Argentina Oil and Gas Report Q1 2012

BMI View: Without the price reforms and improvements in the broader operating environment needed to spur development of Argentina’s burgeoning unconventional oil and gas sector, the country faces continued production declines and a future as a net oil importer. Indeed, our forecasts, which now only incorporate small scale shale oil and gas production, see gas imports rising fourfold over the coming decade and the country becoming a net importer of oil as early as 2014. With that said, the Neuquén basin is attracting significant investment from deep-pocketed majors and large-scale development of the region could radically alter this outlook.
?? Oil production in Argentina has been declining since the late 1990’s and we forecast that trend to continue. We estimate that oil output hit a 15-year low of 718,000b/d in 2011, and is forecast to trend lower to just under 700,000b/d by 2014. The first shale/tight oil production will provide a boost to production in 2015 of around 50,000b/d; however, given current development plans in the Neuquén shale basin that boost will be short-lived, with production still hovering around the 700,000b/d level by the end of the forecast period in 2021.
?? At the same time as oil production is seen falling, consumption should rise on the back of strong economic growth. That trend threatens to see Argentina, long a net oil exporter, become importdependent. Our forecasts, which envision oil demand growing at 3-4% per year, show oil consumption surpassing production of around 700,000b/d in 2020. Imports will be relatively modest but highlight the deteriorating state of Argentina’s oil sector.
?? While Argentina is still holding onto its status as an oil exporter, it became a net gas exporter in 2008, and we forecast imports to rise rapidly over the coming decade. The country should be able to maintain roughly flat gas production at around 40bcm per year, with a small increase forecast towards the latter half of the decade as some shale volumes come online. However, consumption will easily outpace this small increase in production. We estimate demand will have just exceeded 45bcm in 2011; this is forecast to reach 55bcm in 2016, before reaching almost 65bcm by 2020.
?? Given the gas production and consumption trend, we estimate that net imports rose to around 6bcm in 2011, and forecast this to rise to almost 15bcm in 2016 and over 20bcm by 2021. The country’s gas supply deal with Bolivia means that pipeline imports should rise to around 10bcm by the end of the decade, with LNG imports meeting the remainder of the import requirement.
?? Argentina’s shale oil and gas potential poses major upside risks to these forecasts. Currently initial production from YPF is the only output from shale factored into our forecasts. Investment into the burgeoning sector, however, is set to rise rapidly. YPF plans to spend US$400-500mn continuing its exploration programme into 2012, and total investment in the Neuquén shale play could eventually reach US$20bn. Total, ExxonMobil, Apache and Pan American Energy (PAE) are also planning their own shale exploration programmes, which should see investment in the shale sector top US$1bn in 2012. The future of the sector, however, will depend on reforms to the domestic gas price and improvements in the broader operating environment. The Gas Plus scheme that allows production from certain unconventional projects to sell for a higher price has been a positive step, but deeper reforms will be needed.
?? YPF is Argentina’s leading oil producer, with production of about 190,000b/d through the first nine months of 2011 (9M11), and with exposure to the growing shale sector looks set to hold onto that position. YPF is PAE, which produced nearly 115,000b/d of oil through 9M11. Other producers in Argentina lag far behind YPF and PAE. Brazil’s state-run Petrobras is the country’s third-largest oil producer, with output of 39,000b/d through 9M11, followed by US major Chevron, which recorded production of nearly 37,000b/d over the period.

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BMI Industry View 5
SWOT Analysis 7
Argentina Oil and Gas SWOT 7
Global Energy Market Outlook 8
Table: Global Oil Consumption (000b/d), 2009-2016 11
Table: Global Oil Production (000b/d), 2009-2016 12
Regional Energy Market Outlook 13
Oil Supply And Demand 13
Table: Latin America Oil Consumption (000b/d), 2009-2016 15
Table: Latin America Oil Production (000b/d), 2009-2016 16
Table: Latin America Oil Refining Capacity (000b/d), 2009-2016 17
Gas Supply And Demand 18
Table: Latin America Gas Consumption (bcm), 2009-2016 19
Table: Latin America Gas Production (bcm), 2009-2016 19
Liquefied Natural Gas 20
Table: Latin America LNG Exports (bcm), 2009-2016 20
Argentina Energy Market Overview 21
Argentina – Upstream Projects Database 24
Industry Forecast Scenario 25
Oil And Gas Reserves 25
Oil Supply And Demand 26
Gas Supply And Demand 26
LNG 27
Refining And Oil Products Trade 28
Revenues/Import Costs 28
Table: Argentina Oil And Gas – Historical Data And Forecasts, 2009-2016 29
Oil And Gas Infrastructure 31
Oil Refineries 31
Table: Refineries In Argentina 31
Service Stations 32
Oil Terminals/ Ports 32
Oil Pipelines 32
LNG Terminals 33
Gas Storage Facilities 33
Gas Pipelines 34
Regional and Country Risk/Reward Ratings 36
Latin America Region 36
Composite Scores 36
Table: Regional Composite Risk/Reward Ratings 36
Upstream Scores 37
Table: Regional Upstream Risk/Reward Ratings 37
Downstream Scores 38
Table: Regional Downstream Risk/Reward Ratings 38
Competitive Landscape 39
Executive Summary 39
Argentina Oil & Gas Report Q1 2012
© Business Monitor International Ltd Page 4
Table: Key Players – Argentine Oil And Gas Sector 41
Overview/State Role 41
Licensing And Regulation 41
Government Policy 42
Licensing Rounds 43
International Energy Relations 43
Table: Key Upstream Players 46
Table: Key Downstream Players 46
Company Monitor 47
ExxonMobil Colombia 47
Petrobras Energía 49
Chevron Argentina 52
Total Austral 55
ExxonMobil 57
Shell Compañía Argentina de Petróleo 59
BG Group 61
Apache Energía 63
Sinopec/Occidental – Summary 65
Bridas/PAE – Summary 65
Otto Energy – Summary 65
Others – Summary 66
Appendix: Oil And Gas Long-Term Forecasts 69
Regional Oil Demand 69
Table: Latin America Long-term Oil Consumption (000b/d), 2014-2021 69
Regional Oil Supply 70
Table: Latin America Long-term Oil Production (000b/d), 2014-2021 70
Regional Gas Demand 71
Table: Latin America Long-Term Gas Consumption (bcm) 2014-2021 71
Regional Gas Supply 72
Table: Latin America – Long-Term Gas Production (bcm), 2014-2021 72
Methodology And Risks To Forecasts 73
Glossary Of Terms 74
Table: Glossary Of Terms 74
Oil And Gas Risk/Reward Ratings Methodology 77
Ratings Overview 77
Table: BMI’s Oil & Gas Business Environment Ratings – Structure 78
Indicators 79
Indicators 79
Table: BMI’s Oil & Gas Upstream Ratings – Methodology 79
Table: BMI’s Oil & Gas Business Environment Downstream Ratings – Methodology 80
BMI Methodology 82
How We Generate Our Industry Forecasts 82
Energy Industry 82
Cross checks 83
Sources 83
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