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Argentina will give subsidies of a total of US$5.1 billion to shale gas drillers in an attempt to revive production in its Vaca Muerta shale play and attract as much as US$5 billion in investments, Energy Secretary Dario Martinez said this week.
The four-year subsidy program will cost Argentina US$1.5 billion in 2021, but it will still be better than paying to import liquefied natural gas (LNG), even if LNG prices have dropped, Martinez said, as carried by Bloomberg.
Shale drillers who bid in an auction in November can get a maximum of $3.70 per million British thermal units for three-year supply deals.
Argentina unveiled a new plan for natural gas development last week to attract company investments that will revitalize gas production in the Vaca Muerta shale play and make Argentina independent from natural gas imports.
The plan, presented in the Neuquén province home to Vaca Muerta, aims to stop the production decline, replace Argentina’s natural gas imports, boost investment by attracting US$5 billion, and increase tax collection by US$2.525 billion. The gas development plan will also aim to boost local employment and work for Argentinian service companies, the government said.
“The plan is, first of all, working to guarantee the gas that Argentina needs to live and produce. This is not spending, this is investment,” Argentina’s President Alberto Fernández said at the event in Vaca Muerta last week.
Argentina has used subsidy programs in the past to incentivize production in Vaca Muerta, but there has been confusion over details, pricing, and payment of the subsidies in the past.
Signs have emerged in recent weeks that Argentina’s once burgeoning oil industry is coming back to life. Exploration and development drilling has resumed in the Vaca Muerta, on which Argentina has pinned its hope for a petroleum-led economic recovery, Oilprice.com’s Latin-America correspondent Matthew Smith wrote earlier this month.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com