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OIL & GAS

Sector Outlook

The country has 24 continental and oceanic basins, out of which 5 are being exploited. These natural resources belong to the Provinces, who grant permits and concessions for the exploration and exploitation of the areas.

The wealth of Argentina’s fossil resources enables to measure the sector’s potential. Proven conventional oil reserves currently amount to 2.5 billion barrels while those of conventional gas reach 12 Tcf (trillion cubic feet). Furthermore, areas that remain unexploited hold technically recoverable resources that would add 2.2 billion barrels of oil and 42 Tcf of gas.

The extraordinary unconventional hydrocarbon deposits are the ones, however, placing Argentina amongst the world’s leading countries in this sector. The following indicators gauge the relevance of these resources:

  • World’s 2nd largest shale gas reserve, with 802 Tcf of technically recoverable resources;
  • World’s 4th largest shale oil reserve, with 27.0 billion recoverable barrels;
  • Proven unconventional resources equivalent to 11 times more than the current oil reserves and 70 times more than gas reserves;
  • 25% recovery rate of unconventional gas reserves (the world’s highest level);
  • The Vaca Muerta reservoir contains 40% of the country’s shale gas and features comparative advantages: accessibility, operational capacity, water availability, infrastructure and the technical expertise of human capital.

Estimates regarding shale gas and shale oil potential give way to a promising outlook for the country’s development and for attaining the strategic goal of achieving energy security.

Recent Developments

The hydrocarbon industry has received important investments:

  • 20 plants for gas treatment and purification
  • 15,500 kilometres of trunk gas pipelines for natural gas distribution
  • 4 gas pipelines connecting with Chile and 4 with Brazil and Uruguay
  • Refining capacity of 657,000 barrels per day and 33 million tons of by-products per year
  • The Argentine Northeast Gas Pipeline is currently under construction (4,144 kilometres with an estimated budget of USD 2.7 billion) and it will reach all of the Nation’s regions in 2019

YPF (Yacimientos Petrolíferos Fiscales), the country’s flagship company, concentrates 43% of the domestic market’s oil and gas production and 58% of the gasoline segment. The majority shareholder is the Argentine State (which owns 51%), and the company employs more than 72,000 people directly and indirectly. Leading in the exploration and exploitation of unconventional resources, YPF possesses the world’s first commercial shale field, outside North America.

Investment Opportunities

Understanding that the hydrocarbon sector is the foundation of economic development, the Argentine State stimulates investment to promote production growth.

The new regulatory legislation has established new terms that prolong concession permits: 25 years for conventional fields, 35 for unconventional ones and 30 for offshores. This legislation also establishes that the Provinces can grant a 10-year extension of these permits, while it too encourages enhanced oil recovery, extra heavy oils and offshore projects which will be eligible for a reduction of royalties of up to 50%.

The extensive experience of the sector, the wealth of natural resources, the technical skill of human capital, the stimuli of public policies and the renewed confidence stemming from the country’s economic and institutional normalization all derive in a vigorous investment surge. In the first half of 2016 alone, companies announced almost USD 7.0 billion in investments, to advance in the upstream and downstream phases. In this sense, the increase in hydrocarbon production will foster opportunities to boost the petrochemical industry.

In Argentina there awaits a promising future for the oil and gas industry, and its development will underpin economic growth in the upcoming years. The sector’s favourable context in the country and YPF’s contribution in the value chain, from its leading position in the market, create incentives to take investment positions in advance.