The Permian Basin has become so hot that some oil companies are starting to stay away, instead looking at frontiers that are less picked over.
BP is one such company. The British oil giant’s CEO Bob Dudley said that land in the Permian has become too expensive, and instead he is looking to expand operations in Argentina, where the vast Vaca Muerta shale basin offers appetizing opportunity.
In an interview with Bloomberg TV from Buenos Aires, Dudley said BP is planning on acquiring more assets in the Vaca Muerta. And it isn’t just the “enormous potential” from the oil and gas reserves in the shale basin, but also the friendly policy put forth by the new Argentine government led by President Mauricio Macri. “I’m really encouraged by what I see,” Dudley said. “There’s a lot of future here.” BP has a joint venture with Bridas Corp. – BP owns 60 percent of Pan American Energy LLC and Bridas controls the other 40 percent. BP will expand its presence in Argentina through this JV.
Argentina is quickly becoming one of the few countries that has achieved shale development outside of North America. One of the biggest incentives the government has offered is regulated oil prices, set at levels higher than the international price. Several of BP’s peers are already drilling in the Vaca Muerta, including Chevron, ExxonMobil, and Royal Dutch Shell. Related: The Worst Oil Crisis Ever? IEA Sees Unprecedented Decline In Investment
The state-owned YPF said that it would need investments totaling about $200 billion to fully exploit the Vaca Muerta.
Exxon said earlier this year that it might spend more than $10 billion in Argentina, building on several pilot projects. The investments would span decades. “I am very encouraged by the changes that have occurred here in Argentina, with the change in government,” Exxon’s CEO Rex Tillerson said in June. More and more companies are starting to build up their presence in Argentina.
Meanwhile, back in Texas, land prices are shooting through the roof. SM Energy recently spent more than $39,000 per acre for land in the Permian, which some are calling the “hottest zip codes in the industry.” That is pricing out some companies and forcing many to look elsewhere. With West Texas saturated with drillers, Argentina stands to benefit.
By Charles Kennedy of Oilprice.com
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