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Oil union in Argentina's Vaca Muerta play calls off strike

Highlights

Companies halt plans to fire workers

Unions, producers to sit down for further talks

Agreement comes as government seeks to improve investment conditions

Buenos Aires — An oil union in Neuquen, Argentina's biggest oil and natural gas basin, called off a threat to go on strike after companies vowed to not fire some 700 workers, a union leader said Thursday, easing concerns about the impact on oil and gas production.

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"We have reached an agreement to halt all of the layoffs," Guillermo Pereyra, secretary general of the Union of Private Oil and Gas Workers in Rio Negro, Neuquen and La Pampa, said on Radio 10.

Last week, Pereyra had threatened to call a strike if even one worker was fired, which would have hobbled a basin that produces 47% of the country's 514,000 b/d of crude and 62% of its 127 million cu m/d of gas. The basin is home to Vaca Muerta, the country's biggest shale play, which is driving a recovery in oil and gas production after more than a decade of decline.

Pereyra said the agreement comes at an opportune time for the sector, given that the government plans in the next few weeks to submit to Congress a bill designed to shield the sector from the country's economic and political volatility. This is key for widening access to what is needed most to develop Vaca Muerta: low-cost capital.

The bill "can not be debated in a state of conflict," the union leader said. "We are committed to keeping the peace."

As part of the agreement, companies and the union agreed to sit down for talks with the federal government as well as authorities in Neuquen and Rio Negro provinces in order to find ways to emerge from a crisis hitting the sector.

PRICE CONTROLS

Companies reined in investment in August after a freeze on diesel and gasoline prices slashed crude prices to just above breakeven levels in Vaca Muerta, hitting profits and making it harder to create and carry out strategies.

Some 17 rigs have been sidelined, Pereyra said.

Last week, Argentinian President Alberto Fernandez asked oil companies for proposals to adjusting the price intervention, saying it is important to increase oil and gas production and exports.

Pereyra said there is a lot to do to develop the potential of Vaca Muerta, including building a third backbone gas pipeline, extending another gas line to Brazil and constructing a liquefaction terminal for exporting supplies.

"We have to build all of this infrastructure to export the surplus of gas," he said.

Until this infrastructure is in place, companies are expected to focus their investment in the oil window of Vaca Muerta, given that there is ample pipeline capacity and export potential.

Argentina is producing 514,000 b/d, above the demand average of 500,000 b/d, and Vaca Muerta, one of the world's biggest shale plays, is providing a little more than 100,000 b/d of the total production from less than 10% of its acreage so far in development, according to data from the national Energy Secretariat.