Argentina's Vaca Muerta Growth Depends on LNG to Asia
(Reuters) — Argentina needs to plan and build more liquefied natural gas (LNG) capacity to accelerate the development of its largest shale play, Vaca Muerta, the CEO of Pan American Energy said on Wednesday, as many producers switch from gas to oil production looking for bigger profitability.
Shale oil and gas producers are struggling around the world to bring back output to pre-pandemic levels after a bad 2020, when the coronavirus pandemic crushed global demand and prices, making some developments no longer economically viable.
Argentina last year made a new push to pitch the building of an 888-mile (1,400-km) pipeline from Vaca Muerta to Brazil, seeking a market for its gas. The pipeline would take three years to build once it has been decided, but financing the project could be hard.
In Vaca Muerta, a portion of production has recently switched to oil, boosting output to 124,000 barrels per day (bpd) in December after having stalled during the year, as companies revved up wells with an eye on a recovery in prices.
"The basin is at an inflection point", said Marcos Bulgheroni at IHS Markit's CERAWeek conference.
Being the world's fourth-largest shale oil reserve, the formation's potential is so big that future development - after some $20 billion in investment in the last decade - can only be secured by exporting gas to neighbors and LNG to Asia, where demand is firm, he said.
"We have been investing heavily for the last decade in the basin and the investment is paying off. It is now ready to accelerate its potential," said Bulgheroni, whose company is a prominent player in Vaca Muerta with 4 million cubic meters per day of gas produced in Argentina's Neuquen basin in 2019.
"Now the big question mark is how do we fulfill this potential by connecting the local market first with the regional market, but also with the international gas market."
That would require that Argentina plans and builds more gas liquefaction trains in order to export LNG cargoes. Vaca Muerta has taken nearly a century since its discovery in 1931 to get going, with its first exports of oil and LNG between 2019 and 2020.
Bulgheroni also said that companies participating in the giant shale play are ready to accelerate investment as drilling efficiency and potential output are rising.
But a stable regulatory framework and access to financing and hard currency must be secured, he added.
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