Page 5 - GLNG Week 33

GLNG COMMENTARY GLNG
sparked concern among oil company executives. Last week, the government declared a 90-day freeze on gasoline and diesel prices. It took this step in response to data showing that in ation levels had topped 55%, saying it wanted to pro- tect consumers of basic commodities such as
food and fuel.
In the short term, residents of Argentina
could reap some reward for arti cially low motor fuel prices. Likewise, operators of Argentinian oil re neries will see their feedstock bills drop, since the fuel price cap effectively lowers the price that downstream operators pay for crude from $59 per barrel to $40-42 per barrel.
But upstream operators, especially those working within the Vaca Muerta Basin, will see no such bene ts. On the contrary, they will probably lose money or see their pro t margins shrink drastically, since they cannot break even unless they sell their production for at least $40 per barrel.
Macri’s government said last week that the price cap was temporary and would only remain in place for 90 days, until November 15. But this interval is long enough to put a short to medi- um-term dent in the nances of upstream oil operators, especially those that have no down- stream assets to make up their losses. As a result, it could also curb potential investors’ appetite for projects in Argentina in the long run.
The possibilities
Meanwhile, the data analytics and consulting
firm GlobalData has suggested that some of the excitement about Vaca Muerta may be overstated.
In a report published earlier this week, GlobalData stated that the shale basin had driven most of the growth in Argentina’s gas output in recent years, noted that Vaca Muerta elds now accounted for nearly a quarter of total production. It acknowledged this upswing was an achievement, but it also pointed out that the country was still not extracting enough gas to cover domestic consumption in full.
is indicates that Argentina may remain a net importer for some time, even as unconven- tional gas yields continue to rise, the consul- tancy said. Pilot projects and the rst shipment of super-chilled gas from the Tango facility have shown that the country can export LNG pro ta- bly, it commented, but Vaca Muerta still does not produce enough on its own to cover domestic demand while also enabling large-scale exports.
GlobalData’s conclusions, along with Mac- ri’s grim election prospects and oil companies’ concerns about fuel price caps, indicate that Argentina’s economy may be heading for a rough patch. is may not have a signi cant e ect on oil and gas operators that are already well established in Vaca Muerta, but it could certainly discourage new investors from ven- turing into the shale basin. As a result, industry observers should prepare to revise their fore- casts for the South American country’s hydro- carbon output downward.™
Pilot projects and the rst shipment of gas from the Tango facility have shown that the country can export LNG pro tably.
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