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Case Builds For Argentina As The World’s Next Shale Hotspot

Case Builds For Argentina As The World’s Next Shale Hotspot

The race to deploy unconventional drilling outside North America is coming down to a few spots on Earth.

Australia had been leading the way. But news late last week suggests another nation may be pulling even when it comes to shale gas development.

Argentina.

Officials from Argentina's state-run producer YPF told the Argentina Oil & Gas Expo in Buenos Aires last week that recent shale drilling in the country is "showing better-than-expected results". Leading the firm to increase its forecast for production from unconventional sources. Related: Russia’s Move In Syria Threatens Energy Deals With Turkey

YPF's chief executive officer Miguel Galuccio told conference attendees that the company now plans to produce 50 percent of its natural gas from shale by 2020. A major increase, given that YPF currently gets only 15 percent of gas production from unconventional sources.

YPF is using horizontal drilling and fracking to unlock production and reserves at plays across the Neuquen basin -- located in western Argentina, near the border with Chile. And strong industry activity here indeed suggests good potential, with majors like Chevron, Shell and ExxonMobil all working the ground. Related: Nigeria Could Shoot Itself In The Foot With New Oil Revenue Plans

In addition to new technology, drilling in Argentina is being spurred by better pricing. With the government now offering $7.50 per MMBtu for unconventional natgas -- nearly double the $4 average price for conventional production.

YPF officials credited that price increase with making their projects a success. And it appears that a great deal more drilling is on the horizon here, if the company is going to add another 35 percent of unconventional to its production mix over the next five years. Related: Romania Wants New Gas Supplies To Break Russian Gas Hold

The company gave little information on what sort of flow rates and reserves it's getting from horizontals. And that data will be key in evaluating whether Argentina really is the next shale hotpot.

But for the time being, this is one to watch. The next nation to have a full-on shale boom is going to reap immense rewards for developers, investors and government.

Here's to showing us the shale,

Dave Forest

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