China’s interests in shale gas exploration have led to several high-profile visits to support Chinese state-owned and private sector stakeholders who have been showing more interest in Argentina’s vast Vaca Muerta reserves.

On 1 May, International Workers’ Day, the Chinese Chamber of Commerce in Buenos Aires held its first official meeting to discuss the opportunities that Vaca Muerta can offer its investors. President Mauricio Macri’s recent 14-18 May trip to China helped to ratify this interest at the state levels. The big players are now ready to join the local Bridas Corporation — which is 50% owned by the Chinese National Offshore Oil Corporation (CNOOC) — with a large investment in early 2018. China’s Ministry of Energy confirmed its interest and goal of becoming a major partner in Vaca Muerta projects through the state-owned companies: Sinopec; China National Petroleum Corporation (CNPC); and CNOOC.

As is well known, the US Department of Energy has estimated that the Vaca Muerta formation has risked, technically recoverable shale gas and shale oil resources of 308 Tcf of gas and 16 billion barrels of oil and condensate, from 1,202 Tcf and 270 billion barrels of risked, in-place shale gas and shale oil. Therefore, soon after President Macri assumed power in December 2015, the government granted many concessions, some of which are still available.

Two technical aspects that must be taken into account for investors are the volume of the reserves and their depth, which is normally deeper in Argentina than it is in the US. The secondary considerations are: the production costs, with the government already having signed an agreement with the trade unions; market prices, where the government has ensured that investors will receive a fair guaranteed minimum price for their gas; and the length of time that the reserves will last. All of these factors are being taken into consideration in order to make the Vaca Muerta projects as attractive as possible.  ... [article continues] …

This is an excerpt from an article in this month’s Argentina Strategic Brief – for more information please contact us at info@menas.co.uk.