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CERAWeek: Argentina Vaca Muerta has potential to quintuple oil output,‘Lot of Hope’ for Milei: Techint CEO

Paolo Rocca speaks at the CERAWeek by S&P Global conference in Houston, Texas on March 20.Photographer: Aaron M. Sprecher/Bloomberg
Paolo Rocca speaks at the CERAWeek by S&P Global conference in Houston, Texas on March 20. (Aaron M. Sprecher/Bloomberg)

Starr Spencer, Platts S&P Global

HOUSTON
EnergiesNet.com 03 21 2024

Argentina has the potential to quintuple its current oil output and raise its natural gas reserves and output in its Vaca Muerta shale play once the government’s revises its proposed regulatory scheme to streamline investment rules, the CEO of Argentinian energy engineering and construction provider Techint Group said March 20.

Vaca Muerta, located in the Patagonia region, only produces about 300,000 b/d of crude oil even though it has been producing at least a decade, Paolo Rocca, CEO of Techint, which also controls steel and pipe provider Tenaris, said on the third day of the CERAWeek by S&P Global conference in Houston. By comparison, the US’ Permian Basin currently produces 6 million b/d.

“We have in mind 1.5 million b/d [of oil production] in six to seven years,” Rocca said. Vaca Muerta has “the potential for more output, he added.

Raising oil and also LNG development “would be feasible if the macro environment can improve,” Rocca said.

Vaca Muerta produces only 2 Bcf/d, Rocca said, while the Permian produces about 25 Bcf/d, according to the US Energy Information Administration’s March Drilling Productivity Report.

The chief obstacle to higher production is the regulatory environment, Rocca said – specifically, what he termed the “intervention of the government in the price and the market.”

It’s an issue Argentina’s new president, Javier Milei, a free-market economist who assumed that post in December 2023, is trying to address, Rocca said. Chief among the proposed framework is a new hydrocarbon law to assure domestic fuels are priced on par with actual market value.

‘Lot of hope’ for new president

The country is also trying to create an environment that encourages oil and gas investment and infrastructure development, he said.

“We have a lot of hope in the new president,” Rocca said. “There’s a lot of expectations and good will in [Argentina’s] community.”

Milei’s determination to further develop Vaca Muerta comes as he also looks to curb inflation and grow the economy, according to S&P Global Commodity Insights’ February Latin American Short-Term Outlook report.

“State-owned YPF looks to increase its focus on shale production by selling mature fields and divesting its stake in over 20 companies,” the report said. “Millei intends for these efforts to boost production and increase exports.”

The Permian Basin’s speedy growth appears to serve as a motivator for Argentina and those who would like to see the Vaca Muerta grow.

Permian oil output growth was rapid

A decade ago, in March 2014, the Permian was producing 1.4 million b/d of oil and 5.3 Bcf/d of gas, according to EIA data. By March 2018, those figures had risen to 3 million b/d of oil and 10 Bcf/d of gas.

Production dipped during 2020 and early 2021 from a pre-pandemic 4.8 million b/d and nearly 17 Bcf/d of gas, to 4.3 million b/d and 17 Bcf/d in March 2021, according to the EIA. But it recovered quickly and rose to 5.1 million b/d of oil and 20 Bcf/d of gas by March 2022, the EIA data shows.

Although Argentina’s Neuquén Basin, where the Vaca Muerta is sited, has been producing oil since 1918, Repsol-YPF’s shale oil discovery in the Loma La Lata Field opened the play in 2010.

Earlier in March, YPF said it plans to divest some of its aging oil fields and plough back the proceeds into Vaca Muerta.

“Exiting some of our mature conventional fields will release around $800 million in capex to be reallocated primarily to shale oil activity,” Horacio Marin, YPF’s CEO, said on an earnings call. The company is hiring an unnamed advisor to assist in the sales process which will begin at the end of March 2024.

“Our goal is to become a global LNG player through the massive monetization of our shale gas resources,” Marin said.

A May 2023 report by Rystad Energy said that Vaca Muerta’s crude output could top 1 million b/d by the end of the decade – but only if takeaway capacity and rig availability do not limit growth.

“[Our] modeling shows that if production is relatively unimpeded, oil output could realistically grow from 291,000 b/d in February 2023 to more than 1 million b/d in the second half of 2030,” Rystad said.

spglobal.com 03 20 2024

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