Click here to see over 150 global oil prices
Click here to see over 150 global oil prices
Click here to see over 150 global oil prices
Click here to see over 150 global oil prices
Click here to see over 150 global oil prices
Click here to see over 150 global oil prices
Click here to see over 150 global oil prices
Click here to see over 150 global oil prices
Find out more
Just two years ago, analysts praised Argentina’s nascent shale oil boom, which many say would be the next primary oil frontier in Latin America. The vast formation of Lutites of Vaca Muerta, or dead cow in English, which runs along the semi-arid steppe of Argentine Patagonia, is compared to the smallest and most prolific lutite of the Permian. The EIA estimates that the training has technically recoverable resources of 16 billion barrels of oil and 308 trillion cubic feet of herbal fuel. Vaca Muerta is a massive resource, classified as the world’s largest shale fuel tank. If properly carried out, its immense wealth of hydrocarbons will help many of Argentina’s deep economic ills. By 2011, Vaca Muerta’s operation had become a more sensible precedent for the Argentine government, which is suffering monetaryly. In 2012, the management of President Cristina Fernández seized a principal stake in YPF, Argentina’s largest oil producer, from Repsol, Spain’s main incorporated power company. The explanation for the nationalization was that Repsol failed to adequately exploit Vaca Muerta’s abundant hydrocarbon wealth, which can be used through Buenos Aires to prevent the emergence of an energy deficit and a currency crisis. This occasion alarmed the foreign community, provoked reprisals from Spain and showed Argentina’s parity prestige for many foreign power companies.
As a result, foreign investment flows plummeted, accelerating the deterioration in production of oil and plant fuels, which was essential to avoid a new economic crisis. These occasions indicated that Argentina could possibly never disassociate the full view of Vaca Muerta’s vast shale because it would not obtain the mandatory capital and generation of foreign oil companies. As energy imports increased, tensions became fixed on Argentina’s already fragile economy, forcing Buenos Aires to take additional steps to bolster the fiscal revenue the country urgently needs and the rapid decline in Argentina’s hydrocarbon production. By 2017, oil production had fallen to a decade-1 479633 barrels consistent with the day.
Related: Oil costs are emerging despite the growing call to fears. Mauricio Macri’s rise to the presidency in 2015 generated hope in Argentina’s external money markets, yet it was out of the economic cold. Macri has embarked on a normal procedure for implementing market-friendly reforms that he hoped would fuel confidence in Argentina and foreign investment. These measures, combined with Vaca Muerta’s abundant hydrocarbon prospect, have attracted the attention of major foreign power companies, adding ExxonMobil, Chevron and Royal Dutch Shell, as well as a number of small explorers and oil producers. This initiated the movement of important technologies and capital needed to exploit Argentina’s abundant unconventional oil resources.
By the end of 2018, the Latin American country’s significant oil reserves had increased by 24% year-on-year to 3.4 billion barrels, mainly due to significant discoveries of unconventional hydrocarbons. This places Argentina in the fourth position of oil reserves in South America, Venezuela, Brazil and Ecuador. By 2019, total hydrocarbon production, weighted at 38% in crude oil, reached almost 1.4 million barrels steadily, 4.6% more than the previous year and 9% more than in 2017.
These advances highlight Vaca Muerta’s abundant prospects, however, Argentina’s dream of using it as a quick fix to solve its economy in suffering and the unrest of power is rapidly fading. Even before the fall in oil costs in March 2020, which caused oil investment in Latin America to fall, Argentina’s nascent shale boom gave the impression of being in trouble. Another economic crisis, caused by the rapid emergence of debt, a spiral of depreciation of the peso and a sharp contraction in GDP, disrupted Macri’s pro-business reform program.
As a result, foreign investment plummeted to $6.2 billion in 2019, almost 50% less than a year earlier. The fears of power corporations were amplified with the presidential victory of peronist Alberto Fernández in October 2019, which she saw as vice president to former President Cristina Fernández, architect of the nationalization of YPF. Alarmed energy investors have moved away despite Fernandez’s assurances to the oil industry and policy formulas to protect the industry.
Related: Natural fuel has replaced more than a hundred U.S. coal plants. Over the past decade
In reaction to the developing crisis, YPF closed in April some of the oil production in the largest oil field of the time in Argentina, Loma Campana, in Vaca Muerta and 50% through Chevron. According to Baker Hughes data, there were only six platforms active in Argentina at the end of June 2020, less than one of the 11 out of 68 operating at the end of it last year, indicating that drilling activity has collapsed.
The effect on Argentina’s oil production has been considerable. Average daily production of herbal oil and fuel during the first six months of 2020 was slightly less than 1.3 million barrels, consistent with the day, 6% below the 2019 annual average. In a double blow for YPF, Argentina’s largest oil producer, controlled through the state of Buenos Aires, bears the brunt of the crisis. In June 2020, YPF’s herbal oil and fuel production fell by 16% year-on-year to 426,527 barrels of oil equivalent in line with the day, leading to increased monetary pressure for the company.
These developments have a profound effect on the Argentine economy, heavily weighing on public finances and a fiscal formula that is already reeling from excessive borrowing, endemic double-digit inflation, and a highly devalued currency. To avoid further deterioration in oil production, Fernandez’s administration has taken steps to help Argentina’s oil industry. These come with the establishment of a minimum national promotion value for the Brent of $45 consistent with the barrel and the zeroing of export taxes on oil and subtle products. The challenge for oil corporations that agree with the same thing in Argentina is that they will have to maintain the speed of activity, adding production, to 2019 levels.
These measurements do not have the desired effect. Although oil production in June 2020 increased by 2.5% compared to last month, herbal fuel fell by 2%. High equilibrium prices of $45 to $50 consistent with the barrel, particularly lower oil prices, coronavirus restrictions and lack of calls to exports are leading oil corporations to adopt a wait-and-see technique that prevents investment. As long as these points exist, Argentina’s oil production will decline particularly, which will have a significant effect on exports and tax revenues. It is for these reasons that Buenos Aires’ announcement that it had reached an agreement with foreign creditors to restructure its sovereign debt, in order to avoid some other brutal default, may not have come at a better time. This gives Fernandez’s management an inconsequential and necessary respite as it tries to tackle the headwinds affecting Argentina’s oil industry.
More of the maximum Oilprice.com readings:
go back to the home page