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Baker Hughes gets fracking in Argentina

Baker Hughes has finished hydraulic fracturing (fracking) its first shale oil well in Argentina’s Neuquén basin for Repsol YPF.

Rod Larson, Baker Hughes’ president of Latin American operations, said Argentina will be “a promising area” for unconventional oil and gas development. “We are leveraging our capabilities and lessons learned in the US,” added Larson, “to help operators in Argentina develop the country’s unconventional resources.”

The US Energy Information Administration says Argentina could have recoverable shale gas reserves of 774 trillion cubic feet (cf). A host of international operators, including Total, ExxonMobil and Apache, are also hoping to tap the country’s shale-gas deposits, which are concentrated in the western province of Neuquén.

Big finds

YPF is studying results from its well tests in the Neuquén basin to assess the potential for expanding its operations. The Repsol subsidiary spudded Argentina’s first shale-gas well, in the Loma La Lata concession, in June last year. In December, it announced the discovery of 4.5 trillion cf of shale gas in the Neuquén basin – Argentina’s biggest find in 35 years. In May 2011, YPF discovered an estimated 150 million barrels of shale oil at Loma La Lata – the largest oil discovery in the country for 20 years.

Argentine planning minister Julio De Vido said at the time the shale oil find is equal to 8% of the country's crude reserves; while YPF chief executive Sebastian Eskenazi said it had boosted the company’s reserves by 30%.

Argentina’s conventional oil reserves stand at 2.5 billion barrels, according to BP’s Statistical Review of World Energy. Production of 676,000 barrels a day (b/d) more than meets domestic demand (473,000 b/d), but output has been in steady decline since peaking in 1998. Proved gas reserves are 12.2 trillion cf, but consumption (4.19 billion cf/d) outstrips production (3.88 billion cf/d), which has been in decline since 2006.

Reverse the production decline

YPF hopes the new resources could reverse the production decline – a result of falling upstream investment, in part because of state-capped natural gas prices. YPF plans to invest $270 million this year in a pilot project in Loma La Lata, southern Patagonia. It is also set to drill 17 new wells and fracture 14 existing wells.

The company has been studying the potential of other oil and gas reserves in the country in partnership with 12 provinces, including Buenos Aires and San Juan, and 21 universities. It began drilling in San Juan at the end of November and is conducting exploration in Chubut and Mendoza.

High-profile financial organisations, such as Deutsche Bank and Bank of America, have raised their share-price evaluations for Baker Hughes over the past few days. In a research note on Tuesday analysts from Deutsche Bank increased their price target for Baker Hughes shares from $96 to $105. Baker Hughes second-quarter results, released on 25 July, put the company’s revenue up by 40.5% on the same period in 2010.

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