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Argentina's Vaca Muerta faces oil, gas production decline as protest hits sixth day: sources

Highlights

Health workers, truckers blocking roads

Production has held so far

But with rigs sidelined, decline is imminent as new wells can't be connected

Buenos Aires — Argentina's oil and natural gas output could begin to fall in the next few days if protesting health workers and truckers continue to block access to fields in Vaca Muerta, a shale play that has been driving growth, sources at two production companies there said April 12.

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Health workers in Neuquen province, where most of the play is located in northern Patagonia, started blocking highways April 7 to demand salary increases and a few days later were joined by truckers. The roadblocks are limiting access to fields in the play, which has been driving a recovery in oil and gas production from a slump last year.

"Production has not been affected yet," a source at one producer said on the condition of not being named, citing company policy. "But if the conflict is not resolved soon, then we will have an impact on production."

The source said that around 30 rigs have been sidelined in Vaca Muerta because of the roadblocks, including those used for drilling and for completions.

"The main problem that we have is the movement of people and key inputs in and out of the fields to continue with operations," the source added.

The oil and gas production is coming from wells already connected to pipeline systems, meaning that without access to fields to complete and connect new wells there will be a decline in output.

"We can't add new production," the source said.

Potentially large decline

The source said he did not know when production could start to decline, but added that it could be "soon," adding that the decline in output could be "important."

Vaca Muerta is one of the biggest shale plays in the world. It has been leading a recovery in Argentina's overall oil production since it slumped to a low of 445,614 b/d in May 2020 from a prepandemic 520,000 b/d in March that year, according to data from the national Energy Secretariat. The country's output returned to 492,040 b/d in February and was expected — before this protest — to reach 520,000 b/d by the end of 2021. Of the nationwide oil production in February, Vaca Muerta accounted for 139,564 b/d, or 28% of the total. With less than 10% of the play in full-scale development, that leaves plenty of room for growth.

It is similar for gas. While production has been in decline because of low prices since a most recent peak of 144.4 million cu m/d in July 2019, Vaca Muerta has huge potential to turn this around and make the country a global exporter, now the source of nearly a quarter of the country's total gas output of 114.5 million cu m/d in February.

A source at another oil producer also warned of a production decline.

"For the moment we are not impacted," the source said, also speaking on the condition of not being named. "But if it continues we will see an impact on production."

Shortages possible

The protest is also threatening to cause shortages of petroleum products.

According to Rio Negro, a newspaper in Neuquen, service stations were already reporting a depletion in their stocks as trucks have not been able to bring new supplies.