Buenos Aires — Retamco Operating has pulled out of a license in the Vaca Muerta after failing to come up with the financing to develop a block in the Argentinian shale play, a source close to the issue said Thursday, a sign of the hard economic times in the country.
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The US company's Retama Argentina unit won a license for the Parva Negra Oeste block in the play's dry gas window in November 2017, marking the entry of a new player in a field dominated by majors like Chevron, ExxonMobil, Shell and Total.
"Retama pulled out," Alberto Saggese, president of Gas y Petroleo del Neuquen (GyP), the province-owned company that handles tenders for blocks there, told S&P Global Platts.
The company -- and corporations in general in Argentina -- took a beating in 2018 after a more than 100% devaluation of the peso against the dollar pushed the country into a financial crisis, making credit more expensive for companies doing business in Argentina. The local benchmark interest rate is nearly 60%, the highest in the world.
Michael McElwrath, CEO of Retama Argentina, declined to comment on what had happened.
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Alejandro Monteiro, the minister of energy in Neuquen, told Rio Negro newspaper that Retama had lined up partners for the project, but they pulled out as Argentina's economy soured over the past few months, a situation made worse by a slowdown in the global economy.
Saggese told the newspaper that Retama got an extension on the terms of its license to buy rigs, and then asked for another extension due to the financing problems. But the government declined to award a second extension, meaning the concession has expired, he said.
GyP will seek a new developer for the block.
NO BIDDERS IN LATEST ROUND
GyP holds quarterly rounds for blocks, allowing companies to bring forward projects they wish to develop. If approved, licenses are awarded for the blocks.
However, in the last round, which ended in November, no bidders came forward, Saggese said.
That is a sign of how the country's financial wobbles are keeping smaller players out of the Vaca Muerta.
Nevertheless, the majors are pressing ahead. Shell said in December it will start a full-scale development on three blocks with the potential of reaching production of more than 70,000 b/d of oil equivalent in 2025, up from output of 4,500 boe/d this year. Chevron plans to work with the country's state-run YPF on a $800 million project to drill 20 wells in the play this year, while Malaysia's Petronas said in December it and YPF would invest $2.3 billion in a block with a target of boosting output to 60,000 boe/d by 2022 from 9,800 boe/d.
Vaca Muerta is leading a recovery in the country's oil and gas production after years of shortages and a reliance on imports. The Energy Secretariat forecasts the play will help double the country's total oil and natural gas production to 1 million b/d and 260 million cu m/d, respectively, by 2023, allowing exports to surge to 500,000 b/d and 80 million cu m/d by that time.
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