Thursday, March 24, 2011

Will Argentina lead the global shale gas race?

With shale gas drilling going global, energy importing nations are evaluating their own geology, currently, to see if they have shale reserves that can be tapped.  Likewise, Argentina which imports natural gas from neighboring Bolivia is set to win the global shale race where other countries in Asia, Europe and Africa are gearing up aswell. What is considered as the “game-changer” for the US, will shale gas success be replicated outside North America ,or for that matter, in Argentina?

Currently, Europe is in the limelight for being ahead of the shale gas activities, however, one needs to watch out who might be the next one?

Whats  happening in Argentina?
  • In 2010, YPF announced a 4,500 billion cubic feet(Bcf)  shale gas  discovery in Loma de La Lata  conventional gas field  in the well known and productive Neuquen Basin in Patagonia.
  • The Company has also formed a $140 million joint venture with the Brazilian iron ore and mining multinational, Vale, which will use the gas to develop a $4.3 billion dollar potassium project in nearby Mendoza.
  • American Petrogas Inc, which holds about 16 exploration blocks, both for conventional and shale gas in the eastern and western parts of the Neuquen basin, thinks that its western blocks have the greatest potential for shale gas. It believes that about 100 tcf of gas is present in 9 of its blocks.
  • Indian Farmers Fertilizer Cooperative (IFFCO), a strategic  alliance partner with American Petrogas Inc  in Argentina has invited two government owned Indian companies, Oil India and GAIL , to invest in its shale prospects.
  • Apache Corporation expects to hold 900,000 net acres in the shale gas prone part of the Neuquen and has a partnership with YPF to develop shale gas in several prospective blocks. It is currently drilling the first horizontal multi fracture well in Argentina specifically to develop shale gas.
  • Total acquired an interest in 4 shale gas blocks in the Neuquen and will explore in partnership with YPF. This follows the acquisition of an 85% interest in 2 other Neuquen shale gas blocks recently.  Total operates about a quarter of Argentina’s natural gas production. 

Recent Shale Gas Transactions in Argentina

Global Distribution

    Source: Hart Energy Global Shale Gas Study

The Society of Petroleum Engineers estimates 2,116 tcf of shale gas in South America.
  • Argentina – Neuquen Basin, Austral Basin 
  • Colombia – “Cretaceous organic – rich shale source rocks are present in both the Maracaibo and Middle Magdalena basin of Colombia and Venezuela.
  • Peru – Ucayali Basin

As per Hart Energy Global Shale Gas Study, shale gas is plentiful around the globe. Conservative estimates place the total resource volume at about 20,000 Tcf. This volume is likely to increase as more shale gas plays are identified and evaluated.

However , the uncertainty still remains wheather the operators would be able to overcome the hurdles of tapping this source of stored energy. The biggest challenges to developing these resources outside of the US include:

  • Access to acreage / resource
  • Availability of rigs and skilled workforce
  • Access to water and environmental concerns about waste water
  • Finances, due to high cost of wells
  • Necessary infrastructure to transport the gas once in production 

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