Buenos Aires — Equinor, Shell and Total vowed to press on with projects in Vaca Muerta, even as policy uncertainty and price controls make it harder to plan investment in Argentina's biggest shale play, raising concerns of a slowdown in oil and natural gas production growth.
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Representatives of the three companies expressed their determination for the play, one of the world's largest, in meetings with Omar Gutierrez, the governor of Neuquen, a southwestern province where most of the acreage is located.
Gutierrez met with executives of the three companies during a visit to Madrid last week.
Total told him it is delineating an undisclosed block as a step toward entering into mass production, building on a pilot and other developments in the play. The French company also plans to seek unconventional licenses for blocks it is developing for conventional resources in the province at the north end of Patagonia, Gutierrez said in a statement.
Norway's Equinor said it plans to drill six more wells in Bajo del Toro, building on two already in production for oil on the block, which it is developing in partnership with Argentina's state-backed YPF, according to Gutierrez. The partners are seeking a 35-year development license for the block, while Equinor looks for opportunities "to expand their participation in Vaca Muerta," Gutierrez said.
The governor said Shell told him that they will be completing five pre-development wells on Bajada de Anelo in July, a final step before evaluating whether to move into full-scale production on the block. That would build on its first project in the play, the development of the three adjoining blocks where the company said it plans to complete the expansion of an oil treatment plant to take processing capacity to 42,000 b/d from 12,000 b/d, Gutierrez said.
The decisions come after most companies put investments on hold in the play following the introduction of price controls last year that have reduced the price of oil and gas to near breakeven levels.
President Alberto Fernandez, a left-leaning moderate, extended the controls soon after taking office December 10, and he has yet to announce a plan to ease out of them or for the oil sector as a whole. This has left companies guessing what he could do.
"Companies invest when they can see that the future is predictable," said Hugo Giampaoli of Giga Consulting, an energy consultancy outside Buenos Aires. "When they feel that the rules are going to change, they rein in investment. Today, the conditions are not in place to invest."
The result, he said, should be slower production growth this year than in 2019.
Argentina produced a total of 507,412 b/d of oil in the first 11 months of 2019, up 3.7% from 489,159 b/d in all of 2018, according to the latest data from the Argentina Oil and Gas Institute, an industry group. Over the same period, gas production rose 5.6% to 136 million cu m/d from 128.8 million cu m/d, the data show.
The start of several new oil and gas processing plants in Vaca Muerta should boost output this year, but that will be offset by slower growth in blocks where rigs have been sidelined as companies wait for more certainty on policy and pricing.
Fernandez has said he is working on legislation designed to provide stable conditions for investing in Vaca Muerta over the long term.
The bill should gain approval in Congress, where the ruling party has a majority, Giampaoli said. "But until then, there are going to be announcements and meetings, but everything is going to continue at a slow pace like now."