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Argentina, The New Saudi Arabia?

November 8th, 2011 | Categoría: Economics, Politics


OK, maybe not.

Still, Argentina’s biggest oil and gas company, YPF, has found a massive amount of oil in the province of Neuquen.

YPF on Monday confirmed the existence of almost 1 billion barrels worth of oil equivalent in the province. That’s not enough to turn Argentina into Saudi Arabia or even Montana and North Dakota, which have become the new stars in the world’s race to produce more oil.

Saudi Arabia reportedly has hundreds of billions of barrels in oil reserves.

But if the discovery is proven, it is enough to roughly double Argentina’s oil reserves and potentially help turn around the country’s position as an increasingly voracious energy importer.

Argentina’s oil reserves have fallen by about 16% over the past decade amid rising demand and relatively scarce investment in exploration and production, according to the Argentine Energy Institute.

YPF’s discovery, which I wrote about here, could soon help change that trend. Moreover, YPF said it has also outlined another area in Neuqen, where even more oil might be found.

The find comes amid a global boom in unconventional oil and gas exploration and production.

In the U.S., the boom has radically transformed the country’s energy outlook, taking what many said was a doomed domestic industry and possibly putting the U.S. on path to becoming energy indepdendent.

Argentina is ranked third behind China and the U.S. in its potential to produce unconventional gas – gas that’s extracted from incredibly old shale formations – according to a report from the U.S. Energy Information Administration.

Link: My article on MarketWatch
And my colleagues at WSJ have another piece here.

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John GarganNo Gravatar says:

It’s a shame Argentina sold most of their reserves to foreigners! … Thanks to Carlos Menem massively underpriced privitisations of the 1990’s! …. what a crook!

Dave JNo Gravatar says:

John you are missing the point. The world oil price is $95 per barrel. The Argentine government takes everthing after $42 a barrel and they get get paid taxes and royalties on the $42 that correspond to the oil companies. That is why there is minimal investment by foreign oil companies in Argentina. The tax rates in Colombia and Peru are much more favorable and thats where the global oil companies invest now. Colombia the next S Arabia would be a better headline.
Current oil production in Argentina is 600,000 barrels a day so a billion barrels is 5 years production. Rememeber that Argentina consumes 400,000 a day and the rest is sold overseas and the vast amount of this money goes into government coffers to pay the subsidies that most Argentines live off of.
Shales gas is a great resource and will prevent Argentines from freezing in the dark as we say here in Canada. The problem is there is so much of it in the world there are no markets to export it too. That is why in NA the price of gas is languishing at $4 a 1000 BTUs when the production price is close to $6 a 1000 BTUs.
The cruz of the matter is if there are no market to export the gas too and thus subsidize the cost then Argentines will have to pay the $6 plus a profit to YPF.

TezNo Gravatar says:

Thanks for the extra info, Dave. I don’t think even most Argentines know this because they all keep screaming about how it’s all Spanish oil anyway so no use getting excited about it… Good to know.

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