Argentina seeks to boost hydrocarbon production

As part of its strategy to pull the country out of a financial crisis, the government of Argentina will promote oil and natural gas production, with the objective to increase hydrocarbon exports. According to the government, an increase in hydrocarbon production will allow to adequately supply domestic needs, replace imports and to improve energy trade balance. In 2019, imports of natural gas and petroleum products accounted respectively for 10% and 20% of Argentina’s consumption.

Earlier in August 2020, the province of Neuquén (Argentina) awarded the Los Todos II Oeste area concession to ExxonMobil, located in the Vaca Muerta shale play. The Vaca Muerta shale play has estimated gas reserves at around 8,700 bcm and oil reserves at 16.2 Gbl. ExxonMobil is the operator of the block with a 90% stake, together with the provincial oil & gas company Gas y Petróleo del Neuquén.

In May 2020, the Argentinian government set a minimum oil reference price for local producers at US$45/bbl, with the objective to increase domestic production and to limit imports. The country would take the price of Medanito, a light crude from the basin of Neuquén, as a reference. The minimum oil reference price will remain in place until 31 December 2020.

The average break-even oil price for most Argentinian producers is estimated at more than US$30/bbl but can be higher than US$50/bbl for projects in the Vaca Muerta shale gas play. Shale gas production from Vaca Muerta has increased steadily in the last two years and the country bets on the Vaca Muerta field to improve domestic energy supply and begin natural gas exports.