Snapshot: Argentina’s offshore oil and gas E&P push

Argentina is poised to enter a new phase of offshore hydrocarbons exploration. 

Companies are preparing to carry out exploration well-drilling and 3D seismic work off Buenos Aires province, in the Argentina Norte basin.

Work should get underway around the turn of the year, a seminar hosted by local natural gas market trading platform Megsa was told.

Currently, all offshore hydrocarbons come from the Austral basin, in operation for 40 years and which produced 20.2Mm3/d (million cubic meters per day) of gas in 2022, about 15% of national output, and 7,246b/d oil, about 7.5%. The chief player is the CMA-1 consortium, building the 10Mm3/d Fénix gas platform. An Enap-YPF consortium also produces offshore in the basin. 

The projects correspond to blocks CAN-102 (operator YPF, 3D seismic) and blocks CAN-100, CAN-108 and CAN-114 (operator Equinor, 3D seismic and exploratory well at CAN-100).

Drilling-phase work – the Argerich-1 project – is due to start from January at CAN-100, ultra-deepwater acreage is estimated to have recoverable resources of 1Bboe (billion barrels of oil equivalent).

Exploration was carried out in shallower waters offshore Buenos Aires, in the Colorado basin, in 1969-1997, with 18 exploration wells drilled. Oil was extracted from one during repeat formation testing.

Other contract holders, including Shell Argentina and Tullow Oil, are seeking the environmental green light to shoot 3D seismic.

Offshore contracts were awarded in a 2018-19 licensing round, which resulted in Argentina awarding 18 areas to nine groups of companies, with associated investment of US$724mn and surface area of 94,834km2. Argentina had offered 38, across the Malvinas, Argentina Norte and Austral basins.

Offshore projects are subject to a bespoke regulatory regime, with features such as lower initial royalty payments that would climb based on profitability, said Verónica Tito, a legal consultant for the federal energy department. “For me, this is one the most important aspects,” Tito said. 

Under law, royalties can be as low as 5% and as high as 18%.

Authorities have extended by up to two years the initial stipulated exploration periods of contracts, citing the logistical impact of the COVID-19 pandemic.

The 30-year contracts, with an optional 10-year extension period, establish two initial exploration periods of four years each and allow for a five-year extension of the second.

According to a YPF presentation, Argentina has 31Bboe potential offshore hydrocarbons resources, compared with the estimated 29Bboe in the onshore Vaca Muerta unconventional formation.

Any major outlay offshore Buenos Aires would likely hinge on a steadying of the macroeconomic ship and a lifting of capital controls. Argentina already produces surplus crude and is ramping up gas production in the Neuquén basin and investing in midstream infrastructure to help fully substitute gas imports. 

Argentine oil industry officials, as well as their peers in neighboring Uruguay, have said recent hydrocarbons discoveries offshore South Africa were encouraging news as South America and Africa share some geological history and could have similar rocks.

The energy transition clock is ticking for Argentina, where any new large-scale offshore development could take up to 10 years for first production.

Unlike various other matters, hydrocarbons development tends to enjoy bipartisan support in Argentina. All three candidates standing for president have backed development of the sector. 

Local suppliers are eyeing opportunities that an uptick in E&P activity would present, the conference was told.