Shale boom has ended in Argentina
2022.12.27 07:15
Shale boom has ended in Argentina
Budrigannews.com – As oil and gas infrastructure nears capacity, Argentina’s booming shale production in the Vaca Muerta formation, which rivals the Permian Basin in the United States, faces the threat of running out of roads, which could halt the country’s rapid expansion.
Now, the government is working feverishly to improve infrastructure: Midway through the next year, a significant new gas pipeline is scheduled to go online, and there are plans for new export terminals near Buenos Aires. In an effort to encourage investment, the government is also working on a liquefied natural gas (LNG) law to present to Congress.
After years of development that stopped and started, the future of Vaca Muerta depends on how the government does.
Belgium-sized formation can be found in Argentina’s Patagonian south. It has the fourth-largest shale oil deposits and the second-largest shale gas reserves in the world. As the world looks for alternatives to Russia, whose energy industry has been heavily sanctioned due to its invasion of Ukraine, it could become a key global supplier of gas.
However, Reuters reviewed industry data and conducted interviews with a dozen executives, representatives from the local and national governments, and residents of Vaca Muerta. These interviews revealed how bottlenecks, such as pipelines operating at capacity and a lack of fracking equipment and utilities, threaten to impede the country’s plans.
Pablo Trovarelli, head of midstream operations at a gas treatment plant operated by Transportadora de Gas del Sur (TGS) in Vaca Muerta, stated, “The current gas pipelines are very full,” adding that new pipelines were required to increase production.
Trovarelli told Reuters at his office in the energy transport hub town of Tratayén in the province of Neuquen that the plant intends to increase its capacity from 15 million cubic meters per day (m3/d) this year to 21 million m3/d in 2023. However, it cannot meet these goals unless new pipelines are operational.
Trovarelli stated, “If that doesn’t happen, I can’t expand because I have no place to inject the gas.”
Oil and gas production in Vaca Muerta is exceeding the capacity of pipelines, according to data from consultancy Rystad Energy. At pipeline capacity, Neuquen produces approximately 280,000 barrels of oil per day. Gas is also at a maximum of approximately 2 billion cubic feet per day.
According to Rystad analyst Andrés Villarroel, some recent oil cargoes had to be moved by truck because of pipeline shortages.
Anelo, a crucial Vaca Muerta shale town, shows obvious signs of strain on the ground. Locals stated that a problem for attracting new oil and gas workers needed to propel the boom is that many homes are not connected to water or sewage, and red gravel roads remain unpaved.
Local mayor Milton Morales, 40, said, “Anelo is about to collapse.” He cited the town’s lack of services and the hundreds of homes that were not connected to the gas grid. In the past five years, the population has increased by fivefold.
He stated, “It is ludicrous to talk about the potential to develop Vaca Muerta and the projections generated by the reserves that we have behind our town and to think that Anelo today has 700 families without gas.” He also stated that the town’s reserves are behind the town.
Concerned that infrastructure restrictions will reduce energy output, Buenos Aires has taken note. In order to eliminate a $5 billion energy deficit and replenish depleted foreign currency reserves, it has made Vaca Muerta a key focus for raising export dollars.
On the sidelines of an event that took place in Buenos Aires, Energy Secretary Flavia Royon told Reuters, “Today we are focused on the entire transport plan, because first we need the internal supply to be able to promote exports later.”
By guaranteeing long-term stability, the government is pushing an LNG bill that should encourage investment across the sector. It’s likewise centered around building the Nestor Kirchner gas pipeline from Vaca Muerta to approach Buenos Aires that could ultimately increment complete vehicle limit by a third.
The first section of that pipeline, which adds 24 million m3/day of capacity, is expected to be completed in the coming year. It will add 44 million m3/day to the country’s current total of approximately 120 million m3/day by the end of a second stage.
The LNG bill, which would provide the sector with improved access to foreign exchange markets and tax breaks, could be introduced to Congress in the coming days or weeks, according to a source at the state energy company YPF. That would assist with opening arrangements incorporating a likely one with Malaysian energy monster Petronas.
Shale oil and gas production in Vaca Muerta has increased significantly over the past year as a result of improved well efficiency and government efforts to boost production.
Oil and gas executives stated that in order for their output to continue growing, they needed new export markets.
“We could increase production, but more demand would be required. Ricardo Markous, president of Tecpetrol, which manages the enormous Fortin de Piedra field in Vaca Muerta, stated, “Local and regional demand is not sufficient.”
He stated that Argentina lacked the infrastructure necessary to export LNG.
In order to achieve gas exports of approximately $15 billion by 2027, the government hopes to attract investments worth approximately $10 billion in liquefaction plants. The plants, which are essential for exporting gas abroad, take years to construct.
A local oil company’s chief operating officer, who requested anonymity, stated that investment was also required to enhance and expand crude export ports.
Oil and gas executives claimed that investment was hindered by a complex economic environment, which included tight capital controls restricting access to foreign exchange and inflation that was approaching 100 percent. They want a sector-specific regulatory framework.
“Vaca Muerta’s future creation it in danger since there aren’t an adequate number of dollars for SMEs or oil administration firms,” Juan José Aranguren, a previous Shell (LON:) executive and government official, according to a Buenos Aires seminar.
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He stated that having access to foreign currency is essential for paying for imported services or equipment.
Executives stated that Vaca Muerta is at a crossroads. Equipment bottlenecks continue to be a problem, despite the government’s efforts to boost production.
According to Rystad, there are approximately eight fracking crews in Vaca Muerta at the moment, in contrast to nearly 280 in the United States. Additionally, additional hydraulic fracturing equipment is required to extract shale reserves.
Marcelo Mindlin, executive president of Pampa Energa, the third-largest gas producer in the Neuquén basin, stated, “The amount of activity that will take place in Vaca Muerta, the fracture sets we have today in the country are not enough.”
During a visit to one of the company’s fields, Mindlin let Reuters know that Pampa was making a bet in light of expectations Vaca Muerta’s true capacity could at long last be opened.
“We are bringing in our own (crack set) to stay away from any difficulties to our development and speculation,” he said.
