Argentina moving to develop tight shale oil and gas, speakers say

With the largest shale gas resources and tight oil deposits second only to those of the US in the Western Hemisphere, Argentina is trying to attract more foreign investments by continuing to improve government policies, speakers said during a Mar. 27 discussion at the Inter-American Dialogue.

With the largest shale gas resources and tight oil deposits second only to those of the US in the Western Hemisphere, Argentina is trying to attract more foreign investments by continuing to improve government policies, speakers said during a Mar. 27 discussion at the Inter-American Dialogue. But the South American nation faces substantive challenges as it tries to make operating conditions there more transparent and predictable, they added.

“Our general economy has grown for seven consecutive quarters, and poverty is going down,” said Fernando Oris de Rosa, Argentina’s ambassador to the US. “Foreign direct investment grew to $10.7 billion in 2017, and we’d like more. Fiscal and tax reforms have been passed, and discussions with organized labor are planned. Ultimately, we want to move from populism to transparent, realistic policies which become permanent.”

More reforms need to move from transitions to permanence, said Omar Gutierrez, governor of Neuquen province where most of the tight oil and gas supplies are in the Vaca Muerta formation.

“We eliminated gas and oil retentions and installed a pricing regime that has encouraged development. We also have done away with consumption subsidies and allowed prices to rise. With drilling costs half of what they were, unconventional oil and gas now has a greater share of our province’s total production, and 20-22% of Argentina’s,” he said.

Argentina has become the only Latin American country on a par with the US due to the alignment of its government at several levels with all the stakeholders, said Paolo Carvajal, a consulting member at international management services firm Arthur D. Little’s Houston office. “Today, we can talk about a 50% gain in efficiency per square foot there. Multinationals like ExxonMobil, Chevron, and Shell are there along with YPF, the national oil company,” she said.

“We expect that in 2025, Argentina’s oil and gas production will have tripled. But it will need to overcome challenges, including infrastructure, investment climate stability, unions, developing qualified human resources and an oil services sector, and smoothly adopting natural gas market prices,” Carvajal said.

From pilots to development

Gutierrez noted that of Argentina’s 26 tight shale oil and gas concessions, three are being developed now and three to four more are expected to get under way soon. “We have a plan all the actors are monitoring and are involved in. Tonight, I will be in Houston for an event where I expect to discuss this in more detail. We’ve seen capital from many sources and expect to see more projects move from the pilot to the development phase,” he noted.

“We want to make our energy prices competitive so the rest of the country’s economy can follow,” said Gutierrez. “We also have begun to export gas to Chile, with generally good results. Vaca Muerta will give us an efficient energy hub which will drive our national economy.”

Carvajal said, “Argentina has been fortunate because it has been able to develop unconventional resources without as much local and labor opposition as in other Latin American countries. But local issues will need to be addressed. This alignment has let Argentina lead the unconventional resources charge in Latin America. But investments will be needed in other sectors as well.”

Full stakeholder participation is essential, Gutierrez said. “We have a comprehensive plan with dynamic properties. Companies also have shared what they have learned. This has led to a constructive dialogue where all the actors are contributing,” he said.

Carvajal said Argentina President Mauricio Marci’s government has enacted several good reforms, but oil and gas multinationals have long memories and face equally long waits before prospects being producing. “We’re talking about production that would begin 35 years in the future, so the situation could change,” she suggested.

Gutierrez thinks that this looks increasingly less likely. “The government is one of four main actors. It is putting many ideas forward, but everyone else is participating too,” he said. “We’ve done a lot in 3 years. Vaca Muerta has shown what can be done. There is not a single negative result in the pilot programs so the companies will continue to invest. We also are about to announce plans for a huge new gas pipeline so companies will be able to move what they produce to their customers.”

Contact Nick Snow at nicks@pennwell.com.

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