Total and partners pour $1.15bn in Argentina
The Latin American country relies on shale gas production to reduce imports
22 July, 2017
Argentine President Mauricio Macri promised to make shale revolution in South America.
France's Total, Argentina's state-run oil firm YPF, Wintershall Energia and BP unit Pan American Energy announced last Tuesday a $1.15bn investment in a joint shale gas project in Argentina. By boosting shale gas production, Argentine President Mauricio Macri's government tries to reduce reliance on gas imports that have strained the country's finances. Argentina is the third country in the world, after the United States and Canada, to commercially develop tight oil and shale gas.
The four companies will work to increase shale gas production in Vaca Muerta, known as one of the world's largest shale formations. Its geologic properties have been compared to the Eagle Ford play near the Gulf of Mexico in Texas in terms of its depth, thickness, pressure, and mineral composition.
Total announced it would spend $500m over three to four years in the field. “We have giant resources of non-conventional gas under our feet in Argentina,” Chief Executive Officer Patrick Pouyanne told reporters at a conference in Paris last Thursday. “It’s the beginning of a nice story.”
The partners had already invested $500m in the areas between 2014 and 2016.
The provincial government in Neuquen, where Vaca Muerta is located, has agreed to split the Aguada Pichana area into two parts and is also combining it with the Aguada de Castro area to facilitate the works. Total will operate the eastern part of Aguada Pichana with a 41% stake, where 48 horizontal wells will be drilled through 2021, up from 12 currently. Pan American Energy will operate the western part as well as Aguada de Castro with a 45% stake and plans to drill 24 horizontal wells. The investments will double natural gas production in the area to 4.5 million cubic metres per day, up from 2.2 million cubic metres per day currently, Neuquen Governor Omar Gutierrez said at a news conference.
In March, Argentina's Tecpetrol, part of the Techint Group, said it would invest $2.3bn in the Vaca Muerta shale fields through 2019, marking the biggest announcement related to the formation in years. That investment came after the government said it would gradually lower the price it guarantees for gas drilled from new wells to encourage investment sooner rather than later.
Argentina’s dry natural gas production declined each year from 2006 to 2014, and the country has shifted from a net exporter of natural gas to a net importer. In 2015, natural gas production increased for the first time since 2006 and ongoing efforts to increase production from key shale gas areas aimed to reduce the imports. Imports, which accounted for 23% of Argentina’s natural gas consumption in 2015, came by pipeline from countries such as Bolivia and, to a lesser extent, as liquefied natural gas (LNG) from sources such as Trinidad and Tobago. The Argentinian government hopes to stop importing LNG by 2022.