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Argentina Oil and Gas 2015 PRE-RELEASEEDITION Global Business Reports PRE-RELEASE | ARGENTINA OIL AND GAS 2015 www.gbreports.com 2 Global Business Reports | ARGENTINA OIL AND GAS 2015 PRE-RELEASE Global Business Reports www.gbreports.com ARGENTINA OIL AND GAS 2015 | PRE-RELEASE Dear Readers, Table of Contents 4. The Revival of a Century-Old Well N-1, Argentina’s first oil well, was drilled in the windy city of ComodoroRivadavia Industry: 108 years ago in 1907. Over the last century, companies like YPF, Argentina’s national 2015: A Time of Transition oil company, and Shell have led the development of a mature oil and gas industry that 5. Argentina Map has attracted the industry’s majors. Many Argentine oilmen stress that Argentina is a country with oil, but not a petrostate. Nevertheless, Argentina had been proudly energy 7. State of the Industry independent since the 1980s, but became a net importer once again in 2011, to the The Good, the Bad, and the Ugly dismay of the country’s industry and political leaders. Yet shale oil and gas discoveries 13. The Role of the National and in recent years may make Argentina energy independent once again. Provincial Governments: Meat-lovers’ mouths have always watered at the thought of an Argentine steak. But an- Indispensable, if Unavoidable, Parnters other kind of Argentine dead cow has been tantalizing oil and gas investors since 2013, 20. Interview with YPF when the US Energy Information Administration announced that the world’s second largest shale gas reserves and fourth largest shale oil reserves lie beneath Argentina’s 22. YPF: subsurface, mostly at VacaMuerta. The Leader of an Industry Argentina’s newest and massive shale discoveries complement the country’s existing 24. Vaca Muerta and Unconventionals: conventional and offshore opportunities. International players have already arrived, The Future of an Industry but Argentina will need more if the country is to develop its full hydrocarbon potential. Hytech Ingeniería Expert Opinion Article Argentina’s presidential elections now place the country at a crossroads: either sup- 28. port the oil and gas industry, or face the consequences of ever-dwindling oil and gas 33. Beyond Vaca Muerta: production. Remaining Conventional Opportunities 38. Productivity and Labor: A Surmountable Obstacle Alice Pascoletti 42. Petrochemicals: Project Director Downstream Looking Up Juan Ramirez 46. Conclusion: Journalist New opportunities place Argentina at a crossroad Global Business Reports Special Welcome Dear Readers, Please allow me to extend a warm welcome to anyone interested in investing in Argen- tina’s oil and gas industry. Since 1907, local and foreign oil and gas companies have contributed to the construction of Argentina’s world-class oil and gas industry. Over a century of experience has honed Ar- Argentina Oil and Gas 2015 gentina’s expertise in conventional exploration and production of oil and especially gas. Journalist: Juan Ramirez Yet the discovery of VacaMuerta, home to the world’s second largest shale gas reserves Project Director: Alice Pascoletti and fourth largest oil reserves, prompts me to renew my invitation to foreign investors Regional Director, EMEA: Sharon Saylor General Manager: Agostina Da Cunha and experts. Senior Partner: Mungo Smith Fully developing all of Argentina’s hydrocarbon resources will require many players. Doz- Executive Editor: John Bowlus ens of oil and gas companies are already looking for and producing oil and gas, but the Graphic Designer: Leigh Johnson and Gonzalo Da Cunha sheer abundance of Argentina’s hydrocarbon resources—both conventional and uncon- Cover Image: Courtesy of YPF A Global Business Reports Publication ventional—will require many dozens more, if not hundreds. I especially look forward to For updated industry news from our on-the-ground teams welcoming the kinds of small and medium-sized companies that have helped the United around the world, please visit our website at gbreports. com, subscribe to our newsletter by signing up to our VIP list States ignite its own shale revolution. through our website, or follow us on Twitter: @GBReports. In recent years, the most important companies in the world have decided to invest in the future of Argentina’s oil and gas industry. Yet Argentina and I look forward to welcoming many more partners. With appreciation and best regards, I am Sincerely yours, www.gbreports.com Jorge Sapag Governor of the Province of Neuquén Global Business Reports | ARGENTINA OIL AND GAS 2015 PRE-RELEASE 3 Global Business Reports PRE-RELEASE | ARGENTINA OIL AND GAS 2015 www.gbreports.com The Revival of a Century-Old Industry San SalvadorNOROESTE 2015: A Time of Transition de Jujuy San SalvadorNOROESTE deSalta Jujuy Asuncion Salta OVERVIEW 16.2 billion barrels of shale oil and 308 tril- Formosa Meat-lovers’ mouths water at the thought lion cubic feet (TCF) of shale gas according Asuncion CHACO Formosa San Miguel Santiago of an Argentine steak. But another kind of to the EIA, and its shale is exceptionally PARANENSEResistencia de Tucuman del EsteroCHACO Posadas San Miguel Santiago Corrientes Argentine dead cow has been tantalizing oil thick. The abundance of shale resources is Catamarca PARANENSE de Tucuman del Estero Resistencia Posadas and gas investors in recent years. In 2013, 2.35 good news for a country hooked on oil and La Corrientes Catamarca the U.S. Energy Information Administration gas. While hydrocarbons normally supply Ribja 2.35 La (EIA) announced that the world’s second Billion Barrels about 60% of a countries’ energy needs, Ar- BOLSONESRibja largest shale gas reserves and fourth largest gentina relies on hydrocarbons for almost BillionPROVED OIL Barrels RESERVES BOLSONESCordoba shale oil reserves lie beneath Argentina’s 90% of its energy supply—54% coming San Juan Santa Fe Parana Source: U.S. EIA Cordoba subsurface, mostly at Vaca Muerta. PROVED OIL RESERVES from gas 33% from oil. SanMendoza Juan Santa Fe Parana Yet Argentina has been drilling for oil Source: U.S. EIA Argentina has a long and rich history with CUYANASan Luis Mendoza SAN and gas for over a century. When walking natural gas, as Osvaldo del Campo, CEO of Santiago CUYANASan LuisLUIS SAN MERCEDES through Comodoro Rivadavia’s streets, the GNC Galileo Technologies, explained: “Ar- Motevideo Santiago LUIS Buenos PUNTA DEL MERCEDES La Plata dust blown up by the city’s infamous gales 11.14 gentina has been developing its natural gas Aires Motevideo ESTE Buenos PUNTA DEL could easily distract a passerby from noting industry for more than 80 years, making it Aires La Plata 11.14 Santa Rosa MACACHIN ESTE Trillion Cubic Feet SALADO a bronze plaque on a nondescript build- one of the countries with the longest his- NEUQUINA Santa Rosa MACACHIN ing that reads: “In this place were raised: a Trillion Cubic Feet tory in this field. Buenos Aires has received SALADO PROVED NATURAL GAS RESERVES NEUQUINA tower and installation with which Well N-1 natural gas from Patagonia since the 1940s, Neuquen Source: U.S. EIA South was drilled, which preceded the discovery PROVED NATURAL GAS RESERVES with a pipeline that was the longest in the CLAROMECÓ Pacific Neuquen Source: U.S. EIA South CLAROMECÓ of oil in the region—YPF’s golden anniversa- world at the time. The industry grew signifi- Ocean ry, 1907-1957”. Whether Argentina’s newest and it is particularly interesting that some cantly so that by the end of the 1970s natu- Pacific COLORADO Ocean Viedma and most massive hydrocarbon discovery companies have grown when production ral gas was approximately 20% of the ener- COLORADO ÑIRIHUAU will sustain the country’s oil and gas in- trends of oil and gas have gone down. Ar- gy matrix in the country. In 1979, Argentina Viedma dustry for another 108 years remains to be gentine management has been forced to be discovered Loma La Lata during one of the ÑIRIHUAU Rawson PLA. VALDÉS South Atlantic seen, but the find complements what Jorge creative and innovative when confronted worst economic periods in the oil and gas Rawson PLA. VALDÉS South Ocean C. Bacher, a partner at PricewaterhouseC- with adversities like inflation, devaluation, industry. Fifteen years later…Vaca Muerta RAWSON Atlantic Ocean oopers (PwC), considers are three other and social unrest. However, as an indus- is 100 times bigger than Loma La Lata, and RAWSON competitive advantages of the Argentine try, oil and gas is regarded as conservative. history will repeat itself.” DEL GOLFO SAN JORGE economy: “agribusiness, which is highly Other industries, such as technology, retail, DEL GOLFO productive compared to other countries; its and banking, have more modern ways of THE INDUSTRY IN NUMBERS SAN JORGE infrastructure; and the country’s financial management and administration. Oil and Despite Argentina’s hydrocarbon addiction, SAN JULIÁN industry, which is developed but smaller gas in Argentina is catching up”. the country has had to look to neighbors SAN JULIÁN MALVINAS than in countries like Brazil and Chile.” Oilmen and investors are now well aware of like Bolivia to get its fix, as oil and gas pro- NORTE AUSTRAL Bacher continued: “Management of oil and Argentina’s abundant resources and favor- duction have steadily fallen since 2010. In MALVINAS NORTE gas companies in Argentina is very talented, able geology. Vaca Muerta may hold about the last five years, the drop in gas produc- AUSTRALRio Gallegos ARGENTINE PETROELUM PRODUCTION, CONSUMPTION, AND REFINERY CAPACITY (THOUSAND BARRELS PER DAY), 1980-2014 Rio Source: U.S. EIA Gallegos MALVINAS ARGENTINE PETROELUM