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Another $165 Million Deal Signed In This Emerging Oil Hotspot

Another $165 Million Deal Signed In This Emerging Oil Hotspot

I discussed last week how Argentina is now getting the best oil pricing on the planet. Setting up this former pariah nation as perhaps the best play going in petroleum today.

And this week we got confirmation that big players in the E&P space are taking notice.
Companies like Chile’s state energy firm ENAP. Which signed up a major exploration deal in the Argentinean offshore on Wednesday.

ENAP announced that it has agreed on a 10-year contract extension with Argentina’s state oil and gas firm YPF, for work focusing on the Strait of Magellan in southern Argentina (see map below), as well as exploration areas in the offshore proper. Related: 27 Billion Barrels Worth Of Oil Projects Now Cancelled

ENAP and YPF will explore waters in the Strait of Magellan (inland, center of map)

The deal is a big one, with total value announced at $165 million — signaling that incoming partner ENAP is very interested in the potential here.

Of course, this isn’t a new deal — with the partnership between ENAP and YPF in this area actually dating back to 1991. But the signing of this week’s extension conspicuously coincides with recent announcements about energy market reforms by Argentina’s new government. Related: Saudi Arabia: A Weak Kingdom On Its Knees?

That may have given a firm like ENAP the push it needed to commit hundreds of millions of dollars. A very large amount for the company — which has few international projects on its slate.

Argentina’s announced oil price of $67.50 for 2016 will undoubtedly help project economics for discoveries developed in this area. With crude reportedly being targeted here, along with significant natural gas fields.

As an interesting aside, ENAP said it will seek to maximize production from existing natgas fields at the project. Suggesting they may try using advanced production techniques such as unconventional completions — which ENAP has already been using in some parts of Chile recently.

This is further evidence that Argentina’s regulatory moves — along with its attractive petroleum geology — are setting this up as an energy spot to watch for 2016. Keep an eye out for more deals on Argentinean acreage.

Here’s to getting together with the neighbors

By Dave Forest

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