Argentina Oil & Gas Report Q4 2013 - New Market Study Published

From: Fast Market Research, Inc.
Published: Mon Oct 07 2013


The deals forged between YPF and partners for exploration of Argentina's unconventional plays have fuelled momentum in the country's upstream sector. The government has also granted concessions and announced initiatives to attract capital into the upstream sector. YPF nonetheless is further wedged between a rock and a hard place with pressure to implement a multibillion dollar capex programme in a pricing environment driven by the government's inflation priorities, which most recently prompted a freeze of fuel prices until October 2013. We look to the October 2013 Congressional election for guidance on the pivotal pricing regime. The government has been unpopular, something which BMI's Country Risk analysts expect will be echoed in the election results that will highlight lost support for the ruling FPV party. This could either prompt a more aggressive inflation-busting drive from the government in an effort to gain support (creating further pressure on YPF), or a wider platform within Congress could prevent excessive populist policies from being implemented.

Full Report Details at
- http://www.fastmr.com/prod/684644_argentina_oil_gas_report_q4_2013.aspx?afid=302

The main trends and developments we highlight in the Argentine oil & gas sector are:

* The decision by Chevron to invest US$1.2bn in Argentina following the unfreezing of its assets in the country in June 2013 is an upside risk to our forecast that Argentina will become a net importer of hydrocarbons by 2015. Indeed, while we do not discount the substantial above-ground risks inherent in operating in Argentina, if the collaboration between the US super-major and Argentina's YPF is successful, this could spur further investment in the country's shale oil and gas sectors, helping to boost sluggish oil and gas production. Chevron will conduct a pilot project with YPF, which will involve the drilling of 100 wells.
* In addition to the Chevron joint venture, YPF has also been working towards agreements with Uruguay's Ancap in early 2013, as well as with Argentina's Bridas Corporation (which is 50% owned by China's CNOOC). In April 2013 Dow Chemical signed an MoU with YPF to develop the El Orejano block.
* YPF's investment plan envisages US$7bn in capital expenditure (capex) each year to 2017, focusing on the unconventional plays at Vaca Muerta and marginal fields. The aim is to increase production to 219.2 barrels of oil equivalent (boe) by 2017, a rise of 37% on current production levels. YPF aims to increase the number of new wells to 50 per year, in comparison to 19 wells per year between 2007 and 2011. Prior to its nationalisation, Repsol-YPF had estimated that it would invest US$25bn per year to double the country's current oil and gas production.

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