Total and Wintershall commit to Argentine shale
In an early sign that industry interest in Argentina’s shale deposits has not been dimmed by the nationalisation of YPF, Germany’s Wintershall and French major Total announced this week that they had secured a new exploration licence in the country
It is the first exploration licence to be awarded since the Argentine government passed a bill earlier this month to nationalise Repsol’s stake in YPF, Argentina’s largest oil and gas producer and leading acreage holder in the highly prospective Vaca Muerta shale play.
“Total is very concerned about the current situation in Argentina and we follow the situation very closely. But, we believe that our track record makes us a strong partner for the country. Total’s performance in Argentina has never been criticized by provincial or central government officials,” a Total spokesman told Petroleum Economist.
Wintershall also sought to distance itself from the YPF nationalization.
“We don't have any indication that the Argentine government is nationalising other companies besides YPF. We, therefore, do not expect any impact on our business in Argentina,” Wintershall said when asked by Petroleum Economist.
The announcement of new investment into Argentina’s energy sector from two major European companies comes even as the EU is mulling potential retaliatory steps against the country. Last week, the European Commission said that, among other actions, the EU could submit a complaint against Argentina at the World Trade Organization over import tariffs.
The companies were awarded an exploration licence for the 2,232 square km Area Ranquil Norte licence in southern Mendoza Province. Wintershall will operate the licence with a 50% interest, while Total will hold the remaining 50% stake.
The block has unconventional and conventional potential, Wintershall said. The company has been doing field and lab work, including 2D seismic interpretation and geochemical analysis, in the area since 2002. In March this year, Wintershall was awarded an exploration permit for the adjacent Cuenca Neuquina V.
Much of the early exploration in the Vaca Muerta shale formation, which Repsol has said could hold more than 20 billion barrels of oil equivalent (boe), has taken place in Neuquén province, south of Mendoza province.
But there is evidence that Vaca Muerta also stretches into southern Mendoza Province. In late March, just weeks before YPF was nationalised, Repsol announced that it had discovered 1 billion boe across the Payun Oeste and Valle del Rio Grande blocks in southern Mendoza province.
Wintershall expects the first unconventional exploration test results from its Aguada Pichana, Bandurria and San Roque blocks in the summer of this year.
The future of the development of the Vaca Muerta shale formation, which has been compared to major shale plays in the US such as Eagle Ford, has been called into doubt after the nationalisation of YPF.
The newly state-controlled company has inherited a dominant position in the shale play that will require billions of dollars of investment and partnerships with foreign operators that have the drilling technology needed to tap Argentina’s shale reserves.
Repsol said that Vaca Muerta could double the country’s oil and gas output over the next decade and give rise to a new unconventional-focused industry, but annual investment would have to be around $25 billion over the period.