A long the western edge
of Argentina’s Patagonia, on an arid steppe
nestled against the
Andes mountains, lies the Vaca
Muerta shale formation. And
ever since engineers confirmed
what a US geologist suspected
a century ago – that Vaca Muerta, or “Dead cow,” contains massive amounts of oil and gas – the
rush to replicate the US fracking boom was on.
First came YPF SA, the staterun oil giant, and Chevron
Corp. Then the likes of Total
SA and Royal Dutch Shell Plc.
Between them, they poured
some US$13 billion into exploration over the past eight years.
None of them ever had much to
show for it, though. Obstacles
kept popping up, and production was marginal.
Until now. Last month, two
companies exported two small
cargoes from the formation, one
of light oil, the other of liquefied
natural gas (LNG), foreshadowing what industry officials
say will be a steady flow of shipments by the end of the year.
It’s way too early to declare
victory – any number of logistical and economic hurdles remain. But it’s the first sign that
all the money and time invested
might actually pay off, and turn
Argentina back into the global
energy provider it used to be
well over a decade ago.
“The system is going to change from one of importing oil and
products to one of exporting,”
said Sean Rooney, Shell’s chief
in Argentina told Bloomberg.
“And that’s going to grow over
time. It’s going to be some hundreds of thousands of barrels a
Shell announced in December a scale-up of operations and,
in a seal of approval for the first
intensive shale drilling outside
North America, Exxon Mobil
Corp this month made a similar
commitment. Argentina’s light
oil shipments are now forecast
to reach 70,000 barrels a day
LONG WAY TO GO
There’s a long way to go to match – or even come close to
matching – the benchmark of
shale production, the Permian
Basin in Texas and New Mexico, where output is driving Gulf
Coast shipments to about 2.5
million barrels a day. Infrastructure developments, including roads and gathering pipelines, lag drilling progress.
Producers also want President
Mauricio Macri’s government,
which has been shifting Argentina away from protectionism,
to finally let exports off the
leash. That means ending a
right of first refusal for domestic refiners and coming good on
a promise to ditch export taxes
at the end of 2020.
“If industry players and the
government embrace this and
support energy policies to facilitate exports, we have an exciting opportunity ahead,” said
Miguel Galuccio, who led YPF’s
first incursions into the dead
cow and now runs Vista
Oil & Gas, which
sent the recent
light oil cargo.
Drillers must also take into
account politics. Most would
like to see market-oriented President Mauricio Macri win reelection in October, especially
since he faces an opposition
ticket featuring former leader
Cristina Fernández de Kirchner, whose capital controls
spooked foreign investors.
In addition to the Vista shipment, YPF recently exported
Argentina’s first liquefied natural gas from a barge it has anchored off the Atlantic coast.
Next quarter, it’s planning more shipments from the barge,
which can liquefy as many as
eight cargoes a year. There’s
also room to grow sales by pipeline to neighbours Chile, Brazil and Uruguay.
These gas exports are shortterm solutions. With consumption in Argentina tailing off severely in warmer months, domestic drillers need access
to much bigger markets
to make shale gas
investments worthwhile. That’s
why they’re already mulling
of an LNG
t e r m i n a l
b i l l i o n ,
e i t h e r o n
Chile’s Pacific coast or at an Argentine
“The key to tapping our potential is the LNG terminal,” Marcos Bulgheroni, chief executive
officer of Pan American Energy, said at a shale conference in
oil city Neuquén this month.
Ideally, Bulgheroni said, the
dead cow needs both coastal
outlets. (No-one, it should be
noted, really knows why it’s called the dead cow. The most
commonly told story in industry
circles is that it’s because the
formation looks like a cow lying
down when viewed from the
If export plans move ahead
swiftly, LNG production will
soar and by 2024 Argentina
could steal market share in Asia
from the US, especially because
AARON M. SPRECHER/BLOOMBERG
tankers sailing from its shores
can avoid congestion in the Panama Canal, according to a report by energy research firm
But if Argentina fails to gain
a slice of the global LNG market
in the next few years, producers
would likely pull back drilling
plans. To be sure, the nation is
still an importer of the fuel.
When it comes to supplying
energy, time really is of the essence. At the conference in
Neuquén, President Macri warned a room of oil executives that
the world’s slow move away
from fossil fuels imperils
Argentina’s shale prize.
“Oil folks are laid back about
the fact there’s still time,” he
said. “But you never know where ingenuity will take us. So we
need to make the most of the