Argentina could be the forefront of the next shale oil revolution, according to a report Morgan Stanley published today. Of all the areas analysed, the Latin American country displays the most favourable conditions, and the lowest investment costs (graphic above).
La pampa could become the next big thing in shale oil, mainly for three reasons:
Favourable geological conformation.
The Vaca Muerta basin has similar characteristics to one of the richest drilling areas in the US, the Eagle Ford basin in Texas. It is sufficiently thick and rich of liquid resources to foresee a consistent output.
Its richest area, the Loma Campana highlighted in the graphic above, is already producing 21,000 barrel of crude a day for a joint venture of YPF and Chevron.
Urgent energetic demand.
Argentina’s economy is not in good shape. Its energy balance collapsed in the last four years, as shown in the graphic above, despite having a wealth of natural resources and a developed oil industry. Argentine President Cristina Fernández de Kirchner nationalized the country’s oil companies, and production collapsed, discouraging investors. So the hope is that the country’s shale reserves might stimulate a recovery, if used wisely.
For instance, a recently approved hydrocarbon law that allows companies that invest more than $US250 million to sell a fifth of their production on international markets without being taxed on it should ease the way for foreign investors.
Argentina is a huge country, but its resources are condensed: Vaca Muerta alone represents 40% of the country’s shale gas resources and 60% of its shale oil. Moreover, the basin is in the Neuquina province (map above), which is at the core of Argentina’s production history and where the necessary infrastructure for oil production is already present.
Its capital city, Neuquén, is 700 miles far from Buenos Aires, and most of the fields are even further. Low population density (15 people per square mile) and massive water resources make it a perfect ground for hydrocarbon production.
The graphic below shows how the shale boom has revolutionised the energy market in the US. Since the Bakken and Eagleford basins have started pulling out scores of oil and natural gas, the energetic decline that hit the country in the early ’70s has not only stopped, but reversed.
The US is set to become the largest producer of liquid petroleum in the next couple of months according to the Financial Times.
If Argentina manages to do the same, it will be happy days in Buenos Aires.