OTC: Argentina has much to offer, both unconventionally and offshore

Culled from WorldOil.com

Expertise in unconventionals is growing by leaps and bounds in Argentina, and operators are also taking a hard look at the country’s offshore potential.That was the message delivered during a topical breakfast held on Wednesday morning (May 8) at the Offshore Technology Conference (OTC) in Houston. The session was supported by the U.S. Department of Commerce to foster discussion on business development and investment in Argentina’s oil and gas sector, as well as prospects for current and upcoming commercial opportunities in the country.

Progress in three key categories. As regards unconventional activity, mostly in the Vaca Muerta region, Mario Gargiulo, President for South America at BHGE, said the country has made good progress in three key areas: talent, processes, and technology and science. “Argentina has developed world-class talent for unconventionals and is a net exporter of such talent,” said Gargiulo. “The effort in developing talent is focused on productivity, getting the best possible outcome from every team at the wellsite. We’ll continue in Argentina, to develop the required human resources, ahead of the demand curve.”

On the subject of processes, Gargiulo said that improvements are beating expectations, year over year. “Efficiencies (stages per month, per frac fleet) have more than tripled in the last three years,” he continued. “In reaching some key achievements through the journey, we’ve had unprecedented cooperation among oil companies, oilfield service companies and government.” He said that there will be further development of local service companies that supply peripheral and support services. Infrastructure growth should follow activity growth.

Regarding technology and science, Gargiulo said that “there have been some outstanding results, due to utilization and specific application of ultimate technology. Argentina has built on unconventional experience in the U.S. But, local scientists know the local challenges—they are, and must be, at the commanding seat.” He added that an effort will continue to develop and utilize technology for specific local needs, while also focusing on formation evaluation. He thinks that more than 10% improvement in EUR can be achieved in the next 18 months.

The data support the rhetoric. Gargiulo’s comments were backed up by some data presented by Sebastian Borgarello, V.P. for Americas Upstream at IHS Markit. In the Vaca Muerta region, oil well productivity has risen 24% in the last four years. Furthermore, said Borgarello, “normalized well cost from 2014 to 2018 has fallen 51% for oil wells and 44% for gas wells.” Meanwhile, he added, the breakeven prices for oil (per boe) and gas (per Mcf) have fallen 53% and 49%, respectively. “Therefore, you can see that Vaca Muerta oil window break-evens are competitive globally,” declared Borgarello. And those favorable economics are driving further Vaca Muerta oil and gas production growth.

Looking at the potential for some years to come, Borgarello said that “potential commercial resources amount to 5 Bbbl of oil and 60 Tcf of gas. This is enough to probably last over 30 years, at anticipated production rates. But the speed of development depends on a favorable regulatory environment and further infrastructure development.”

Offshore. Turning to the country’s offshore sector, Borgarello said that Argentina had excellent results with its latest bidding round. “The offshore bidding round attracted seven of the 10 most active global explorers. That’s a very good sign.” Indeed, Argentina announced in April that the round attracted bids from 13 companies. Among the 38 blocks that were offered, 18 were licensed by various companies, including Equinor, ExxonMobil and Total, with winning bids totaling more than $718 million.

In terms of where offshore activity might result in the most likely development activity, the analyst said that the West Malvinas basin “seems to offer the best risk-adjusted potential.” This certainly seems to be the case, as regards ExxonMobil. The U.S. firm increased its holdings in Argentina after its subsidiary, ExxonMobil Argentina Offshore Investments B.V., along with an affiliate of Qatar Petroleum, won three exploration blocks. The award adds about 2.6 million net acres to ExxonMobil’s existing holdings in Argentina, which include the Vaca Muerta unconventional oil play and a business support center in Buenos Aires. The blocks are in the Malvinas basin, roughly 200 mi (320 km) offshore Tierra del Fuego, and include MLO-113, MLO-117 and MLO-118. 


Kabir Ismail is a blogger, website developer/administrator and a comrade.

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