• 2 days PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 2 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 2 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 2 days Schlumberger Warns Of Moderating Investment In North America
  • 2 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 2 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 2 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 2 days New Video Game Targets Oil Infrastructure
  • 2 days Shell Restarts Bonny Light Exports
  • 2 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 2 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 3 days British Utility Companies Brace For Major Reforms
  • 3 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 3 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 3 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 3 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 3 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 3 days Rosneft Signs $400M Deal With Kurdistan
  • 3 days Kinder Morgan Warns About Trans Mountain Delays
  • 3 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 4 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 4 days Russia, Saudis Team Up To Boost Fracking Tech
  • 4 days Conflicting News Spurs Doubt On Aramco IPO
  • 4 days Exxon Starts Production At New Refinery In Texas
  • 4 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 5 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 5 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 5 days China To Take 5% Of Rosneft’s Output In New Deal
  • 5 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 5 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 5 days VW Fails To Secure Critical Commodity For EVs
  • 5 days Enbridge Pipeline Expansion Finally Approved
  • 5 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 5 days OPEC Oil Deal Compliance Falls To 86%
  • 6 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 6 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 6 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 6 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 6 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 6 days Aramco Says No Plans To Shelve IPO
Alt Text

Are Combustion Engines Reaching Peak Demand?

As countries announce plans to…

Alt Text

OPEC Seeks Help From U.S. Shale

OPEC’s secretary general has asked…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Trouble Ahead For The World’s Next Shale Boom?

Trouble Ahead For The World’s Next Shale Boom?

Argentina has often been held up as the next most likely location for a shale revolution, with some of the largest shale oil and gas reserves in the world.

Argentina could hold more than 800 trillion cubic feet of shale gas, more than the U.S., and second only to China, according to the EIA. Its shale oil resources, at 27 billion barrels, are also significant.

If Argentina is to succeed in developing its shale resources, the Vaca Muerta is where it will happen. The shale basin in central Argentina has been one of the most watched shale basins outside of North America, with significant interest and investment from major international oil companies including ExxonMobil, Royal Dutch Shell, Chevron, Wintershall, Total, and Russia’s Gazprom. Chevron’s $1.2 billion deal with Argentina’s YPF in 2013 raised expectations that the boom was not far behind. YPF says that the Vaca Muerta could require $200 billion in order for Argentina to erase its energy deficit. Related: Oil Majors Sacrifice Production To Protect Dividends

Despite the presence of international companies and the few hundred wells drilled to date, it is still early days. Production has ticked up, but the shale region has barely been picked over. Chevron and YPF are producing around 43,000 barrels per day of oil equivalent from the Vaca Muerta.

Low oil prices, however, are dampening activity in the country. YPF’s Miguel Galuccio said in April that, with oil prices so low, some wells are not profitable. “It is not profitable with an $11 million well and prices at $50 per barrel. We drilled our vertical wells with the expectation that they would be profitable at $84 per barrel and with wells that cost between $6.5 or $7 million,” he said. YPF has succeeded in bringing down the cost of drilling, but it is still shy of its target of $4 to $5 million per well, which would be much closer to the drilling costs in North America. Related: How Russia’s Oil Companies Are Defying Sanctions and Low Oil Prices

Producing oil in Argentina does have one unique benefit, however. The Argentine government regulates prices, allowing producers to sell oil at a set price of $77 per barrel, rather than the much lower international price. Brent crude, for example, has been selling for under $50 per barrel since early August. The fixed price effectively means that Argentine motorists are subsidizing drillers. Argentina does have much higher drilling costs and less infrastructure in and around the Vaca Muerta, but the regulated oil price offers one advantage for oil companies in Argentina when market prices collapse.

However, there could be quite a few changes in the works in Argentina with a presidential election set to take place in October. International companies in a variety of sectors, including oil and gas, are hoping that the new administration will be much friendlier to business, foreign investment, and capital flows. Current President Cristina Fernandez de Kirchner has been blamed for slowing investment. Her government has put in place capital controls, which is reviled by the capital-intensive oil industry. The government’s confrontation with debt holders, dating back to the country’s default more than a decade ago, has also locked Argentina out of international financial markets, making borrowing costs (and as a result, drilling costs) much higher.

The potential for a change in government has raised hopes that the much-anticipated energy bonanza in Argentina will kick into a higher gear. But the change could be a mixed bag for oil and gas companies. Related: Is This The Decade's Most Important Mining News?

According to several experts surveyed by Bloomberg, the new government could cut the regulated price for oil down to just $66 per barrel. Whether the new president is Daniel Scioli, the governor of Buenos Aires province and a member of the ruling party, or Mauricio Macri, a more business-friendly opposition candidate, changes are expected for the price of oil.

If that were to occur, it would significantly cut into revenues for oil companies operating there. YPF may be forced into spending by up to 20 percent next year, after hardly touching its budget for this year and despite major cuts by its international peers. A cut to the oil price would also force YPF to refocus its efforts on relatively more natural gas instead of oil. Natural gas prices are also regulated in Argentina, set at $7.50 per million Btu.

Ironically, while the cut to the regulated price would be negative for oil companies, it would amount to a more market-based approach for the government, something that the private sector has been clamoring for. So while the industry is eager to see a new president to replace the current one, it is not as if the drilling environment will improve on all fronts for the industry with a new government.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News