This analysis highlights that LAC producers face tremendous uncertainty on production and tax receipts returns over coming decades, driven by climate policy and technological change reducing demand for oil, and by the production output of major producers in OPEC. These uncertainties reinforce the message that all reserves may not be bankable today; they do not necessarily translate into production, nor revenues to government. There is considerable uncertainty as to what future production levels might be – and therefore planning taking account of this uncertainty is critical.
In summary, this analysis highlights the need for consideration of uncertainty, to highlight not only the potential prospects for developing oil reserves, and the benefits to public revenues, but also the worst-case outcome. To illustrate, by 2035, Chile could have exploited 50% of its reserves, or only 15%. This has major implications for the long-term budgetary planning, the questions of economic diversification, and the types of incentives and fiscal regimes governments might want to consider.