Buenos Aires — Argentinian energy industry participants are set to meet August 13 in Neuquen with labor leaders and politicians to discuss the future of the Vaca Muerta, as issues mount that could slow development of one of the world's largest shale plays.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
Omar Gutierrez, the governor of Neuquen, the southwestern province that holds most of the play's potential, said the meeting in Neuquen City will bring together national and provincial authorities as well as labor leaders and the executives from operators, rig suppliers and other services companies.
Among those set to attend the meeting are the country's energy minister, Javier Iguacel, and its production minister, Dante Sica, Gutierrez said in a statement late Monday.
"The objective of the meeting will be to articulate what is necessary in terms of credit, logistics and all those recurrent areas that make it possible for a working plan to be carried out," in order to make sure the play can develop and jobs be created, Gutierrez said.
Tension has been mounting since the exit of Juan Jose Aranguren as the country's energy minister in June, raising concerns that changes in energy policy could cut the potential for profit, leading companies to trim investments.
His replacement has said wellhead gas prices will rise in line with inflation, now at about 30%. That is slower than previously established by Aranguren.
At the same time, a 50% devaluation of the currency against the dollar since the start of the year has pushed down earnings in dollar terms in the sector and pushed up some costs like importing rigs. An increase in the benchmark interest rate to 40% as well has made it harder to finance projects, from importing rigs to building infrastructure such as a revamped train line for lowering logistics costs in Vaca Muerta, a key to speeding up the pace of investment.
Despite the challenges, Iguacel expressed cheer about the growth potential of Vaca Muerta during a two-day visit to Neuquen last week.
"We are growing by leaps and bounds in Vaca Muerta," he said in a tweet after visiting the shale oil drilling sites of Mexico's Vista Oil & Gas and France's Total July 27.
Iguacel said more independent companies like Vista are needed to speed up and widen exploration and production.
But with production growth as forecast today, oil exports from the play will reach 500,000 barrels a year by 2023, or nearly 1,400 b/d.
That would be in addition to the around 28,700 b/d the country exported in 2017 of its heavier crude, according to energy ministry data.
Gas exports are due to restart in September, with the first heading to Chile, he added.
Even so, there are more immediate concerns for the play's development stemming from the country's financial problems.
A leading labor union in the Neuquen Basin has warned of walkouts and other measures if services companies continue to pay workers late.
"We are working so that the employees get paid before the fifth business day of each month," Ricardo Dewey, a leader of the union's branch in Anelo, a town at the heart of the play's current development, said in a statement Monday. "Otherwise we will make the corresponding complaints and we will take the measures that we have to take."
This could involve workers showing up at drilling sites but refraining from doing their tasks.
"We are very busy in Vaca Muerta and we know that investments will come permanently, but we also have this big problem with some contractors who cannot pay, who say they are in financial trouble," Dewey added.
The latest numbers from the Neuquen government show Vaca Muerta produced 50,098 b/d of crude in April, compared with production of 57,519 b/d of conventional oil and 3,854 b/d of associated oil from tight gas wells. Gas production from the play averaged 13.9 million cu m/d in April, compared with 22 million cu m/d from tight plays and 30.4 million cu m/d from conventional reserves, the data show.
Argentina is betting on Vaca Muerta to turn around years of sagging oil production as conventional reserves mature. The energy ministry estimates the play will lead a recovery in total oil production to 750,000 b/d in 2030, up from 478,000 b/d this year. Over the same period, total gas production is expected to reach as much as 200 million cu m/d in 2030, up from 125 million cu m/d this year. --Charles Newbery, firstname.lastname@example.org
--Edited by Keiron Greenhalgh, email@example.com