Argentina will have to focus on developing conventional oil and natural gas reserves over the next five to 10 years to meet domestic energy demand, as the country's large shale potential could take that long to put into production, oil executives said Thursday.
Shale development still requires "a long road to run" in Argentina, said Oscar Vicente, CEO of Petrolera Entre Lomas, a top-10 producer in the country.
Vicente said that information on shale rock formations is still limited and drilling methods -- horizontal or vertical -- uncertain, and that more knowledge, financing and rigs and longer licenses are needed to put the resources into production.
"We still don't know how things are going to play out," he said at an oil industry event in Buenos Aires.
"We have the rock formation, and this is positive," he said. "But we have to see ... how much oil can be found and what methods can be used to find and extract it."
Argentina is thought to have the third-largest shale gas resources in the world after China and the US, with the most potential in the Vaca Muerta formation. YPF, the state-run oil company, has estimated at 22.8 billion barrels of oil equivalent the shale resources in a portion of Vaca Muerta.
Vicente said there are seven such rock formations in the country, but so far the focus is on Vaca Muerta. The formation is drawing the interest of companies like ConocoPhillips, Chevron, ExxonMobil and EOG Resources.
Yet the intensity of investment depends on the price of oil -- now reasonable, according to him, at a maximum of $75/b domestically -- and the opportunities and incentive policies, Vicente said.
"The unconventional prospects are very challenging, but the results are not immediate. It is something for the long term," he said.
In the meantime, oil companies will have "to work on the conventional fields even if they are mature because they are the short-term answer" for maintaining production.
Argentina has been producing oil for more than 100 years, focused on five basins where many existing fields are maturing, and this along with years of low exploration investment and few finds has cut production. Oil output has dropped by a third to 570,000 b/d this year from a record 847,000 b/d in 1998, while gas has fallen 16% to 120 million cubic meters/d from 143.1 million in 2004.
The shale potential, which became widely known last year, has raised the prospect of replacing some of the decline with shale resources.
Vicente said that won't happen just yet.
"You need at least five times more investment in unconventional than conventional, so you need to work on both fronts. You need to work on mature fields to compensate for the decline today while developing unconventional for the future," Vicente said.
Ernesto Lopez Anadon, president of the Argentine Institute of Oil and Gas, said on the sidelines of the event that Argentina has potential for boosting output from mature fields.
In recent years, producers have stepped up the use of secondary and tertiary methods to increase extraction, helping slow the production decline to 3-7% a year from what would be 15% without such efforts, he estimated.
Lopez Anadon said there is still much to do with enhanced oil recovery methods that could boost output by another 2-3% a year.
Indeed, YPF, the country's biggest energy company, said it plans to invest $35 billion through 2017 to turn around its 6% slide in output by squeezing more out of mature fields and developing shale resources.
