Politics Drives Shale Fluctuations In Argentina

(Argus, 8.Jan.2020) — Argentina’s shale fracturing hit a record in 2019 despite a deceleration sparked by political and economic uncertainty at the end of the year.

A total of 6,425 hydraulic fractures were carried out last year in the Vaca Muerta formation, a 33pc increase from 4,825 in 2018, according to data provided to Argus by Luciano Fucello, country manager of NCS Multistage, a US-based services firm specializing in fracturing technology.

The 2019 level is almost double the 1,542 fractures that were carried out in Vaca Muerta in 2016 when the play was in its infancy.

Rising unconventional activity pulled up Argentina’s hydrocarbons production last year, providing a rare bright spot for an economy plagued by recession, steep inflation and rising poverty.

Oil production rose 3.9pc to 507,861 b/d in the first 11 months of 2019, compared with the same period of 2018. Gas output increased 5.5pc to 135.98mn cm/d (4.8bn cf/d).

State-controlled YPF, the country’s largest oil producer and retailer, carried out the largest number of fractures by a huge margin with 3,034 in 2019, a 54pc increase from the previous year.

The data illustrates how even though several big oil companies, including ExxonMobil, Total and Shell, hold significant acreage in Vaca Muerta, YPF is driving the play.

YPF was followed by Tecpetrol, a subsidiary of Argentina’s Techint Group, which carried out 752 fractures, a 45pc decline from the 1,392 fractures it carried out in 2018.

Tecpetrol has become one of the country’s largest gas producers with its shale flow from the Fortin de Piedra block in Vaca Muerta. But the company cut investment after the government changed the way it calculates subsidies for unconventional gas production in January 2019.

Pan American Energy, a 50:50 joint venture between BP and Bridas that is the country’s second-largest hydrocarbons producer, came in third place with 538 fractures, largely in line with the 526 it carried out in 2018.

France’s Total was a close fourth place with 499 fractures, compared to 443 in 2018, while Shell carried out 433, more than double the company’s 200 fractures in 2018, according to the NCS Multistage data.

February 2019 marked a monthly fracturing record of 712. October was a low point with just 312, mainly reflecting a 90-day fuel and crude price freeze imposed in August by former president Mauricio Macri.

The freeze followed a sharp peso depreciation sparked by an August electoral primary that gave opposition presidential candidate Alberto Fernandez a substantial lead. Fernandez went on to win the 27 October presidential election and took office on 10 December.

The number of fractures rebounded in November to 537 only to slip again in December to 467.

Oil firms in Argentina are generally taking a wait-and-see approach to investment following the election amid fear of a return to the interventionist policies of Cristina Fernandez de Kirchner, who was president 2007-15 and is now vice president.

By Daniel Politi


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