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  • Type: Business and industry issue
  • Date: 7/4/2013

Argentina 

Argentina Shale
Investors are taking a cautious approach in the face of political and regulatory uncertainty

Opportunities

Argentina has some of the world’s largest shale reserves, with an estimate 802 trillion cubic feet (tcf) of gas and 27 billion barrels of oil1. The 2012 discovery of shale gas in the Vaca Muerta formation in Argentina’s Neuquén Province is further confirmation of the country’s new-found promise of gas self-sufficiency.


Issues

In March 2013, Argentina’s state-run energy company YPF took a major step towards exploiting Vaca Muerta by developing a connection to the main pacific gas pipeline, with an initial investment thought to be between 25-40 billion US dollars ($US). Forecasts suggest that, even without shale gas, natural gas production will reach 40.5 billion cubic meters (bcm) by 2017, with imports expected to exceed 15 bcm within the same timeframe5.


M&A trends

There have been a number of joint ventures involving YPF, with a letter of intent with Chevron signed in late 2012 for a pilot project in the Vaca Muerta. However, progress has been tentative, due to a court freeze of over US$19 billion worth of Chevron’s assets in Argentina, in connection to environmental claims over its activities in Ecuador3. In March 2013, YPF and Dow Argentina signed a Memorandum of Understanding for the joint development of the first deposits of shale gas in the El Orejano block of the Vaca Muerta4.


Outlook

Although foreign investors are naturally excited about the prospects in Argentina, they are sizing up the political and economic environment before committing significant funds, with concerns over a recession and possible resource nationalism.


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1Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States EIA/ARI Advanced Resources International, Energy Information Administration (EIA), 10 June 2013.

2Argentina Oil and Gas Report Q2 2013, Business Monitor International, 17 April, 2013.

3Chevron hit by Argentine legal quagmire, Financial Times, 13 Feb, 2013.

4Argentina's YPF, Dow Chemical could team up on shale gas, Reuters, 26 March, 2013.

 

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