In January this year, the Federal Court of Appeals in Mar del Plata dismissed a lawsuit brought forward by several environmentalist organizations and the mayor of the coastal resort city against an offshore oil and gas exploration project.
The court set strict environmental protection conditions for the companies involved in the exploration works—YPF, Shell, and Equinor—and stipulated that permanent observers are appointed for the project to make sure these conditions are met. With this ruling, the court basically gave what looks like the final push for Argentina's offshore oil industry.
Up until recently, the South American country has been best known in oil industry circles for its massive Vaca Muerta shale formation. It is certainly an important part of the Argentine government's plans for future export revenues, with its estimated 16 billion barrels of oil and 308 trillion cubic feet of natural gas. But Vaca Muerta is not the only one.
"We celebrate this great news for the country. It is estimated that this offshore project could reach a production volume of 200,000 barrels per day, 35% of Argentina's current production. Undoubtedly, a before and after for the development and growth of our country," said the Argentine energy minister, Flavia Royon, following the court of appeals' ruling in favor of the Mar del Plata project.
Equinor is set to begin drilling in the CAN 100 block, some 300 km off the Argentine coast, later this year, and if it encounters hydrocarbons, the project, dubbed Argerich, will proceed to the next stage, where the reserves tapped will be assessed.
It's not the only offshore oil and gas project in this new South American hopeful. Earlier this month, the media reported that the energy ministry was organizing a public consultation on an offshore natural gas project near the coast of Tierra del Fuego.
The $700-million project dubbed Fenix is being led by a consortium including French TotalEnergies, German Wintershall Dea, and BP's subsidiary Pan American Energy. Production of natural gas is scheduled to begin in 2025, and peak output is seen at 10 million cubic meters daily over a period of 15 years.
The Fenix project should help reverse a decline in Argentine natural gas production, along with expected production boosts in the Vaca Muerta.
That's not all, either. Earlier this year, the Argentine authorities extended an exploration drilling license held by Norway's Equinor and Argentine YPF by one year. The license is for an offshore area known as CAN 102 in the deep waters off the Buenos Aires coast.
Equinor, by the way, had quite an ambitious drilling program offshore Argentina, but it has run into court injunctions courtesy of drilling opponents even as Argentina grapples with what is now a chronic economic crisis and could certainly do with additional export revenues.
According to YPF, the Argentine state oil and gas company, the country has reserves of some 31 billion barrels of oil equivalent off its coast. That's even more than Vaca Muerta's total reserves, which translate into some 29 billion barrels of oil equivalent. Together, Argentina's waters and the shale formation make for an impressive set of oil and gas resources—most of them untapped.
As for whether these offshore reserves would end up being exploited, with Argentina repeating Brazil's offshore boom, that remains to be seen. The fact that supermajors are investing in offshore drilling in Argentina suggests they are not banking on peak oil and gas demand. On the contrary, they seem to be banking on the continued relevance of both oil and gas despite the energy transition push governments in the West are swearing by these days.
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By Charles Kennedy for Oilprice.com
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