields, which could constrain throughput at refineries config- ured to process heavier grades. As Vaca Muerta continues to increase exports of lighter crude, these refineries
towards export markets, driven by rising global demand for low-carbon and renew- able fuels. This opportunity is particularly relevant for projects processing feedstocks that comply with increasingly stringent inter- national sustainability requirements. In Europe, RED III implementation is rein- forcing the distinction between feedstock pathways, placing greater restrictions on food-based crops and increasing scrutiny on indirect land-use change. Sustainability criteria and feedstock eligibility require- ments are expected to tighten further over the coming decade. Decarbonisation of operations – and consequently the final carbon impact of finished products – is also a target invest- ment area. Refiners are evaluating meas- ures to reduce Scope 1 and Scope 2 emissions through the electrification of process units and utilities, and the replace- ment of natural gas with biomethane for steam generation, process heating, and hydrogen production. Such initiatives could materially reduce operational carbon intensity while leveraging Brazil’s low-car- bon power grid and emerging biomethane industry and regulatory framework, help- ing companies achieve their decarbonisa- tion ambitions. Under this framework, Europe is likely to
Contact: Rodrigo.Jacob@woodmac.com
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