Argentina Oil &
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ARGENTINA OIL & GAS 2016 Vaca Muerta - Conventionals - E&P - Services and Equipment - YPF Government - Regulations - Legal Framework - Analysis - Survey ARGENTINA OIL & GAS 2016 ARGENTINA Dear Reader, Welcome to GBR’s Industry Exploration covering the current state of the Oil and Gas Industry in Argentina. We could not have visited the country at a more exciting time. 2015 has been a pivotal year for the industry, as Argentina attempts to wrestle back to energy self-sufficiency in the immediate term, and anticipates a shale revolution in the medium to long term. To add to the velocity of change, Argentines ousted the populist government of the Kirchners, who between husband, and then wife, have governed the country since 2003, at great detriment to the Argentine economy, to elect President Macri in December, who leads a coalition fittingly entitled ‘Cambiemos’, ‘Let’s Change’ and has set about his mission with gusto. Currency controls have already been lifted, the Argentine debt has been successfully renegotiated and, after twelve years on the fringes, Argentina is now set to reintegrate with the global economy. With the second largest shale deposits in the world outside of the USA, at ‘Vaca Muerta’ Argentines hope to imitate the shale revolution that has helped to lift the USA out of its economic gloom and enabled the country to overtake Saudi Arabia as the world’s leading oil producer. The challenge is as daunting as the opportunity is immense. Argentina must attract billions of dollars of investment as well as entice junior and independent oil companies with the relevant expertise to take a play in the development of its fledgling shale industry so that the bonanza that is shale can benefit the economy. Compiling this report, we were able to speak with the full gambit of players that are involved in the industry from majors to minors, E&P to EPC. Given the rapidity of recent changes, some of their comments may be slightly outdated as most interviews were conducted during the second half of the very eventful year that was 2015. Nevertheless, we have updated wherever possible in order to represent the contemporary issues in Argentina as perceived by its stakeholders today. I hope that readers will find this study helpful and informative in allowing a clearer understanding of this fascinating country at this pivotal time. It only remains for me to thank the Argentines and foreign investors that we met during our lengthy stay in beautiful Argentina for their insights, their hospitality and the kindness and enthusiasm with which they received our team. Their optimism was contagious and I hope that the pages that follow reflect that. Best Regards, Mungo Smith, Senior Partner, Global Business Reports PERU Exclusive Data and Survey Interviews Maps BOLIVIA GBR conducted an Leaders from both the Quantitative data help anonymous opinion survey private and public sector readers better understand amongst Argentina’s leading delve into the nuances and the position of Argentina, oil & gas executives. 72 64 56 48 nascent developments that especially relative to its Learn its results. PARAGUAY are shaping the industry. global competitors. JUJUY San Salvador 14, 18, 20, 22, 23, 7, 11, 13, 44, 69 20, 21, 40, de Jujuy Salta and many more 41, 64 FORMOSA SALTA 24 24 Asuncion BRAZIL Formosa TUCUMAN CHACO San Miguel Santiago de Tucumán del Estero Resistencia Posadas MISIONES CATAMARCA Corrientes Catamarca SANTIAGO Editorial Vaca La DE ESTERO CORRIENTES Rioja LA RIOJA SANTA Content Muerta FE SAN JUAN Global Business Reports’ Argentina is home to the 80 Córdoba journalists provide on-the- largest shale reserves San Juan Santa Fe Paraná ENTRE ground analysis of the trends outside of USA and China. Mendoza CORDOBA San Luis RIOS that are shaping Argentina’s GBR visits Vaca Muerta, 32 32 URUGUAY oil and gas industry. the greatest deposit. Santiago SAN LUIS South MENDOZA Montevideo Pacific Buenos 10, 26, 40, 48, 52, 66-78 Aires La Plata Ocean South and many more CHILE Atlantic Ocean Santa Rosa BUENOS AIRES LA PAMPA NEUQUEN Neuquén An Introduction to YPF 97. Interview with Wintershall Argentina Oil and Gas in Argentina 98. Interview with Petrolera Entre Lomas RIO 58. YPF – A hybrid giant 99. Interview with Ingeniería SIMA Argentina Oil & Gas 2016 NEGRO 10. Can Argentina's massive shale reserves fuel an 60. Interview with YPF 100. OFS Perspective – Searching for the sweet Industy Explorations Global Business Reports Viedma 40 economic revival as in the USA? 62. Interview with YPF Tecnología (Y-TEC) spot 40 14. Interview with Minister of Energy and Mines 64. Production Survey 102. Interview with Bolland 18. Interview with Instituto de Petroleo y Gaz 104. Interview with Rodial (IAPG) 106. Interview with Transeparation Rawson 20. Investment Climate Survey Vaca Muerta and Unconventionals 108. EPC – Cautiously building 22. Interview with Mantamat y Asociados 110. Interview with AESA Area CHUBUT 23. Interview with Apud & Asociados 68. A play for high stakes 112. Interview with Sener Argentina • Total 2,780,400 km2 (*) 70. Loma Campana – A trip down the ruta del 114. Interview with Contreras Hermanos 2 petróleo 116. Interview with Panamerican Geophysical Considering 1,084,386 km of the Exclusive Economic Zone area, Argentina 71. Interview with Tecpetrol 117. Suppliers – Satisfying unconventional Argentina is 3,939,463 km2 Rules and Regulations in 72. Interview with Andes Energía desires In this figure the areas claimed are not included. 8th largest country International Boundary Argentina Oil and Gas 74. Expert Opinion: Optimism about the future of 118. Interview with Refinor shale development in Argentina should 119. Interview with GAPP • Water (%) 1.57 SANTA Province Boundary CRUZ 26. State of the Industry - Rehauling a sprawling continue - Ali Moshiri – Chevron 120. Interview with Sandvik Coromant National Capital infrastructure 75. Interview with DLS Archer 122. Interview with SA Lito Gonella Population Province Capital 48 30. Interview with Dow Argentina 76. Interview with CEOPE 124. Interview with Oiltanking • 2015 estimate48 43,431,886 Falkland Islands 33. Interview with Ernst & Young Argentina 78. Interview with Madalena Energy 125. Interview with Thorsa • Density 14.4/km2 Islas Malvinas administred by U.K., 34. Interview with Deloitte Argentina 127. Interview with Air Liquide Argentina & claimed by Argentina N Rio Uruguay (*)Area does not include territorial claims in Antarctica 36. Interview with PwC Gallegos 37. Interview with Total Austral Conventionals and Other 128. Interview with Taval (965,597 km2, including the South Orkney Islands), the Falkland Islands (11,410 km2), the South Georgia (3,560 km2) Strait of 130. Interview with Valvtronic and the South Sandwich Islands (307 km2) 38. Interview with G&G Energy Consultants Magellan 40. Government and Regulations Survey 82. E&P – A more mature approach 131. Interview with Duralitte Group 42. Interview with EcoStim Energy Solutions 85. OFS – Supplying the new to the old TIERRA DEL FUEGO, ANTARTIDA E 87. Interview with Medanito ISLAS DEL ATLANTICO SUR 88. Interview with CGC Productivity and Labor Ushuaia 90. Interview with Geopark Argentina This research has been conducted by Government 91. Interview with Central Resources 134. Unions – Oil can set them ablaze Alice Pascoletti, Juan Ramirez, Katherina Pruegel and Harriet Bailey 72 92. Interview with Novomet 136. Interview with Society of Petroleum 80 56 64 56 48 46. National – An era of change 93. Interview with Innovision Engineers Edited by Mungo Smith Graphic design by Designa 49. Interview with Petróleos Sudamericanos 137. Interview with Calfrac Well Serevices Energy 138. Interview with Estudio Jurídico Ferreira de A Global Business Reports Publication For updated industry news from our 0 100 200 300 Kilometers 50. Neuquén – The promised land Industry Perspectives las Casas on-the-ground teams around the world, 52. Interview with Minister of Energy for please visit our website at gbreports.com, 0 100 200 300 Miles Getting to grips with a 140. Index subscribe to our newsletter by signing up Neuquén 95. E&P Perspective – to our VIP list through our website, 54. Interview with Gas y Petróleo de Neuquén dead cow 142. Credits or follow us on Twitter: @GBReports 60 (GyP) 74 Industry Explorations ARGENTINA OIL & GAS 2016 Global Business Reports ARGENTINA OIL & GAS 2016 Industry Explorations • GBR • AN INTRODUCTION TO OIL & GAS IN ARGENTINA “Given low international oil prices, unconventional and other capital-intensive activity will not be economical if productivity does not improve. It is a global challenge and all the actors need to play their role to achieve the objective: operators must develop more efficient techniques and foster cost- reducing synergies; services providers must optimize their activities and reduce their own costs; federal and provincial authorities must establish a stable and investment-friendly environment; and trade unions are key to establishing a competitive labor environment. The industry as a whole needs to focus on increasing productivity, as it is a pre-requisite to making future projects economical.” - Jean-Marc Hosanski, Managing Director, Total Austral Image: GeoPark Argentina EDITORIAL Global Business Reports Global Business Reports Source: International Monetary Fund FACTSHEET 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Introduction: GROWTH, 2008-2017 FORECAST 10 10 Can Argentina’s 9 9 8 8 7 7 massive shale reserves 6 6 5 5 fuel an economic 4 4 3 3 revival as in the USA? 2 2 1 1 0 0 -1 -1 A new government will attempt INFLATION, 2008-2017 (% change) to revitalize energy production 33 33 30 30 27 27 10 24 24 11 21 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 21 18 18 15 15 Meat-lovers’ mouths water at the thought of an Argentine steak. But another kind of Argentine dead cow has been tantalizing oil and gas investors in recent years. In 2013, 12 12 the US Energy Information Administration (EIA) announced that the world’s second 9 9 largest shale gas reserves and fourth largest shale oil reserves lies beneath Argentina’s 6 6 subsurface, mostly at Vaca Muerta in Neuquén province.