YPF slows shale exploration due to price controls

Argentina's state-owned oil company YPF will back off from shale exploration as government price controls reduce potential revenue, according to reports.

YPF will invest US$2.8 billion in 2020, compared to US$3.5 billion last year, which would mean some projects that do not immediately generate cash may be sidelined, said the firm's Executive Director Daniel González, during a conference call on Friday, according to Perfil.

That means exploration into the Vaca Muerta shale formation may slow this year. Instead, YPF will focus on three well-established oil blocks that it shares with international partners.

In one such area, Bandurria Sur, YPF recently sold a stake to Royal Dutch Shell Plc and Equinor ASA. The amount paid for those assets values Bandurria Sur at US$900 million, demonstrating the growing value of Vaca Muerta, González argued.

YPF struggled in the fourth quarter, posting another loss as it was hampered by price problems, a decline in natural gas prices driven by excess and political volatility.

Shale production in the quarter increased to the equivalent of 112,000 barrels per day, representing 18 percent of all production. In the meantime, Yields of 10 percent for Argentina's corporate debt put world bond markets out of reach.

YPF is looking at taking its shale expertise abroad, although such projects are not a priority.

– TIMES/PERFIL