Argentina may have the biggest potential to develop shale oil outside North America, a US government report said yesterday, providing a further boost to the potential for unconventional hydrocarbons production that has already piqued the interest of some of the world’s biggest players.
Argentina ranks fourth, behind Russia, the United States and China with technically recoverable shale oil reserves of 27 billion barrels, the US Energy Information Administration (EIA) said in a landmark report yesterday that offers a preliminary glimpse of the hydrocarbons that remain untapped across the world.
A 2011 EIA report had already ranked Argentina third behind China and the US in shale gas resources but yesterday’s report was the first official estimate of shale oil resources as well.
“Argentina has world-class shale gas and shale oil potential—possibly the most prospective outside of North America—primarily within the Neuquén Basin. Additional shale resource potential exists in three other untested sedimentary basins,” noted the EIA study.
Technically recoverable reserves are an estimation of the amount of oil or gas that can be extracted with today’s technology.
In 2011, the EIA estimated shale gas resources of 774 trillion feet3 (22 trillion metres3) in Argentina.
Although the third-place ranking increased interest in Argentina that failed to increase exploration in the country as much as expected though as international companies hesitate to invest in Argentina at a time of increased government control over the oil and gas sector.
In its latest report, the EIA increased technically recoverable shale gas resources in Argentina to 802 trillion feet3.
The study released yesterday marked the first time the US government has estimated potential shale oil resources outside the United States, saying that technically recoverable shale oil reserves in 41 countries total 345 billion barrels.
The EIA details how there has been “significant” exploration in Argentina as well as “early-stage commercial production” by several top companies, including Apache, EOG, ExxonMobil, Total and YPF.
The exploration has mostly been in the Los Molles and Vaca Muerta formations, where some 50 wells have been tested “with mostly good results,” according to the EIA.
Vertical wells in the formations are “producing at initial rates of 180 to 600” barrels per day, noted the report.
The Vaca Muerta formation in the Neuquén basin, has technically recoverable shale gas and shale oil resources of 308 trillion cubic feet of gas and 16 billion barrels of oil and condensate. In Los Molles, EIA estimates technically recoverable shale resources at 275 trillion cubic feet of gas and 3.7 billion barrels of shale oil.
State-controlled YPF has the rights to around 3 million acres in the basin and is currently negotiating with several companies, including Chevron, Total, Statoil and Dow Chemical, among others, to jointly develop shale resources. YPF and Chevron are reportedly in the final stages of sealing a shale-focused deal that could be worth as much as US$1.5 billion.
YPF has emphasized the country’s shale potential after President Cristina Fernández de Kirchner signed into law the expropriation of a majority stake in the company from Spain’s Repsol, its previous controller.
But most international players have so far kept a low profile in Argentina, likely wary of legal threats from Repsol that has vowed to file lawsuits against any company that partners with YPF. Repsol has called the expropriation of YPF “illegal” and is demanding US$10.5 billion in compensation.
For its part, Apache has 1.3 million net acres in the Neuquén Basin with shale potential and estimates net recoverable potential at 0.8 billion barrels, according to the EIA.
Argentina’s Golfo San Jorge basin, located largely in Chubut and Santa Cruz, and Austral basins, mostly in Santa Cruz and Tierrra del Fuego, “also have good potential,” according to the EIA. But so far there has been no shale exploration reported in either basin.
Boost reserves
Overall, estimated global reserves of oil in shale rock deposits will boost total world crude resources by 11 percent, according to the report.
Oil and natural gas production has rocketed in the United States in recent years due to the emergence of horizontal drilling and hydraulic fracturing, or fracking, that have unlocked decades of supply from shale deposits dotted across the country.
But while the EIA report offers a comprehensive glimpse of global shale potential, technically recoverable reserves are not a guarantee of supply and it is unclear if deposits outside the United States, with varying geology, can be developed economically. Even inside the United States some areas have proved to be more difficult and expensive to develop than others, halting development.
“The reserves are one thing, but the ability to scale up the production for those reserves is another thing, which is not as straightforward in many parts of the world as it has proved to be in the US,” said Jan Stuart, head of energy research at Credit Suisse in New York.
Still, David Pumphrey, a senior fellow at the Centre for Strategic and International Studies, said the report could help push countries like Argentina to develop their reserves.
“The fact that it is there in the ground keeps reinforcing this is a big story,” he said.
Pumphrey expected further evolution in drilling technologies could make more and more of the resources economically favourable to produce in the future.
Suorce: Herald with Reuters