BP, Pan American Eye Exporting Argentina Shale Gas As LNG Via Chile

(S&P Global Platts, 15.Nov.2018) — Pan American Energy, the second-biggest oil producer and third for gas in Argentina, is working with BP on potentially exporting LNG out of Chile, a project that could prove faster to get Vaca Muerta shale gas to market than building a liquefaction facility in Argentina.

The project is in the conceptual design phase and would involve delivering supplies over an existing Argentina-Chile pipeline to the Quintero LNG regasification terminal in Chile, said Alejandro Lopez Angriman, vice president of reserves development at Pan American.

The Quintero terminal “can be turned around so it can liquefy to export,” he said on the sidelines of an energy conference in Mendoza, Argentina.

The pipeline has 10 million cu m/d of capacity for moving supplies from Vaca Muerta to Chile, but is mostly running empty. It has been used over the past few June-to-August winters to bring regasified LNG to Argentina from Chile.

To deliver supplies to Chile, the pipeline would have to be modified with a loop, Lopez Angriman said.

BP — which owns 50% of Pan American alongside Bridas, itself 50% owned by China’s CNOOC — is helping on the conceptual engineering for the project, he added.

The project could cost around $300 million if it goes forward, he added, with the first train exporting 25 million cu m/d.

LOOKING FOR NEW MARKETS

The research into the project comes as gas production surges in Argentina, led by Vaca Muerta, one of the world’s largest shale plays.

The country’s overall gas production rose 14% to 130 million cu m/d this year from a 16-year low of 113.7 million cu m/d in 2014, allowing the country to restart exports by pipeline to Chile after an 11-year suspension.

The Energy Secretariat estimates that with enough investment Vaca Muerta could double the country’s gas production over the next five years to 238 million cu m/d, allowing exports to surge to 100 million cu m/d in 2023 from less than 1 million cu m/d this year.

In the late 1990s and early 2000s, Argentina exported 20 million cu m/d to Brazil, Chile and Uruguay, and the pipelines are still in place. The country halted exports in the mid-2000s as production plunged, bringing shortages and a surge in imports of Bolivian gas and LNG. Imports have averaged 30 million cu m/d since 2012, but started declining this year, according to Energy Secretariat data.

Pan American got a permit this year to export gas to Chile, and it likely will start to make deliveries during the upcoming December to February summer for consumption in that market, Lopez Angriman said.

But he said that won’t be enough to sustain a larger development of Vaca Muerta, where he estimates one field could easily supply the LNG export terminal.

“The field could produce 25, 50, or even 100 million cu m/d,” Lopez Angriman said. “It’s incredible the number of wells that you can do in Vaca Muerta for gas.”

Frackers, he added, have de-risked the gas potential in Vaca Muerta, and the next step is to find the capital to put it into full-scale production. But to attract investors, more pipelines are needed to get the gas out and additional markets must be found to increase sales so production can be sustained year-round, not slowed during the summer with the closing of wells. State-run YPF, the country’s biggest gas producer, had to close gas wells in the third quarter of this year, in part because warming temperatures and a contracting economy reduced demand.

Argentina has sharp fluctuations in gas demand, from 115 million cu m/d in the summer and peaks at 180 million cu m/d in the winter, according to data from Enargas, the national gas regulator.

“It is not a good thing to convince investors to invest in shale gas when production has to be halted during the summer,” Lopez Angriman said.

CUTTING WELLHEAD COSTS

While gas exports can be increased to neighboring countries, these markets suffer the same predicament as Argentina: their demand for gas plunges in the summer. That means LNG must be pursued if output from Vaca Muerta is to be expanded, he said.

But to do that, a big challenge is to bring down development costs in the play so the gas can be competitive against Australia, Qatar, the US and other suppliers in sales to Southeast Asia, where demand is expected to grow, Lopez Angriman said.

He estimates that at around $3/MMBtu, sales can be competitive. But to get there, Vaca Muerta development costs must come down 30%, and the focus is on easing the strain of frack sand, which accounts for 30% of the well completion cost, he said.

Frackers have shaved the cost of sand to $190/mt from $250/mt over the past few years, but it is still higher than the $60/mt figure in the US.

“If we are going to compete with the US or Canada, one way or another we have to reduce the cost of sand,” he said.

Help is to come from moving more sand by boat and train to Vaca Muerta, located in the southwest. Most of the sand is currently being trucked 1,000 km (621 miles) from Entre Rios, a central province, with transport accounting for 50% of the total cost of sand.

There is a government-led plan to extend a cargo railway to Vaca Muerta, but it is not likely to start for three to four years. Once it is in operation, the cost will come down because it is cheaper to move the sand from Entre Rios by river and ocean to Bahia Blanca, an Atlantic port where it can be loaded onto the train for delivery to the well sites.

THE ARGENTINA LNG OPTION

Pan American also is looking at the option of building liquefaction capacity in Argentina, as are other companies.

On Monday, YPF said it plans to install a floating liquefaction barge in Bahia Blanca to export up to 2.5 million cu m/d of LNG from 2019, and then work on building a larger export terminal.

The government, meanwhile, is studying a project for exporting LNG from a six-train onshore terminal in Bahia Blanca, likely starting in 2023 with shipments of 40 million cu m/d, increasing to 120 million cu m/d in 2025.

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Argentina’s Energy Secretary Iguacel Promotes Vaca Muerta in US Road Show

(Energy Analytics Institute, Aaron Simonsky, 13.Nov.2018) — Argentina’s Energy Secretary Javier Iguacel participated in the annual Independent Petroleum Association of America (IPPA) meeting held in New Orleans, Louisiana.

“We have a great opportunity to give Argentine citizens plenty of energy and at affordable prices. We are very happy because today we see there are many North American companies wanting to invest in Argentina with local companies,” reported Argentina’s Treasury in a statement on its website, citing Iguacel. “This will not only allow us to accelerate development of Vaca Muerta, but it will generate a lot of work and progress for many Argentine citizens.”

The meeting was attended by 35 Argentine companies and more than 50 North American companies interested in developing Argentina’s conventional and unconventional hydrocarbon potential and its value chain.

Companies in attendance included but were not limited to the following: Perez Companc Group, SICA Metalúrgica Argentina, SIDECO, MEDANITO-FLARGENT, CUDD, Ardyne, Nine Energy Service and Evcam, among others.

Also participating in the meeting was Argentina’s Ambassador to the U.S. Fernando Oris de Roa; Office of International Affairs of the U.S. Department of Energy Advisor Kennet Stevens; and Overseas Private Investment Corporation (OPIC) Advisor Deaver Alexander.

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Argentina Initiates U.S. ‘Vaca Muerta’ Road Show

(Energy Analytics Institute, Aaron Simonsky, 12.Nov.2018) — Officials from Argentina initiated a road show today in the U.S. aimed at attracting investments in the Vaca Muerta formation in Neuquen.

Argentina’s Energy Secretary Javier Iguacel, along with officials and representatives from more than 30 oil companies, plan to participate in the investor road show that will take them to several cities in the U.S., reported online media Vaca Muerta News.

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Argentina Awaits Hydrocarbon Investments Of Nearly $13 Billion in 2019

(Energy Analytics Institute, Aaron Simonsky, 8.Nov.2018) — Argentine hydrocarbon investments are projected to increase in 2019 compared to 2018, announced the country’s Energy Secretary Javier Iguacel.

“This year they invested $9 billion in oil and gas. Next year we expect investments of $13 billion and double the amount of equipment that is drilling,” Argentina’s Treasury reported in an official statement, citing comments made by Iguacel during his participation at the meeting ‘Energy in Argentina,’ which was organized by the Ministry of Foreign Affairs and held at Palace San Martín.

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YPF To Invest $5 Billion Per Year During 2019-2023

(Energy Analytics Institute, Jared Yamin, 4.Nov.2018) — YPF expects to make investments of $5 billion per year during the 2019-2023 period as part of its initiative to be a leader in the production of energy in Argentina.

As a result, YPF’s hydrocarbon production is expected to grow between 5% and 7% per year, the company announced in an official statement on its website.

“YPF plans to focus on cost improvement and operational excellence, while seeking to efficiently manage the decline of conventional deposits and accelerate the development of the unconventional,” the company announced.

YPF has already begun to apply conventional technologies related to secondary and tertiary recovery at mature reservoirs with good results in pilot projects in the Neuquén basin and the San Jorge Gulf, the statement said.

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Colombia’s Ecopetrol Advances With Fracking Plans, Seeks License

(Energy Analytics Institute, Piero Stewart, 30.Oct.2018) — Colombia’s state oil company Ecopetrol has requested an environmental license over an area where it plans to begin a pilot project to explore crude oil in unconventional deposits with the hydraulic stimulation technique known as fracking.

If a permit from Colombia’s National Environmental Licenses Authority (Anla by its Spanish acronym) is approved, the pilot project would be carried out in coming months in the Magdalena Medio region where the La Luna and Tablazo geological formations converge, and which holds shale potential estimated between 2,000 and 7,000 million barrels of original oil in site, reported the daily newspaper El Tiempo, citing Ecopetrol President Felipe Bayón.

Colombia currently has oil reserves that total 1,782 million barrels of crude oil, the daily reported.

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Argentina Restarts Natural Gas Exports To Chile

(Reuters, Dave Sherwood, 30.Oct.2018) —  Argentina has begun exporting natural gas to Chile after a 12 year interlude, Chilean President Sebastian Pinera said on Tuesday, as the two South American neighbors seek to increasingly integrate their energy supply and electricity grids.

The unconventional gas is being piped from Argentina’s oil- and gas-rich Vaca Muerta shale field in the Neuquen basin, then sent over the Andes mountain range to Chile’s southern province of Biobio.

“We are working enthusiastically with (Argentine) President Mauricio Macri to integrate our energy supply,” Pinera said in a speech.

The exports mark a turning point in energy trade in the region. Argentina, which sits atop the world’s No. 2 shale gas reserves, was once a major supplier of natural gas to Chile, but triggered a diplomatic crisis in the mid-2000s by cutting off shipments when its own supplies ran low.

The move sent Chile, a global mining powerhouse that has few hydrocarbons of its own, scrambling to find new sources of supply. The spat also helped foster a move towards alternative energy sources like wind and solar in Chile.

Pinera said the two countries had very different, but often complementary, energy needs, and that depending on the time of year and circumstance, could either export or import fuel and electricity across their shared border.

“This will permit us to back one another up without having to spend excess money to do so,” he said.

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Ecopetrol Seeks License To Start Fracking Tests In Colombia

(Reuters, Luis Jaime Acosta, 29.Oct.2018) — Colombia’s state oil company Ecopetrol has requested an environmental license to launch a pilot plan to explore for crude oil from unconventional deposits using fracking technology, its chief executive said.

Felipe Bayon told Reuters late on Friday the plan, which could triple Colombia’s proven reserves, would be supervised by local communities and environmentalists to ensure it meets safety standards.

Colombia does not currently carry out oil exploration or exploitation activities with fracking, but President Ivan Duque favors the technique, used to extract oil and gas from unconventional deposits in rock formations that do not allow the movement of fluid.

Hydraulic fracturing, or fracking, technology fractures rock formations with pressurized liquid. Its use is credited for booming oil and gas production in the United States, but environmental activist have blamed it for water pollution. Local communities and environmentalists in Colombia have opposed the technology.

If the permit is granted the pilot would begin in the coming months in Magdalena Medio, an area where the La Luna and Tablazo geological formations converge and which could have between 2 billion to 7 billion barrels of oil, Bayon said during a visit to the Barrancabermeja refinery in central Colombia.

This would triple the nation’s reserves. Colombia has 1.78 billion barrels of proven reserves of crude.

“The Magdalena Medio zone has a potential to be determined, but it could continue to help the country’s energy security and self-supply,” he said.

Bayon declined to say how much money would be invested in the pilot.

Colombia, which produced 854,121 barrels of oil per day in 2017, was hurt in recent years by the drop in international oil prices, hitting hard at the economy.

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Related stories:

Colombia’s Ecopetrol Advances With Fracking Plans, Seeks License

Weatherford Reports Higher Activity Levels In Argentina and Mexico

(Energy Analytics Institute, Ian Silverman, 29.Oct.2018) — Weatherford International plc reported Western Hemisphere 3Q:18 revenues of $762 million were down $7 million, or 1%, sequentially, and down $5 million, or 1%, year-over-year, the company reported in an official statement.

Compared to the second quarter of 2018, revenues in Canada improved seasonally as the rig count increased following the spring breakup, but were offset by lower results in the United States and negative foreign exchange impacts in Latin America.

Year-over-year revenue increases from integrated service projects in Latin America were offset by lower activity levels in Canada as crude differentials expanded, which reduced demand for Completions and Production services and products.

Third quarter segment operating income of $78 million was up $28 million sequentially and up $75 million year-over-year. The sequential increase benefited from lower expenses and improved operating efficiencies mainly associated with the transformation. The year-over-year improvements were driven by a combination of higher activity levels in Argentina and Mexico and the positive impacts from our transformation efforts, which overcame lower operating results in Canada and foreign exchange effects in Latin America, the company said.

Operational highlights in Latin America during the quarter include:

— In Mexico, Weatherford replaced an incumbent’s system with the Magnus RSS, which ran onshore alongside the RipTide® drilling reamer to drill and enlarge a directional well with a 42° profile.

— Weatherford displaced an incumbent in Brazil by signing a new tubular running contract with Petrobras. The contract awards Weatherford work on 14 deepwater rigs, which represents significant market share.

— Working in collaboration with a customer, Weatherford devised an integrated solution that included logging, pressure pumping services, and the FracAdvisor® workflow to execute the first documented multistage frac job in the Jurassic Superior Pimienta Shale in Mexico. The large-scale solution complied with new government regulations and overcame significant logistical issues to fracture 17 stages in less time than allotted.

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YPF To Spend Billions To Boost Oil And Gas Output

(Reuters, Eliana Raszewski, Hugh Bronstein, 26.Oct.2018) — Argentina’s state-controlled oil company, YPF, will significantly boost oil and gas production, investing between $4 billion and $5 billion per year through 2022, Chief Executive Daniel Gonzalez told Reuters on Friday.

It plans to raise production by between 5 percent and 7 percent per year, with the largest increase in the Vaca Muerta formation, one of the world’s largest reserves of shale oil and gas.

The company intends to invest $3.6 billion on infrastructure in Vaca Muerta over the next five years, Gonzalez said, adding that the company is looking to speed up shale oil and gas extraction, with 1,700 wells drilled by 2023.

YPF shares jumped 4.3 percent to 562.35 pesos ($15.20) per unit in afternoon trade, after having traded down 2.5 percent earlier in the day.

“Crude oil is going to grow, I would say twice as fast as natural gas for us in the next five years,” Gonzalez said.

“Having said that, crude oil production will be seven times what it is today and shale gas will be four times what it is today in five years. So there will be a significant growth in unconventional (shale) production,” he said.

The company also plans to begin exporting gas to Chile, and investing in offshore exploration in the Argentina’s Gulf of San Jorge, on the southern Atlantic coast.

Gonzalez said the plans would allow YPF to double its dividends every year over the next three years.

“We are going to do that in a very disciplined way, reducing our debt significantly, increasing our dividends and more importantly generating cash that we can invest in new ventures. All of this growth can be financed organically by the company, by markets and our cash generation,” Gonzalez said.

YPF said it will also double its electricity generation capacity, and that 20 percent of that electricity would come from renewable sources by 2023.

While YPF is the leading investor in Vaca Muerta, the Argentine government has tried to spur investment in the region with a labor agreement to incentivize competition among oil and gas drillers, construction companies and mid-stream service providers.

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Añelo Population Growth Part Of Region’s Shale Boom

(Energy Analytics Institute, Ian Silverman, 20.Oct.2018) — Añelo’s population is expected to reach 25,000 by 2023 compared to nearly 8,000 today and just 2,000 in 2011, reported the media outlet Río Negro.

“80% of the city has basic services such as water, electricity, gas and sewage,” reported the daily, citing Deliberative Council President Milton Morales.

In October 2018, the city will inaugurate its first level 3 hospital with assistance from the YPF Foundation and Chevron’s Baylor Foundation.

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Argentina To Reduce Bolivian Gas Imports To Minimum

(Energy Analytics Institute, Jared Yamin, 20.Oct.2018) — Argentina will likely reduce its demand for Bolivian natural gas imports to a minimum, says an oil analyst.

Argentina, which continues to boost production of its unconventional shale gas resources located in the Vaca Muerta formation in the Neuquen region, will likely reduce its demand for natural gas imports from Bolivia to a minimum 23.5 million cubic meters per day (MMcm/d), reported the daily newspaper El Diario, citing Jubilee Foundation Oil Analyst Raul Velásquez.

The analyst made the comments after declarations from Argentina’s Energy Secretary Javier Iguacel that revealed that in two years the country would no longer need to import gas from Bolivia.

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Argentina Plans To Close LNG Importing Facility

(Bloomberg, Jonathan Gilbert, 17.Oct.2018) — Argentina plans to close a facility for importing liquefied natural gas (LNG), according to people with direct knowledge of the matter, after booming production from shale deposits in the Vaca Muerta region turned the country into a seasonal exporter.

A contract with Excelerate Energy, which has a regasification ship moored at the Atlantic port of Bahia Blanca, won’t be renewed when it expires at the end of the month, said the people, who asked not to be named because the decision isn’t yet public. Argentina will continue to import LNG at another facility in Escobar, on the River Plate estuary, the people said.

YPF SA, the state-run oil company that manages the contract, declined to comment on the decision. A spokeswoman for Excelerate didn’t immediately comment.

The decision not to renew the decade-old contract comes as output from Vaca Muerta, the nation’s answer to the Permian basin, has created an oversupply of gas during the summer. Shale gas production soared to 205 million cubic meters a day in August, more than triple the level seen a year earlier. The government has negotiated exports to Chile to help solve the problem. It has also initiated talks to receive less gas from neighboring Bolivia, with which it has a contract through 2026.

Three Cheniere Energy tankers were set to unload at Bahia Blanca this year through May, according to the latest official import schedule.

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Texas Would Have A ‘Party’ If Mexico Prohibited Fracking

(Energy Analytics Institute, Ian Silverman, 16.Oct.2018) — Prohibiting fracking in a generalized manner, as announced by Mexico’s president-elect Andrés Manuel López Obrador (AMLO), would be an error that would benefit the United States.

“I’d regret this initiative to ban fracking in a general way in our country. The day it happens there would be a party in Texas for the gift we Mexicans are giving them,” reported Mexican media El Financiero, citing Mexico’s Energy Secretariat Pedro Joaquín Coldwell. “It would condemn [Mexico] to continue importing gas.”

Besides, approximately 53% of Mexico’s gas reserves are precisely unconventional resources, he added.

Fracking has been carried out in Mexico since 1960, and nearly 22% of the wells that have been exploited in conventional deposits have used this controversial technique in one way or another, announced Coldwell.

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Argentina: The Energy Challenge

(YPF, 1.Oct.2018) — Argentina’s unconventional oil & gas resources are among the world’s largest. YPF is working and investing to increase production with the aim of meeting the challenge of regaining energy self-sufficiency.

The importance of hydrocarbons

Energy is the basis of our society and our way of life. We depend on it for food production, transportation, heating, electricity, lighting, telecommunications and technology.

The economic development of the country depends on the availability of oil and gas, the main sources of energy which do not only generate electricity.

90% of the objects we use every day are derived from petroleum products. Petroleum is also essential for producing bottles, bags, cell phones, watches, clothing, paint, detergents, fertilizers, toothpaste, hair conditioner and much more.

Moreover, in Argentina, 1,800 million liters of diesel are used to produce 100 million tons of grain annually.

It is estimated that by 2040 renewable energies will occupy nearly 15% of the world’s energy matrix. However energy from fossil fuels will continue to occupy a high percentage of more than 80%.

Resources to regain self-sufficiency

Due to the natural decline of conventional hydrocarbon reserves and a sustained increase in demand for fuel and the thousands of products derived from it, in addition to alternative energies it is also necessary to explore and add new resources. Shale is a sedimentary formation with low permeability which contains unconventional hydrocarbons housed in the micropores of the rock. To extract oil and gas from this rock conventional perforations are performed similar to those used in Argentina over the past 70 years, and with the addition of a next-generation technology known as hydraulic stimulation. The highest safety standards are applied in this technique and this ensures both efficiency and environmental care.
Our country has an enormous worldwide potential to obtain large hydrocarbon reserves from unconventional resources.

Vaca Muerta

It is a geological formation of 30,000 km² (12,000 km² in concession to YPF) located mainly in the province of Neuquén and containing oil and gas found at a depth of more than 2,500 meters, far from the groundwater that in this region is located at a depth of between 300 and 400 meters.

The relevance of Vaca Muerta is so significant that the development of only a small part of this formation could cover the country’s energy deficit.

Read he full story online here.

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Neuquen Gas Production Reaches 69.8 MMcm/d in August 2018

(Energy Analytics Institute, Jared Yamin, 27.Sep.2018) — Crude oil and natural gas production from the Neuquen Basin rose sequentially in August 2018.

Oil production reached 120,551 barrels per day (b/d) in August 2018, up 6.64% compared to July 2018, and up 16.9% compared to August 2017, while gas production reached 69.8 million cubic meters per day (MMcm/d), up 2.48% sequentially, and up 13.3% year-over-year.

A large part of this growth was due to three massive developments carried out in the unconventional area, the Government of the Neuquén Province reported in an official statement on its website

Of this total, Vaca Muerta today produces 65,186 b/d of oil (54% of what the Neuquen basin produces) and 43.2 MMcm/d of gas (62% of what the Neuquen basin produces). Of this last figure, 30% corresponds to shale gas (20.5 MMcm/d) and 32% to tight gas (22.6 MMcm/d).

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Argentina’s Conventional Oil and Gas Attract Explorers

(Ft.com, Charles Newberry, 23.Sep.2019) — Fresh discovery indicates life beyond Vaca Muerta.

A few years ago, when the giant shale play of Vaca Muerta was starting to lure oil majors such as Chevron, ExxonMobil and Shell to Argentina’s south-west, a small company called Roch struck oil far away at the country’s southern tip.

The result surprised Ricardo Chacra, the company’s president. Roch had found oil in Tierra del Fuego, traditionally a source of natural gas, in a formation that had not been thought to hold much promise after more than a century of exploration in Argentina.

“We found something new,” Mr Chacra says. The find has fuelled optimism that Argentina’s mature conventional oil and gas reservoirs may have more to give. “When you drill into a mature field, you expect to drill into a squeezed lemon,” Mr Chacra says. “You take out what you can. But sometimes you find a virgin lemon.”

Argentina first struck oil early last century on the mainland of southern Patagonia, about 1,000km north of Tierra del Fuego, and exploration and production spread to the west and north-west. Argentina has the fourth-largest proven oil reserves in South America, trailing Venezuela, Brazil and Ecuador and equal with Colombia. But production and reserves sagged under the populist Peronist governments of 2003-15, as price controls and other regulation deterred exploration.

President Mauricio Macri has been removing such constraints to bring capital back to Argentina and his policies have attracted several oil majors. Most of them, however, are going to exploit Vaca Muerta’s shale, the source of unconventional oil and gas that is promising to make Argentina an energy powerhouse for the Americas as a whole.

While a handful of smaller companies has wanted to invest in Vaca Muerta, “it’s incredibly expensive”, says Fiona MacAulay, chief executive of London-based Echo Energy. Instead her company is exploring three conventional blocks in the south of the country at what she estimates to be a 100th of the cost of Vaca Muerta acreage.

Thanks to Argentina’s long history of oil activity, talent, services and infrastructure are available. Gas is delivered by pipeline to Buenos Aires and there are ports to handle oil storage and deliveries.

“The big conventional finds have already been made in Argentina,” says Hugo Giampaoli of local energy consultants GiGa. Even so, they have more to offer. Luciano Fucello, country manager for Houston-based services company NCS Multistage, estimates that only 20 per cent of Argentina’s oil has been recovered.

Daniel Kokogian, a director of Argentina’s Compañía General de Combustibles, says his company has more than doubled its gas output over the past two years in the south, and expects to find “a lot” of conventional oil to recover.

Such potential may not be enough to attract the big guns away from Vaca Muerta but a number of small independents are still taking a shot at a more conventional oil and gas approach.

Canada-based Madalena Energy, for example, is using the cash flow from conventional output to finance drilling in costly Vaca Muerta, says its chief executive, José Penafiel. He estimates that while it takes five to six years to generate a positive cash flow in Vaca Muerta, conventional projects pay back in two to three years.

For companies such as his, which are on far tighter budgets than the majors, he says, “you have to make sure you have the sufficient cash flow to stay in the game long enough to see the value creation of the bigger shale plays”.

An alternative is to push offshore. Several small UK companies, such as London-based Premier Oil and Rockhopper, of Salisbury, Wiltshire, in the south of England, have explored waters around the Falkland Islands that are claimed by Argentina. While still in the pre-development phase, these companies’ finds could spur bids for acreage in Argentine waters in a bidding round, the first in two decades, proposed for this year. “Pretty much every major I know is looking to bid in that offshore round,” Ms MacAulay says.

“Offshore is the last big question mark for exploration in Argentina,” says Mr Kokogian. Much hope is being pinned on waters about 300km-400km from the coast in depths of more than 1,500m. “We have to go to see what is there,” Mr Kokogian adds. “The prize could be big, or very big.”

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Argentina to Seek Bids on Renewable Energy Projects

(Efe, 6.Sep.2018) — The government of Argentina announced Thursday that it will launch a third round of tenders for bids on renewable energy projects in October.

The announcement was made by the undersecretary of Renewable Energy, Sebastian Kind, during the Argentina Wind Power 2018 conference, organized by the Global Wind Energy Council.

The third round of the RenovAr program will seek to take advantage of the existing medium-voltage networks.

Kind explained that, while Argentina works on expanding its high-voltage networks, the government seeks to promote diverse renewable energy projects throughout the country that will use the existing medium-voltage networks.

“We seek to bring in capital from non-traditional actors to develop renewable energy projects and take advantage of the existing medium-voltage networks to promote regional development,” Kind said.

The undersecretary said that the projects will be presented next March, and that the contracts are expected to be signed in July 2019.

“We have taken the decision to make the announcement beforehand (…) to provide more time for the projects to be designed,” he said.

The Argentine government has already developed two stages of its RenovAr program, the first having begun in 2016, when 17 renewable energy projects for 1,109 MW were assigned.

RenovAr 2, for its part, was launched last year, when 22 projects for 634.3 MW were allotted.

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Argentina: Exploration And Production Snapshots

(Deloitte, 31.Aug.2018) — In the wake of a decade-long slump in Argentina’s oil and gas industry, the country is now well positioned to resurrect international investment and exploit its world-class resources to their full potential. With the support of a new pro-business government and the discovery of massive shale potential in the Vaca Muerta basin, the road to revitalizing Argentina’s natural gas-based economy is clear: attract skilled workers, upgrade its infrastructure, and adopt new technologies to spark the first shale revolution outside of North America.

Read the full report here by Deloitte.

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ShaleWolf Capital Sees Oil Prices Above $110 by 2019

(ShaleWolf Capital, 9.Aug.2018) – On June 22nd, 2018 President Donald Trump asked OPEC to increase its daily oil output by 1 million barrels. Industry experts would agree that OPEC is at or near its full production capacity. OPEC can’t just increase production. As demand continues to grow the world is set to outpace oil production by more than 500,000 barrels by 2020. When you consider the current situation in several oil contributing countries like Venezuela, Africa and Iran it becomes a perfect storm for oil prices potentially above $110 per barrel. Based on the data, its not a matter of if we see $110 prices but when. ShaleWolf Capital analysts believe that now is a perfect opportunity to acquire oil and gas assets as part of its overall strategy.

ShaleWolf Capital agrees to partner with NCE on the developmental drilling of its Cotton Valley reserves located in Harrison County, Texas. This formation is considered a long term income asset by the likes of British Petroleum (BP), Samson, Chesapeake Energy and XTO Energy. Based on 3rd party reserve evaluations the upside potential could equal over 684,000 BOE and 55BCFG in oil and natural gas reserves. There is also a strong potential of condensate reserves being on target with oil reserve estimates. In this area it would not be outrageous to potentially see condensate prices match current WTI oil prices. SWC has carefully reviewed surrounding fields in conjunction with Cotton Valley reserves and production. In more than 76 wells drilled into the Cotton Valley Sands in this area there are ZERO dry holes. This is prolific and could prove to be similar to formations like those found in the Permian Basin, Eagleford Shale, Austin Chalk and other blanket formations.

ShaleWolf Capital executives also anticipate acquiring 3-4 additional acreage positions in areas that include the Permian Basin, Austin Chalk, Bone Springs and Eagleford Shale oil and gas reserves in 2018. No capital contributions will be required from current partners to complete said acquisitions. This purchase is anticipated to close in Q3 or Q4 of 2018 utilizing cash reserves on hand. Due to strong demand driven by current potential partners ShaleWolf Capital has elected to restrict new partners from acreage participation in the foreseeable future.

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Venezuela Inflation to Hit 1 Mln Percent. Thanks, Socialism.

Oil pumpjacks are seen in Venezuela in May. (Isaac Urrutia/Reuters)

(Washington Post, Megan McArdle, 27.Jul.2018) – According to the International Monetary Fund, by the end of the year, the annual inflation rate in Venezuela will reach 1 million percent.

A number like that is hard to grasp. Simply put, a candy bar that cost $1 today would cost $10,000 at the end of a year. Anyone in that position would understandably rush to spend the money right now, on anything that might possibly hold its value. Everyone else would too. The entire economy becomes a giant game of monetary “hot potato.” Saving or planning becomes a sucker’s game.

Venezuela is not exactly a struggling undeveloped country; it has the world’s largest proven oil reserves. How the heck did this happen?

There are two answers, one technical and one political.

The technical answer is that hyperinflations occur because the government wants to spend much more money than it is collecting in taxes — so much more that no one is willing to lend it the money to cover the deficit. Instead, the government uses the central bank to finance the deficit. That puts more money in the economy, but since it’s chasing the same number of goods and services, prices rise to soak up all the extra cash. Unless the government manages to close its budget deficit, it must print even more money to buy the same amount of stuff . . .

Rinse and repeat a few times, and the inflation rate starts running into many zeros. The end generally arrives in one of two unpleasant ways: The government decides to stop the madness and implement a strenuous reform program, or the currency becomes so utterly devalued that churning out more of it is pointless. By the end of its hyperinflation, Zimbabwe was printing bank notes that ran into the trillions.

But it’s not a secret that this is where hyperinflation ends. Why did Venezuela embark on the road to destruction? And why does the government stay on it while the citizenry slowly starves?

In a word, socialism. After his election as president in 1998, Hugo Chávez pursued an increasingly aggressive socialist agenda, one that continued under his 2013 successor, Nicolás Maduro. Chávez nationalized foreign oil fields, along with other significant portions of the economy, and diverted investment funds from PDVSA, the state-owned oil company, into vastly expanded social spending.

Unfortunately, Venezuela’s heavy, sour crude oil was unusually hard to get out of the ground. Continual investment was needed to keep it flowing. So was the expertise of the banished foreign owners and the PDVSA engineers Chávez had purged for opposing this scheme. Production plunged; the only thing that kept Venezuela from disaster was a decade-long oil boom that offset falling production with rising prices.

Then came the 2008 financial crisis that crushed global demand for oil, followed by the onrush of U.S. shale oil, driving prices down further. And no one would loan money to Venezuela that couldn’t be repaid in oil. Meanwhile, unwilling to admit that socialism had failed, Venezuela made a fateful turn to the central bank.

Now, one could say that this is not an indictment of socialism so much as the particular Venezuelan implementation of it. But it’s striking how the precarious economics of socialism, including hyperinflations, are tied to petroleum. Many of the notable hyperinflations in history were tied to the collapse of the Soviet Union. And the story of the Soviet collapse is also a story about oil.

Central planning had wrecked the Soviets’ grain production by the 1960s, and collectivized industry didn’t produce anything that the rest of the world wanted to buy, leaving the Soviets unable to obtain hard currency to import grain. Oil sales propped up the Soviets until the mid-1980s , when prices crashed as new sources of oil came online (sound familiar?). The Soviet leadership was forced to liberalize to rescue the economy. The U.S.S.R.’s collapse soon followed.

Socialism, in other words, often seems to end up curiously synonymous with “petrostate.” The new breed of socialists cites Norway as a model, but saying “we should be like Norway” is equivalent to saying “we should be a very small country on top of a very large oil field.”

Without brute commodity extraction, you need capitalist markets to generate a surplus to distribute, which is why Denmark’s and Sweden’s economies have more in common with the U.S. system than with the platform of the Democratic Socialists of America. And as both Venezuela and the Soviet Union show, even oil may not be enough to save socialism from itself.

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Argentina Gears Up For Offshore Licensing Round

(E&Pmag, Brunno Braga, 25.Jun.2018) — Argentina is working to increase its attractiveness in the energy sector in a region where other countries such as Brazil, Guyana and Mexico have lured investment from major oil companies.

The South American country is about to launch its first round of offshore licensing after nearly three decades. Argentina’s Energy Minister Juan Jose Aranguren recently told investors during an event in Houston that the goal is to expand exploration for long-term production growth in what is considered one of the world’s practically unexplored offshore areas.

Argentina plans to launch the licensing round in July when officials will also announce when bids will be awarded. Expectations are that the auction, which will cover roughly 240,000 sq km in three areas, will be held by the end of the year.

The areas include:

— 5,000 sq km in the Austral Basin, the southernmost basin in the country;

— Roughly 80,000 sq km in the western Malvinas Basin; and

— 170,000 sq km in Plataforma del Norte Argentino.

Due to the greater risks associated with offshore drilling, the licensing contract will grant 10 years for exploratory activities.

“The round offers risky but attractive frontier exploration acreage. An oil system has been proved in shallow waters with over 100 offshore wells drilled to date,” said Horacio Cuenca, research director, upstream Latin America, for Wood Mackenzie. “The majors and independent explorers will be attracted by the large block size, competitive fiscal regime and low upfront entry cost. We expect the majority of the blocks to receive bids.”

In the short term the round will have a limited impact on the oil industry and the wider economy despite Argentina’s need to expand its oil and gas industry, according to Cuenca. Yet, he believes the round will enlarge the footprint of majors and bring back focus to the offshore after years of little activity. “Only in the medium term, if significant commercial discoveries are made, it would have the potential to significantly change the upstream landscape of the country.

The oil and gas regulatory framework in Argentina can be seen as an advantage for oil companies that want to do business in the country. As Reuters reported recently,  oil firms, including Norway’s Equinor, U.S.’ Anadarko Petroleum Corp., China’s CNOOC and Malaysia’s Petronas, have shown interest in Argentina’s auction, indicating that offshore areas in the region could be on the verge of expanded E&P activities.

But Cuenca asserted that some of the offshore specific terms will need updating.

“There are some questions remaining around unitization. But the government designed the contractual and fiscal regimes with the high level of competition for investment in mind,” he said. “Companies’ exploration budgets have been halved, on average, from their highest levels in 2014. And countries and governments are competing for that reduced investment, so only the most attractive terms will drive exploration investment.”

Attractiveness

The fact that Brazil has been successful in attracting investments in the offshore segment does not pose a threat to Argentina’s ambitions to create opportunities off its coast, according to Cuenca.

“It is not possible to do a direct comparison between discovered resources (fields) with exploration potential,” he said. “Brazil has very mature areas and proven basins like the Campos and Santos basins, and other untested basins with frontier exploration potential (like Pelotas) similar to the ones on offer in the Argentina bid round.”

He said that attractiveness, in the end, depends on the type of company. “Some companies are looking to grow their portfolios through high-impact exploration, and to them Argentina’s offshore acreage presents an attractive opportunity given the size of the blocks and the low cost of entry.”

In addition, Argentina is home to the Vaca Muerta shale play, one of the largest and most prospective onshore fields in the world, and its players could be drawn to the country’s offshore segment, according to Cuenca.

According to the U.S. Energy Information Administration, Argentina’s Vaca Muerta makes up about 60% of the country’s 27 billion barrels of technically recoverable shale oil reserves, making it the fourth largest shale oil reserve in the world.

Majors such as Exxon Mobil, Royal Dutch Shell, Total, BP and Wintershall are making larges investments in the area seeking to take advantage of Vaca Muerta’s giant resources.

“It has definitely been an advantage for the country to have most of the majors already present in the Vaca Muerta play,” he said. “The offshore and unconventional play offerings are complementary offerings for the majors. With the companies already present in country, they can go after both opportunities with the same overhead and established operational base.”

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#LatAmNRG

Macri’s Reverse Unnerves Shale Investors

(Financial Times, Benedict Mander, 25.Jun.2018) – The collapse of the Argentine peso and the government’s struggle to tackle soaring inflation are causing disquiet among companies developing Vaca Muerta, one of the world’s largest deposits of shale oil and gas.

In his drive to liberalise Argentina’s energy markets, President Mauricio Macri phased out consumer subsidies and increased tariffs. Local oil prices rose and late last year converged with those of international crude, providing an important stimulus for companies in Vaca Muerta, Argentina’s star investment attraction.

But the government has now capped the price at which companies producing oil in Argentina can sell to refineries, along with the price of petrol at the pump, to shield consumers from rising global oil prices and prevent inflation soaring even further.

Companies now must sell at prices considerably below the international level, which on Thursday was above $77 a barrel for Brent crude, the global benchmark. This, as well as the devaluation of the peso, is hitting profitability and forcing companies to reassess their plans in Vaca Muerta.

“Suddenly from moving in the right direction, it feels like the country is taking a step back,” said Anuj Sharma, chief executive of Phoenix Global Resources, a mid-sized oil company investing in Vaca Muerta. “If there’s one thing markets hate, it is uncertainty. It makes planning very difficult.” He added that it was hard to plan more than 3-5 months ahead.

As little as four years ago, the state oil company YPF estimated that the break-even oil price for wells in Vaca Muerta to be economically viable was about $80 a barrel. Wood Mackenzie, the energy consultants, now estimates the break-even price to be $56 a barrel. After the first well began producing commercially in 2013, Vaca Muerta is now producing 120,000 barrels a day, or more than 10 per cent of national production.

“Just 5 years ago Vaca Muerta was a dream. Now it is starting to become a reality. It is at an inflection point where you can actually make money drilling it,” said one senior executive whose company is investing in Vaca Muerta.

“You can argue that at $67-68 a barrel you can make more than the break-even price, but you are not obliged to drill Vaca Muerta. Elsewhere you get 75 or even higher if oil prices go up . . . if there’s no [price] visibility, it’s very hard to deploy billions into Vaca Muerta.”

With Javier Iguacel replacing Juan José Aranguren as energy minister as part of a shake-up last week, the government’s plans remain unclear. Mr Aranguren, a former executive at Royal Dutch Shell, was widely applauded by the private sector for increasing the tariffs that consumers pay for electricity and natural gas, which enabled the government to cut subsidies in its effort to rein in the fiscal deficit. But he is unpopular with voters.

How Mr Iguacel, a petroleum engineer who also has a private sector background, proceeds depends on a precarious political scenario for Mr Macri, who is seeking re-election next year. Tariff hikes — as well as a $50bn bailout from the IMF in response to the currency crisis — was one of the main motives for trade unions on Monday holding their third national strike since Mr Macri took power.

Freezing prices at petrol pumps may go some way to keeping voters happy, even if it is debatable what impact it might have on inflation, which is running at more than 25 per cent annually. But international companies are not keen on effectively financing Mr Macri’s “gradualist” economic reform programme, which seeks to cushion the impact of austerity on poorer Argentines.

“If prices remain uncoupled, that would be negative. Without doubt, investment would fall, production too, and we would have to import more,” said Daniel Gerold, an energy consultant in Buenos Aires. “If it becomes clear that prices do not follow clear rules or the law is not respected, even if costs are low in Vaca Muerta, investments are not going to come.”

Nevertheless, analysts are broadly optimistic about the prospects for Vaca Muerta, which has seen a sharp fall in costs in recent years, while production has jumped dramatically. Argentina might even have an oversupply of natural gas this summer, when demand is lower, said Amanda Kupchella, an analyst at Wood Mackenzie.

“There are a lot of things that just come with the territory in Argentina — like price controls, working with unions and so on. They are things that operators are used to dealing with,” said Ms Kupchella. “Productivity in Vaca Muerta is so good that it doesn’t seem to be keeping [investors] away . . . wells just seem to be getting better and better.”

Alejandro Bulgheroni, chairman of Pan American Energy Group, expects that in 2-3 years it will be as cheap to drill wells in Vaca Muerta as it is in the US.

“Let’s hope this is resolved and that we return to international prices,” said Mr Bulgheroni. Although it was a “difficult moment”, he recognised that under this government, negotiations had always ended in mutual agreements, with no impositions. “We have lived through much worse times.”

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Pampa Reaches 35-Year Extension in El Mangrullo Block

(Pampa Energía S.A., 5.Jun.2018) – Pampa Energía S.A. was granted a 35-year period extension to the operation of the El Mangrullo block for the development of unconventional gas (shale and tight), within the new exploitation license that Neuquén province granted to the Cutral Có and Plaza Huincul Inter-city Autonomous Body (‘ENIM’), which will come into force with the corresponding Provincial Order.

Currently, the El Mangrullo block is 100% developed by Pampa, is located in the mid-east of Neuquén province and accounts an area of 35,830 acres. Pampa produces natural gas from Mulichinco formation (compact sands or tight gas), with 41 productive wells and 97 million cubic feet per day. In consideration for the operation’s period extension, Pampa committed to disburse $205 million for a pilot investment plan during the next 5 years, with the objective to continue developing Mulichinco formation by drilling 15 wells, in addition to 1 well targeting Tordillo formation and explore the potential of Vaca Muerta formation (shale gas), by drilling 3 additional horizontal wells. Moreover, Pampa paid an exploitation bond and a contribution to corporate social responsibility that amounts to US$15.4 million.

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Gas Supply Problems Turning Cos. Away from Trinidad

(InterFax, 18.May.2018) – Jerome Dookie, the chief executive of Trinidadian ammonia producer Caribbean Nitrogen Co. (CNC), said on Wednesday that gas supply disruptions have made Trinidad and Tobago a less attractive location for new petrochemical projects.

“In terms of new projects being built, Trinidad and Tobago is no longer an attractive destination because the feedstock availability is questionable and the pricing is higher,” Dookie was quoted as saying by local press.

“Certainly, the US now, driven by shale gas, is a preferred destination for capital,” he added.

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Argentina to Develop Tight Shale Oil, Gas

(OGJ, Nick Snow, 27.Mar.2018) — 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.”

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Tecpetrol Opens Gas Treatment Plant in Vaca Muerta

(ARPEL, February 6, 2018) — Tecpetrol, an oil company of the Techint Group and member of ARPEL, opened a gas treatment plant located in the vicinity of Añelo, Neuquén, with Governor of the Province of Neuquén Omar Gutiérrez and Minister of Energy and Mines of Argentina Juan J. Aranguren. This plant will process the unconventional gas produced in the Fortín de Piedra deposit of the Vaca Muerta formation. 1st plant

Also present at the opening ceremony were Senator Guillermo Pereyra, Secretary General of the Union of Private Oil and Gas Workers, and Manuel Arévalo, General Secretary of the Union of Oil and Gas Professional and Senior Staff. Representatives of Tecpetrol present were Carlos Ormachea, President and CEO of Tecpetrol, Horacio Marín, Director General of Tecpetrol Exploration and Production (E&P), and Pablo Iuliano, Technical Director of the Neuquén Basin.

With an investment of more than US$ 30 million, the plant has a processing capacity of 6.5 million cubic meters of gas per day (m3/d). The new facilities will allow increasing the production of gas from 1.5 million m3/d to 6.5 million m3/d. With this, the first phase of the Fortín de Piedra project will be completed. A total investment of US$ 2,300 million is planned up to 2019 for this project.

To date, Tecpetrol has invested approximately US$ 700 million in the Fortín de Piedra project, which has already created more than 3500 direct jobs. During the last quarter of 2017, the gas production was 1.5 million m3/d, and it is estimated that it will reach 5 m3/d by the end of February. At present, the activity is performed with six oil drilling units.

Techint Engineering and Construction

The construction of the gas treatment plant of Tecpetrol was carried out by Techint Engineering and Construction, which is also part of the Techint Group. It was completed in six months, a record time for works of these characteristics; it involved more than 280 thousand man-hours with peaks of 120 people working. The design, construction and assembly was fully modular, with around 60 modules provided locally by companies of the value chain of the Techint Group in Argentina.

At the same time, the company is moving forward with the construction of the Central Gas Plant of Tecpetrol, whose startup is estimated for June 2018. With a treatment capacity of more than 14 million m3/day of gas, the final investment for this plant will be around US$ 280 million. In addition, Techint Engineering and Construction is working in the water intake and gas pipelines for Tecpetrol production.

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Vaca Muerta Megaproject – A Fracking Carbon Bomb In Patagonia

(Observatorio Petrolero Sur, 5.Feb.2018) — Vaca Muerta is a leading case for the next generation of fossil fuels. Big Oil and Gas companies are keen to turn it into a success story —which is why we collectively need to put a stop to this if we are serious about restricting oil and gas supply globally, protecting territories and fighting climate change. It is our view that “Killing the Dead Cow”—and thus preventing a further expansion of the fossil fuel industry that would be a door-opener for further projects in the Global South— is necessary to build up pressure for an honest dialogue about “managed decline” and fair transition. The collective success of movements in an emblematic case like this would increase leverage for such a conversation.

Briefing: Vaca Muerta shale play – climate impacts, wealth concentration and human rights abuses.

Argentina ranks in second and fourth place globally in shale gas and shale oil resources. Almost all of this potential is concentrated in “Vaca Muerta” (“Dead Cow”), which has been identified as the biggest shale play outside North America and makes Argentina the third country, after the United States, and Canada, to reach commercial development. Vaca Muerta is presented as a test case for the Global South, and especially for the Latin American region, where several governments are proposing new unconventional projects.

Total estimated resources amount to 19.9 billion barrels of oil and 583 trillion cubic feet of gas. They represent around 50 billion tons of CO2 that are currently locked in the ground which can only be extracted with hydraulic fracturing (or fracking), a highly controversial technique which has been banned in several countries or sub-national entities.

Although it is still at an early stage of development (2 to 4%, 1,500 fracking wells), almost every oil major is present in the region. Ventures include YPF, Chevron, Total, Dow Petrochemical, Petronas, Schlumberger, Shell, Pan American Energy (BP, CNOOC, and Bridas), Wintershall, Statoil, Gazprom, and ExxonMobil.

International involvement is crucial for funding (estimated at tens of billions of dollars), capacity building and governance. Other involved actors include U.S. Department of State, World Bank, Inter-American Development Bank, Citibank, ICBC, and Deutsche Bank.

Regulation and policy enforcement is scarce. Its early development is currently infringing on a range of individual and collective human rights in working-class neighborhoods, indigenous communities, agriculture regions, and protected areas. Fracking is an experimental technique so various accidents have been recorded: radioactive pills have been lost in wells, wells have gone up in flames due to gas leaks, truck accidents have caused spills, pipelines have broken, and five workers lost their lives, among other incidents. Social impacts are also exacerbated.

Vaca Muerta is a complex, multidimensional and global issue. It seems unstoppable, but the venture has shown great structural intrinsic fragility and its real potential has been overhyped. On top of that, its scope and speed have also been reduced by networks of national and international resistance. Across the country, numerous bans on fracking and infrastructure projects have been obtained.

Download the project brief here

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#LatAmNRG

Next Hot Spot for Shale Drilling? Argentina

(CNN Money, 28.Jul.2016) – Argentina has exceptional hydrocarbon reserves, but politics has greatly affected its development.

The economy in Argentina is best described as a “pendulum”, going from loose economic policies in the ’80s to Washington-consensus liberalisation in the ’90s and back again under the Kirchner regime.

Since the current president Macri took office in December 2015, he has been reversing the policies of his predecessor and has focused on boosting the economy with free-market measures through eliminating currency controls and lowering utility subsidies.

In March, the government also announced a $7.50 per barrel subsidy on exported oil while Brent remained below $47.50 per barrel to attract foreign investment.

Argentina’s recoverable shale oil reserves are estimated at 27 billion barrels and hold the third largest shale gas and fourth-largest shale oil reserves in the world. Appearing in the spotlight is the Vaca Muerta formation with technically recoverable shale gas of 308 trillion cubic feet and 16 billion barrels of oil.

The Vaca Muerta Shale spans across four provinces – Neuquén, La Pampa, Mendoza and Rio Negro and is almost double the size of the Eagle Ford shale.

Current production from the Vaca Muerta formation is about 50,000 bbl/day, an amount that is expected to double by 2018. IHS Energy research indicates that the Vaca Muerta is characterized by favourable traits such as thick, high-quality, organic-rich shale, similar to the Permian Basin.

While the American consumer basks in low oil prices, the Argentinean consumer is helping to fund the oil industry. Government regulated oil prices were imposed to protect citizens from market fluctuations, although consumers currently face the reverse effect by paying a premium on Brent and WTI.

For 2016 the price of oil in Argentina is frozen at $67.50, with gas prices of $7.50—almost 4 times that of the United States.

The recent nationalization of YPF has opened doors for foreign investments, making Argentina’s oil industry more attractive. Chevron (CVX) has decreased drilling costs in Vaca Muerta by 20% this year. Chevron’s Argentinian drilling costs dropped from $14 million per well to $11.2 million per well in the last three months of 2015.

One major source of savings stemmed from the discovery of a sand deposit in Chubut enabling YPF to eliminate the use of imported sand. Sand is the main ingredient in hydraulic fracturing treatments, which are essential in the completion process in shale oil and gas wells.

In the current environment of low oil prices, Argentina’s regulated crude prices combined with 27 billion barrels of recoverable oil and 802 trillion cubic feet of gas is one of the most attractive ventures for oil companies.

While the U.S. experienced severe cuts in spending by as much as 40%, YPF increased spending by about 4%.

In 2013, Chevron and YPF signed a $1.6 billion exploration deal to develop tight shale oil and gas resources through drilling 132 wells. Dow Chemical Company (DOW) and Shell Argentina followed shortly thereafter by drilling 16 horizontal natural gas wells and a $500 million investment.

YPF also signed a memorandum of understanding with Malaysian oil company PETRONAS in a $550 million pilot project in 2014. Russia’s Gazprom, the world’s largest natural gas producer also engaged in a confidential deal for the development of the Vaca Muerta field.

Exxon Mobil (XOM) has announced the initiation a $250 million pilot project, which if successful would lead to the further development and an excess of $10 billion in additional investment.

Although Argentina is becoming an increasingly attractive investment for oil companies, Vaca Muerta remains vastly untapped. Analysts estimate that YPF is expected to need up to $200 billion to fully exploit the formation.

The rich geological characteristics of Vaca Muerta is only a piece of the puzzle, the recent change in government and the economic policy reforms have set the stage for a more favourable business environment in Argentina.

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More Countries Hold Recoverable Shale Gas

(EIA, 25.Sep.2015) – The amount of unproved technically recoverable shale natural gas around the world has reached 7,576 Tcf, higher than previously estimated, according to a survey by the U.S.-based Energy Information Administration (EIA).

New names were added to the list of countries with shale reserves. The U.S. holds 622.5 Tcf of recoverable shale gas that is sufficient in meeting domestic demand for about 27 years, lower than the previously projected 37 years, the survey found.

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