A Special Report from Oil and Gas Investor and Global Business Reports

Argentina A Special Report From Oil and Gas Investor and Global Business Reports Photo courtesy of YPF July 2011 - OilandGasInvestor.com P-1 ARGENTINA OIL AND GAS The Revival of Century-Old Industry 2015: A Time of Transition eat-lovers’ mouths water at the thought of an Ar- Yet 2015 seems to be a turning point for hydrocarbon gentine steak, but another kind of Argentine dead production in Argentina. Producers extracted about 1.4% Mcow has been tantalizing oil and gas investors in more oil and 1.8% more gas in July 2015 than they had in recent years. In 2013, the U.S. Energy Information Admin- the same month a year ago, which indicates that the last few istration (EIA) announced that the world’s second largest years of local and foreign investment are finally paying off. shale gas reserves and fourth largest shale oil reserves lie Three companies dominate hydrocarbon production in beneath Argentina’s subsurface, mostly at Vaca Muerta, in Argentina: Yacimientos Petrolíferos Fiscales (YPF), Pan the province of Neuquén. American Energy, and Total. From 2010 to 2014, YPF and Yet Argentina has been drilling for oil and gas for over Pan American Energy produced 55% of all the oil that Ar- a century. When walking through Comodoro Rivadavia’s gentina produced, while YPF and Total produced 54% of streets in Patagonia, the dust blown up by the city’s infa- all the gas that Argentina produced, according to data from mous gales could easily distract a passerby from noting a Argentina’s Secretary of Energy. In 2014, YPF was the top bronze plaque on a nondescript building that reads: “In this oil and gas producer in Argentina. From 2010 to 2013, Total place were raised a tower and installation with which Well dominated gas production as YPF produced an average of N-1 was drilled, which preceded the discovery of oil in the about 18% less every year. But in 2014, YPF took the top region—YPF’s golden anniversary, 1907-1957.” Whether spot for both oil and gas when it produced almost 2% more Argentina’s newest and most massive hydrocarbon discov- than Total. Since 2010, Pan American Energy has been con- ery will sustain the country’s oil and gas industry for an- sistently the second most prolific oil producer and has pro- other 108 years remains to be seen. duced about half of what YPF produces every year. Oilmen and investors are now well aware of Argentina’s Argentina has five hydrocarbon-producing basins. From abundant resources and favorable geology. Vaca Muerta may northernmost to southernmost, they are the Northeast ba- hold about 16.2 billion barrels of shale oil and 308 trillion cu- sin, Cuyana basin, Neuquén basin, San Jorge Gulf basin, bic feet (Tcf) of shale gas, according to the EIA, and its shale and Austral basin. Most of Argentina’s oil comes from the is exceptionally thick. The abundance of shale resources is San Jorge Gulf and Neuquén basins, which together pro- good news for a country hooked on oil and gas. While hy- duced 88% of the country’s oil from 2010 to 2014. During drocarbons normally supply about 60% of a country’s energy the same time, the Neuquén and Austral basins produced needs, Argentina relies on hydrocarbons for almost 90% of about 79% of the country’s gas, of which Neuquén pro- its energy supply—54% coming from gas, 33% from oil. duced 55%. Argentina has a long and rich history with natural gas, Ernesto López Anadón, president of the Instituto Ar- as Osvaldo del Campo, CEO of Galileo Technologies, ex- gentino de Petróleo y Gas (IAPG), reflected on the features plained: “Argentina has been developing its natural gas of Argentina’s producing basins: “Each province has its industry for more than 80 years, making it one of the coun- own basin with distinct characteristics…the Neuquén basin tries with the longest history in this field…in 1979, Argen- differs from San Jorge in that it is prone to light oil with tina discovered Loma La Lata during one of the worst eco- much more gas content than the San Jorge basin. And then nomic periods in the oil and gas industry. Fifteen years later Vaca Muerta has good organic content, good quality of rock … Vaca Muerta is 100 times bigger than Loma La Lata, and that can be fractured, and the kind of access to water and history will repeat itself.” other infrastructure needed to develop the oil and gas sector that the other basins lack.” The Industry in Numbers If YPF, Pan American Energy, and Total are the main Despite Argentina’s hydrocarbon addiction, the country has corporate players, the provinces of Neuquén, Chubut, and had to look to neighbors like Bolivia to get its fix, as oil and Santa Cruz are the main government players, along with the gas production has steadily fallen since 2010. In the last five national government. These three provinces regulated the years, the drop in gas production has outpaced the drop in production of almost 70% of total oil production from 2010 oil production. From 2010 to 2014, gas production fell by an to 2014. Yet Neuquén stands out as the most important pro- average of about 3.1% while oil production fell by an aver- vincial player, overseeing about 45% of Argentina’s total age of about 2.5%. gas production, the most vital hydrocarbon to the country’s Oil and gas production continued to decline in 2014, economy, over the last five years. when oil production hit a record-low of about 532,159 barrels per day (bbl/d), while natural gas production also bot- This report was prepared by Alice tomed out at about 113,654.8 Mm3 per day. In 2011, Argen- Pascoletti and Juan Ramirez of Global Business tina became a net energy importer for the first time since Reports. For more information contact: 1984. Getting its hydrocarbon fix has come at a cost—Ar- [email protected] gentina now has an energy trade deficit of about $7 billion. P-2 December 2015 - OilandGasInvestor.com December 2015 - OilandGasInvestor.com P-3 ARGENTINA OIL AND GAS most important projects in the last sevenGlobal years, Business Reportsespecially in Patagonia: www.gbreports.com ARGENTINA OIL AND GAS 2015 | PRE-RELEASE “Since 2008, Contrera’s main projects in Argentina have related to the State of the Industry expansiontion has of outpaced the country’s the drop gasin oil trans produc- - tion. From 2010 to 2014, gas production fell The Good, the Bad, and the Ugly port capacity. The government and ENARSAby an averageaimed of at about increasing 3.1% while trans oil pro- - duction fell by an average of about 2.5%. port capacity of the pipes that come Infrastructure Oil and gas production continued to de- from all regions.” Some foreign oil and gas investors cline in 2014, when oil production hit a may wonder whether old, leaky pipe- Likerecord-low pipelines of about and intra-field 532 barrels roads, per day companies(bpd), whilein Argentina natural gas willproduction need toalso San SalvadorNOROESTE lines will disrupt production; whether de Jujuy improvebottomed the roadsout at aboutand highways113,654.8 Mm3 that per single-lane roads will cause traffic Salta connectday. oilIn 2011,and gasArgentina fields became to cities a netand en - jams and delay important deliveries; Asuncion or whether logistics companies will ports.ergy López importer Anadón for the explained:first time since “Up 1984. Formosa to now,Getting the itslack hydrocarbon of adequate fix has transpor come at- a CHACO be professional enough to foresee San Miguel cost—Argentina now has an energy trade SantiagoPARANENSE tation options to and from the Neu- de Tucuman del Estero Resistencia Posadas and fulfill delivery times. Oil and gas deficit of about $7 billion. Corrientes infrastructure, transportation infra- quén has not been a problem since oil Catamarca 2.35 Yet 2015 seems to be a turning point for La and gas activity does not yet compare structure, and logistics are three is- hydrocarbon production in Argentina. Pro- Ribja to the activity in, for example, the sues that pose distinct challenges in Billion Barrels ducers extracted about 1.4% more oil and BOLSONES United States. But if the number of Argentina, but that also provide sev- 1.8% more gas in July 2015 than they had in Cordoba PROVED OIL RESERVES rigs and fracking equipment were to eral opportunities. Ernesto López Anadón, president, Instituto Jean-Marc Hosanski, managing director, the same month a year ago, which indicates San Juan Santa Fe Parana Source: U.S. EIA Argentino de Petróleo y Gas (IAPG) Total Austral triple, then the lack of roads and rail- López Anadón of the IAPG does that the last few years of local and foreign Mendoza roadsinvestment would be are a finally problem. paying Theof. need CUYANASan Luis not believe that oil and gas infrastruc- SAN companies is Contreras Hermanos, which built much of the to transferThree companieswater, propane, dominate chemicals hydrocar - Santiago LUIS ture will be a problem: “The industry is capable of sup- MERCEDES and trucksbon production will surpass in Argentina: the capacity Yacimientos of Motevideo plying the rigs, pumps, motors etc., that are required to internal road network in the fields of the San Jorge Gulf Buenos PUNTA DEL La Plata 11.14 our currentPetrolíferos infrastructure. Fiscales (YPF), ThatPan American said, Aires ESTE sustain increased activity.” basin throughout the 1960s and 1970s. federalEnergy, and and provincial Total. From governments2010 to 2014, YPF With a century-old hydrocarbon industry, Argentina Yet pipelines are another story. Jean-Marc Hosanski, Santa Rosa MACACHIN Trillion Cubic Feet and Pan American Energy produced 55% SALADO managing director of Total Austral, explained: “The main know what needs to be done and have NEUQUINA unsurprisingly has well-established companies that have of all the oil that Argentina produced, while built the country’s oil and gas infrastructure.

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