Argentina has world-class hydrocarbon resources, including shale reserves that rank near the very top globally. But the country’s conventional oil and natural gas production has been sagging for several years, and by 2011 Argentina had flipped from being a net energy exporter to a net importer. It has also been a frequent recipient of LNG cargoes from Cheniere Energy’s Sabine Pass liquefaction plant/export terminal in Louisiana. Things have been turning around of late, though, and there may no longer be a reason to cry for Argentina. Investment in the country’s Vaca Muerta shale play — whose oil and gas potential has been compared to the Eagle Ford Shale in South Texas — is ramping up, drilling and production results are pouring in and at least some midstream infrastructure is being developed to handle what could someday become a Latin American shale boom. Today we take a mirada fresca (or fresh look) at the situation.
As we said in our Born in the U.S.A. Drill Down Report on international shale development a couple of years back, potentially productive shale can be found underneath at least 10 million square miles of the earth’s surface — an area greater than the U.S., Canada and Mexico combined. So far, though, almost all of the world’s shale development has occurred in the U.S., with Canada a distant second. We explained the reasons for American dominance — not only were the techniques for economically extracting oil and gas from shale fine-tuned in Texas (by the late George Mitchell in the 1990s in the Barnett Shale), the U.S. offered the perfect combination of geology and legal, political and business conditions (mineral rights, free markets, existing infrastructure, etc.) to support the development of something innovative, risky and capital-intensive.
Argentina has been shaping up as one of the best prospects for shale exploitation outside the U.S. According to the Energy Information Administration (EIA), the country of 44 million people ranks fourth globally in technically recoverable shale oil resources (27 billion barrels) and second in shale gas resources (802 trillion cubic feet), with most of the oil and gas trapped within the relatively compact Neuquén Basin and its Vaca Muerta play near the middle of Argentina’s long border with Chile (dashed red oval in map inset to upper left of Figure 1). It’s important to remember, though, that Argentina’s oil and gas industry isn’t huge — crude production averages about 500 Mb/d, gas production is only about 1.4 billion cubic feet/day (Bcf/d) and only 67 rigs (56 of them oil-focused) were active in the whole country as of August 2017, according to Baker Hughes.