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Argentine exploration and production firm Tecpetrol has plans to invest $2.3 billion on gas exploration in the massive Vaca Muerta shale formation. As part of the plan, Tecpetrol, which is the fifth largest energy company in the country, will drill 150 wells over the next three years in the Fortin de Piedra block.
Tecpetrol eyes daily output of 14 million cu m of gas by 2019, which is equal to 50 percent of Argentina’s current natural gas imports, according to a union leader who took part in the talks between the government and Tecpetrol regarding the investment program.
The investment news comes after Mauricio Macri’s government implemented some significant legislative changes to encourage more foreign investments in Argentina’s oil and gas industry.
For gas investors, the government came up with price incentives that will shield them from market prices until 2022. So, next year, gas producers in Vaca Muerta will receive $7.50 per MMBtu of gas at the wellhead, which will gradually decline to $6 per MMBtu by 2021.
Another part of efforts to stimulate energy investments came in the form of scrapping a duty on oil product exports. Last year, Macri’s government also pledged to remove subsidies for the local oil and gas industry, although it gave no timeline for this.
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The Vaca Muerta formation is estimated to hold some 16.2 billion barrels of crude oil and 308 trillion cu ft of natural gas, which makes it the second-largest in terms of gas reserves globally.
Among the Big Oil players who have declared interest in taking part in the development of Vaca Muerta are Chevron and Exxon. They have already invested in exploration there: Exxon has splashed $250 million and plans to add another $10 billion to this over the next 20-30 years. Chevron invested $1.5 billion when it struck a joint venture deal with YPF three years ago.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.