Falling oil prices won’t derail Argentina’s burgeoning shale boom unless they plunge below US$45 a barrel, said the chief executive of the country’s top driller, state-run YPF SA.
“Some projects are resilient at US$40 and some at US$45. Up to that price we can develop,” CEO Horacio Marin said in an interview at Bloomberg’s headquarters in New York. “Our profitability suffers, but at US$45 you can make all the investment.”
Momentum has been building in the Vaca Muerta, Argentina’s shale patch in Patagonia that has the potential to export one million barrels a day of crude by the end of the decade if pipeline expansions go ahead as planned. But an escalating trade war between the United States and its biggest trading partners has pressured global oil prices lower, threatening the economics of crude fields around the world. Brent oil, the global benchmark, is trading around US$63 a barrel near a four-year low.
For now, YPF is maintaining its guidance for capital investments in shale this year at about US$3.2 billion, with Marin expressing confidence that Argentina’s broader shale industry can survive a market downturn.
“In the long term, Vaca Muerta will be developed,” he said.
It helps that the Donald Trump administration has exempted energy shipments from his wave of import tariffs, including a 10-percent baseline for Argentina. The US is the number two destination for Argentina’s shale oil.
Even so, the county’s second-biggest shale oil producer, Vista Energy, warned earlier in the year that it would consider budget cuts if prices for the region’s light Medanito crude drop below US$55.
Marin — appointed by President Javier Milei when he took office in December 2023 — attributed YPF’s ability to withstand lower prices to a strategy he has orchestrated of focusing entirely on shale while divesting aging, conventional fields that have higher production costs. YPF is also benefitting from Milei’s move to free up Argentine crude and fuel markets, ending a culture of capping local oil prices to tame inflation.
Other highlights from the interview:
– Drillers led by YPF who are seeking a US$1.7-billion syndicated bank loan to fund the key Vaca Muerta Sur shale oil pipeline and port are close to signing off on the financing arrangement.
– As drillers continue to develop an initial LNG export project with floating liquefaction plant provider Golar LNG Ltd., YPF is spearheading a bigger project with Shell Plc that could advance to a final investment decision next year.
– Marin said that the Shell venture would be ready next month to tender for bids to design the engineering of several floating LNG facilities.
– YPF would be interested in acquiring any assets that improve its drilling portfolio.
by Jonathan Gilbert, Bloomberg
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