Tecpetrol CEO Ricardo Markous touted Argentina’s conventional and unconventional potential during CERAWeek by S&P Global on March 19, saying the country’s oil production would nearly double by 2030 while LNG exports would likely evolve over three phases.
Markous said that all of Argentina’s political parties understand the positive economic and financial impacts that could continue to accrue to the government related to developments related to conventional resources. These [developments] “could be one, not the only one,” to help solve the country’s economic problems, he said.
Argentina reported an economic energy deficit of round $4 billion in 2022 and 2023, Markous said, but emphasized that a surplus of around $3 billion was expected in 2024.
Tecpetrol and Argentina’s Hydrocarbon Chamber foresee Argentina’s oil production reaching 1.2 MMbbl/d to 1.5 MMbbl/d in 2030, of which around 80% would come from unconventional wells. Argentina’s production currently ranges from 650,000 bbl/d to 700,000 bbl/d, much higher than in recent years but still down from upwards to 850,000 bbl/d in the 1990s, according to Markous.
Markous didn’t give a specific timeframe, but said that Argentina onshore potential coupled with the offshore and oil exports of around 1 MMbbl/d – as well as eventual LNG exports – could eventually generate an energy surplus of about $25 billion.
In the Latin America region, Tecpetrol also has activities in Bolivia, Colombia, Ecuador, Mexico, Peru and Venezuela. However, Argentina is the company’s main region of focus due to the large conventional potential. Tecpetrol, which is part of the Techint group of companies, is also investing in renewables in order to reduce its carbon footprint at its steel plants, and understands the role lithium will play in energy transition, Markous said.
Vaca Muerta: huge potential
At year end 2020, Argentina was home to around 13.6 Tcf of proved gas reserves, enough to last 10.1 years and around 2.5 Bbbls of oil reserves – enough to last 11.3 years, according to the U.S. Energy Information Administration (EIA).
But Argentina’s gas potential is huge considering the massive resources in the Vaca Muerta formation, situated in the South American country’s Neuquén Basin. There, Argentina boasts technically recoverable shale gas resources of 308 Tcf: 194 Tcf of which is dry gas, 91 Tcf wet gas and 23 Tcf in associated gas from oil wells, according to the EIA.
The country also boasts technically recoverable shale oil resources of 27 Bbbls, of which 60% or 16.2 Bbbls are located in the Vaca Muerta. That includes 2.6 Bbbls of condensate and 13.6 Bbbls of volatile/black oil, according to the EIA.
“I think what is a distinction of Argentina and Vaca Muerta is the quality of the rock. In all, we think we have better productivity than Permian. In gas, we have better productivity than Haynesville or Marcellus,” Markous said. “The subsurface is excellent … The problem relates to economics.”
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Argentina continues to struggle from rampant inflation, which was 211.4% in 2023 according to the National Institute of Statistics and Censuses, or INDEC. An unstable currency and banking controls limit potential for companies to get their money out of the country. Javier Milei, the country’s new president, is taking drastic steps to pull the country out of its economic situation.
Argentina has plenty of gas infrastructure and recently restarted gas exports to Chile. And Argentina is in discussions with Brazil as it eyes supplying its giant neighbor with gas and eventually replacing Bolivia gas exports to the country. Bolivia continues to struggle to boost exploration-related capex and production has declined as a result.
“We are thinking of reversing the pipelines that connect Brazil, Bolivia and Argentina in order to export [Argentine gas] to Brazil. I’m very optimistic,” Markous said. “Taking into account that the macro-economic [environment] has been bad and still and conventional [developments were] a huge success. If the economy improves, it’s a huge thing for Argentina.”
Argentine LNG exports: three phases
Argentina’s state-owned YPF SA and its Malaysian counterpart Petronas continue to evaluate the potential for an LNG facility on Argentina’s Atlantic Coast. The facility would source Vaca Muerta gas and have a combined capacity of 25 million tonnes per annum (mtpa).
But getting to that full potential will not be easy for Argentina and could take time. Markous envisioned Argentina getting there in a three-phase process.
First, Argentina would need to completely replace LNG imports. Argentina imported around 20 to 25 LNG cargoes in its recent winter period, down from about 80 cargos in recent years, according to Markous.
Argentina could start to expand its pipe-gas exports to neighboring countries. Currently, the country is only exporting to Chile. Brazil would represent a large market, as could the addition of other countries in the Southern Cone region.
And, finaly, Argentina would start to focus on its LNG export project.
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“I think it's feasible. The reserves are there. The cost of gas we can produce is reasonable. The problem is macroeconomic and if you have to wait for Argentina to stabilize macro-economically, it's going to take a very long time in order for Argentina to build an LNG plant,” Markous said.
However, Markous said a recent law Milei presented to Congress includes incentives for big projects and would reduce income taxes. It also calls for disallowing all value added tax (VAT) during construction as well as import duties on equipment brought in from abroad.
The chief goal is to reduce inflation.
“To reduce inflation, you have to reduce the fiscal deficit and … [to do so] you have to reduce state expenditures. This has started and it’s going to be a hard time at the beginning,” Markous said. “If this law passes … I think that will be a first step and a very good step.”
Markous said Tecpetrol – like YPF and Petronas – has studied Argentina’s proposed LNG project and remains positive about its future.
“We're also talking with [YPF and Petronas] about the project [and] believe it’s going to be done. If the law passes it will [be] a big step because if not, we have a lot of gas that will be staying there,” Markous said.
The alternative: All that Vaca Muerta shale gas would be stranded.