As I discussed earlier this month, there’s one place on Earth that oil and gas firms should be looking today: Argentina.
And this week, the outlook for the petroleum sector in this world leading petro-nation just got better.
That’s because of reports from Platts, which suggest that commodities prices may be rising again here. This time in the natural gas market.
The news service reported that a group of Argentinian politicians is crafting a plan to raise purchase prices for natural gas produced in the country. And not just at high-tech unconventional plays — but also for plain old conventional production. Related: Currencies Under Deeper Pressure From Rout In Commodities
Currently, conventional natgas wells receive low pricing across Argentina. With rates for such production running between $2.70 and $3.00 per MMBtu.
But Omar Gutierrez, the governor of Argentina’s petroleum-rich Neuquen province, wants to change that.
The governor said he has been working with Argentine senator Guillermo Pereyra (who also runs the Union of Private Oil and Gas Workers in the provinces of La Pampa, Neuquen and Rio Negro) on a plan to raise prices for conventional natgas, to $5.80 per MMBtu. With the draft measure having recently been delivered to national Energy Minister Juan Jose Aranguren. Related: China Invests $4.6 Billion In Killing Coal, But Is It Enough?
Gutierrez indicated that further meetings are scheduled with the energy minister on this subject. Suggesting that advancement of the new pricing regime could be happening soon.
If realized, this would be another huge lift for producers in Argentina. Representing a quick hike of up to 115% in revenues from natural gas fields.
Such preferential pricing has boosted activity in unconventional natgas plays in Argentina. With producers in areas like the Vaca Muerta shale receiving a special price of $7.50/MMBtu. Related: 9 Billion Barrels Of Crude At Risk In Massive Nigerian Oil Shakeup
If this new measure passes, we could see focus shifting from strictly unconventional to older, more straightforward fields across Argentina. With the proposed price of $5.80/MMBtu likely giving substantial room for profit.
Watch for announcements on finalization of this proposal. And knock-on activity in drilling and M&A for conventional natgas fields here.
Here’s to a quick three digits
By Dave Forest
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