Page 5 - LatAmOil Week 36 2022

LatAmOil COMMENTARY LatAmOil

On the other hand, Argentina does have the Officials in Buenos Aires have calculated that the
potential to become an exporter of oil and gas, pipeline, which is set to carry 11mn cubic metres
even if it is not one now. per day of gas from the shale formation, will
The country has sizeable hydrocarbon bring the country’s winter fuel import expenses
reserves and has only developed a fraction of down by another $2.2bn in 2023.
them so far – especially in the unconventional
oil and gas basin known as Vaca Muerta. This Not fueling the world yet
basin, which lies mostly within the northern Rising production levels at Vaca Muerta are
Neuquen province, is one of the largest shale a positive development, in that they indicate
formations in the world. It is around the size of that Argentina is reducing its dependence on
Belgium and contains around 308 trillion cubic imported fuel. However, they are not necessar-
feet (8.722 trillion cubic metres) of shale gas and ily a signal that the country is ready to “fuel the
16bn barrels of shale oil, according to the US world”, as the Argentinian official informed the
Energy Information Administration (EIA). US State Department. It is, after all, still working
The problem is that Vaca Muerta’s potential toward net self-sufficiency and must achieve
has not yet been realised. As noted above, the that goal before it can boast of having a net
shale formation has not yet been subjected to exportable surplus.
intensive development. It has been talked about And reaching that goal is likely to take some
– endlessly, it sometimes seems – as a source of time. For one thing, Argentina cannot simply
future energy supplies, both for domestic con- increase oil and gas output at will, as it does
sumption and for the export market, but that not have idle spare capacity that can be acti- Argentina cannot
talk has been slow to bear fruit. Vaca Muerta has vated quickly. Instead, it must wait for ongoing simply increase
attracted a number of prominent international upstream projects to reach the development
oil companies (IOCs), including TotalEnergies stage – and it must also solicit new invest- oil and gas
(France), Shell (UK) and Equinor (Norway), ments, sign contracts, carry out exploration
but even these big-name investors have not been programmes and drill new development wells. output at will
able to ramp up production as quickly as Buenos Additionally, it must establish transportation
Aires would like. infrastructure – that is, pipelines and terminals
– to carry new production streams to market.
Vaca Muerta production rising These endeavours all take time and money.
Nevertheless, there are some positive signs – The government will also have to establish a
such as the fact that output levels are rising at policy environment that is more supportive of
Vaca Muerta fields. new investments. Argentina’s bouts of fiscal and
Omar Gutierrez, the governor of Neuquen economic instability have led IOCs to be more
Province, told reporters in Buenos Aires on Sep- cautious about committing to Vaca Muerta pro-
tember 6 that the formation was now yielding jects than they might otherwise have been, and
91mn cubic metres per day of unconventional their caution has affected the pace at which pro-
gas, the highest level ever recorded. Unconven- duction has risen. Massa has been charged with
tional oil yields are also trending upward and are overcoming such hurdles and overhauling the
on track to hit a record high of 308,000 barrels economy, but it remains to be seen how success-
per day (bpd) by the end of the year, he added. ful he will be – and how quickly he can work, if
In the meantime, he said, the total value of he does succeed.
oil exported from Vaca Muerta fields is set to What this means is that Argentina truly is not
reach $2bn in 2022, a five-fold increase on the in a position to provide world energy markets
2021 figure. Moreover, he said, Vaca Muerta gas with short-term relief for the supply disruptions
production is helping Argentina reduce its bill and price fluctuations that have emerged since
for winter fuel imports by around $4bn per year. Russia’s invasion of Ukraine in late February. It
Argentina’s government hopes to save even may become a significant new supplier within
more next year, following the completion of a a few years, assuming that it implements the
new pipeline that allow Vaca Muerta producers policies and builds the infrastructure needed to
to deliver more gas to north-eastern Argentina, support increased production. But that will take
the most heavily populated part of the country. time. ™

Production levels are rising in Vaca Muerta, but less rapidly than Buenos Aires would like (Photo: Wintershall Dea)

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