Page 16 - LatAmOil Week 21 2020

LatAmOil ARGENTINA LatAmOil
Domestic oil price gets mixed reception
ARGENTINA’S decision last week to establish a local crude oil reference price of $45 per barrel has been welcomed by the market. Some ana- lysts fear, though, that the move may leave the South American country unable to rebuild pro- duction quickly, even in Vaca Muerta, the mas- sive shale formation that has drawn attention from many international oil companies (IOCs).
The government set the domestic oil price in an effort to save the country’s domestic upstream oil industry – with a focus on Vaca Muerta, which is one of the world’s largest shale basins – and to shore up production, spending and employment levels. This did not go unno- ticed in the country’s oil-producing areas.
For example, Omar Gutierrez, the gover- nor of Neuquen Province, described the min- imum reference price as “a great stimulus for investment, production and especially for the protection of jobs.” Neuquen, located in central Argentina, is home to most of Vaca Muerta.
By contrast, Emilio Apud, a former energy secretary, said the new policy, which restricts exports, might discourage investment. “What was creating the momentum for Vaca Muerta was the fact that companies saw that they would
be able to export at reasonable margins even with export taxes,” he said. “Now they have to depend on the local reference price, a small domestic market and an uncertain energy pol- icy. I don’t think companies will put significant investments forward, at least not this year.”
Apud’s statements are in line with warnings from industry analysts, who have cautioned that until the measures to contain the coronavirus (COVID-19) outbreak are fully lifted, produc- ers will have little incentive to increase output substantially. That is, since upstream opera- tors must sell their crude to local buyers, they have no urgent reason to extract more oil than needed to meet domestic fuel demand, which remains relatively low. As a result, companies may not be able to push production back up to the pre-pandemic level of 518,000 barrels per day (bpd) quickly.
Under a government decree issued last week, the minimum reference price, which sets the rate for Medanito grade crude (also known as the criollo barrel), will stay in place until the end of 2020. It will remain unchanged unless the price of Brent crude exceeds $45 per barrel for 10 straight days. ™
Argentina reports production, sales of VLSFO up in Q1-2020
ARGENTINA has that reported its output of very low-sulphur fuel oil (VLSFO) rose in the first quarter of 2020, following the introduction of new marine fuel specifications by the Interna- tional Maritime Organisation (IMO).
Between January and March, local producers turned out 678,293 tonnes of VLSFO, according to the Buenos Aires-based Argentinian Insti- tute of Oil and Gas (IAPG). This represents an increase of 8.7% on the figure of 623,998 tonnes reported for the same period of 2019, the insti- tute said earlier this week.
It also noted that just over 47% of Argentina’s first-quarter production of VLSFO, or 319,374 tonnes, had been sold on the domestic market as bunker fuel. This marks an 86% year-on-year rise, as the country sold some 171,714 tonnes for bunkering in the same period of 2019, it said.
Four companies accounted for 100% of domestic sales in the January-March period, it added. Royal Dutch Shell (UK/Netherlands) sold 98,987 tonnes of VLSFO for bunkering,
while Trafigura (Switzerland) sold 87,677 tonnes, YPF (Argentina, state-owned) 80,593 tonnes and Pan American Energy (Argentina, private) 52,117 tonnes.
IAPG data also showed that Argenti- na’s domestic consumption of marine gasoil (MGO), another type of fuel that complies with IMO standards, went up in the first quarter of 2020. MGO sales amounted to about 162,340 tonnes between January and March, up by 47% on the figure of 110,435 tonnes posted in the same period of last year.
YPF accounted for 67% of all MGO sales, or 108,768 tonnes, while Pan American Energy sold another 27%, or 42,832 tonnes, and Shell 7%, or 9,740 tonnes.
The new IMO specifications, known as IMO 2020, took effect on January 1. They limit sul- phur content in marine fuels to 0.5%. Argen- tinian refineries can meet this standard, as their main feedstock is sweet crude oil from domestic fields. ™
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w w w . N E W S B A S E . c o m Week 21 28•May•2020