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Technology for Development of Non-conventional Hydrocarbons

Market Overview

Argentina’s energy industry is experiencing significant challenges. In 2011, the country became a net importer of energy for the first time since 1984. In 2013, Argentina’s energy imports reached approximately $13 billion. Private analysts forecast energy imports surpassing $14 billion in 2014. These imports constitute a significant drag on Argentina’s balance of payments, making development of local energy sources a high priority for the Argentine government. We expect government resources to flow toward this sector, along with policy changes to make investment and development more attractive and likely.

Shale-oil and shale-gas reserves in the Vaca Muerta formation, located in the Province of Neuquén, are estimated to hold 16 billion barrels of shale oil and approximately 310 trillion cubic feet (8.8 trillion cubic meters) of shale gas, which would give Argentina the world’s fourth-largest reserve of shale oil and second-largest of shale gas.

It is estimated that developing Vaca Muerta will require between $70 to 90 billion.

YPF, Argentina’s state-owned oil company and major oil & gas producer, recently signed a strategic partnership agreement with Chevron, comprising an initial investment of $1.24 billion in Vaca Muerta as part of a joint venture with YPF. Chevron and YPF announced a $1.6 billion follow-on agreement, which will be funded equally by both parties.

YPF has also signed agreements with Petronas of Malaysia and Dow Chemical, among other players. Although these partnerships have had a positive effect on the industry, YPF continues to make efforts to attract additional international investment to develop Vaca Muerta, in an effort to improve Argentina’s current energy situation in the medium term. YPF increased its energy production in 2013 by 3 percent; however, this was not enough to balance out an overall production decline of 2 percent for Argentina as a whole. These results are encouraging and convey positive signs to the market and to potential investors.

Currently, approximately 150 shale wells are in production in Vaca Muerta, which has geologic features comparable to the Barnett, Haynesville, Marcellus, and Eagle Ford shale formations in the United States. There are approximately 68 drilling rigs in operation, a 48 percent increase since 2012.

Market preference for U.S. technology in this sector is significant, given the U.S. experience and expertise in the shale segment. The U.S. Commercial Service in Buenos Aires encourages U.S. companies to contact us in order to learn more about the current business climate, market trends, and potential business opportunities.

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Environmental Framework Governing the Oil and Gas Sector

Onshore oil and gas resources in Argentina are governed by provincial governments, granted by Argentina’s constitution and regulated under the Federal Hydrocarbon Law #48. Thus, exploration permits are issued by the provincial government. Environmental protection regulations mandated by the Federal Secretary of Energy govern operators’ activities; typically, these regulations are more stringent at the provincial level. In addition, interested parties should be aware, that Argentina’s federal government has indicated a desire to increase its oversight over hydrocarbon development and may seek changes that supersede current powers granted to provincial governments. Parties should monitor events in Argentina in this vein.

Environmental Impact Studies are required by Resolution 105/92 and Resolution 340/93, which affect the oil and gas industry, and require annual auditing by consulting firms registered under the Secretary of Energy. Water is primarily regulated by the provincial government. In the province of Neuquen, the Water Resources Bureau (DGRH) is the regulatory body that enforces the provincial water code. Various interest groups demand a more stringent wastewater discharge framework, leading to reduced water contamination. In this context, various environmental experts have raised concerns regarding chemicals used in the fracking process and requested disclosure of fracking fluids’ contents, which currently is not mandatory in Argentina.

Environmental awareness and enforcement in Argentina is not comparable to what it is in the U.S. This segment presents significant business opportunities for U.S. exporters.

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Opportunities

YPF is currently drilling and completing vertical wells at a cost of approximately $7.5 million (down from $10 million, which was the cost of the first well drilled in Vaca Muerta). Each well is finalized in approximately 18 days. While YPF has increased its efficiency, it is still far from U.S. industry benchmarks of $2 to $3 million per perforation. Thus, this is an area in which U.S. firms can be competitive and add value to the local market.

As water is an essential resource for shale exploration, opportunities also exist for U.S. companies that can provide expertise, products, and services that improve the efficiency of water use and can improve wastewater treatment.

Relevant products/services in demand include the following:

Products: Biocides; Chemicals & Gases; Downhole Tools; Drill Bits & Reamers; Drilling Equipment; Drilling Fluids; Friction Reducers; Gelling Agents; Proppants; Sand Proppants; Stimulation Products; Tubular Goods; Produced-Water Treatment Systems; Water-Waste Treatment/Disposal Technologies; Data Collection Technology; Drilling Foot-Print Reduction Technologies; Land Disturbance-Mitigation Systems

Services: Completion & Production Services; Drilling Services; Pressure Pumping Services

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Useful Links

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Contact Information

Please feel free to contact the U.S. Commercial Service Argentina Specialist for additional information or assistance.

Marcelo Amden
Environmental Technologies Industry Specialist
U.S. Commercial Service Argentina
Embassy of the United States of America
Av. Colombia 4300
C1425GMN Buenos Aires, Argentina
Phone: (54-11) 5777-4509
Fax: (54-11) 5777-4203
Email: Marcelo.Amden@trade.gov

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