Proven Hydrocarbon Reserves Continue to Decline in Argentina

The General Mosconi Argentine Energy Institute has released a report based on data from the Energy Secretary showing that proven natural gas reserves fell by 50% between 2002 and 2011. Proven gas reserves at end-2011 stood at 332,510 mmcm, down by 7% from the previous year, while the country's natural gas output fell to 45.52 bcm in 2011 and the reserve-to-production ratio stood at just 7.3 years. The sharpest declines in reserves were seen in the Neuquén and North-East basins, where proven reserves fell by 58% and 74%, respectively, since 2002. Meanwhile, the only two basins to have seen an increase in proven reserves over the period were Cuyana and Golfo San Jorge.

Probable gas reserves figures are slightly more positive, showing a 3% increase between 2010 and 2011 to 137,398 mmcm, although there was a decline of 55% between 2002 and 2011. However, what the figures fail to show is the potential offered by unconventional prospects, with gas resources down year-on-year at 197,608 mmcm.

Proven oil reserves were also down last year, totalling 393,996 thousand cm, a drop of 12% from 2002 and 2% less than in 2010, while oil production was 24% lower than a decade ago.

The report also looked at reserves by company, showing that the steepest declines in proven gas reserves over the past decade were recorded by Pluspetrol and YPF, at 77% and 72% respectively, while the operators with the largest declines in proven oil reserves were Petrobras, down 77%, and Chevron Corporation with a 64% drop since 2002.

Outlook and Implications

The proven reserves figures do not provide the full picture as they do not reflect the production potential offered by the country's unconventional resources. Although Argentina's unconventional sector is still in its infancy and further exploration is required before prospective resources can be converted into reserves, expectations are high. A United States Department of Energy study released in April 2011 ranked Argentina as the third most attractive country globally for unconventional prospectivity, with an estimated 774 trillion cubic feet in recoverable shale gas resources. Meanwhile, a technical study commissioned by Repsol into the potential of the Vaca Muerta shale formation in the Neuquén Basin estimated that this formation has gross prospective resources of 21.167 billion boe in an area of 8,071 sq. km and gross contingent resources of 1.525 billion boe over an area of around 1,100 sq. km. The formation is thought to cover 30,000 sq. km.

The release of a report showing the continued decline in Argentina's proven oil and gas reserves is a reminder of the serious challenges facing the energy sector if it is not able to tap into its shale resources. Falling reserves and production, combined with strong demand, have forced the country to become increasingly reliant on imports and have made the government's growing fuel subsidy bill unsustainable. Unfortunately, rather than addressing its own policy failings, such as low prices, the government has blamed foreign companies operating in the sector—principally Repsol—for failing to invest sufficiently and it sought to remedy the situation by taking control of the country's largest oil company, YPF (see Special Report: Argentina: 18 May 2012: The Renationalisation of YPF in Argentina: Future Perspectives). The new CEO of YPF, Miguel Galuccio, has laid out plans to invest USD35 billion between 2012 and 2017 but the state-controlled company will need the support of other companies and a more favourable investment climate if it is to make the most of the production potential offered by its recent finds in the Vaca Muerta shale play and help bring about Argentina's resurgence as a leading regional gas producer.