Argentine Shale Gas Production could alter the Southern Cones Geopolitical Landscape

<br /><div class="MsoNormal" style="color: red; line-height: normal;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdnmKBmOpbC6hOnlcjZoyD1gD2DkBwbMlMshZx6NiOH8Jnhm-s0eQRGIi6hiLwWDT2WVr02_L7qbLMRUIZR2Y9Ab8071-G9H8bZ8qmrcc4MGvr8588MX2fdK0nTKFbyIOoYth1enpVw2Pt/s1600/Shale.jpeg.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="260" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdnmKBmOpbC6hOnlcjZoyD1gD2DkBwbMlMshZx6NiOH8Jnhm-s0eQRGIi6hiLwWDT2WVr02_L7qbLMRUIZR2Y9Ab8071-G9H8bZ8qmrcc4MGvr8588MX2fdK0nTKFbyIOoYth1enpVw2Pt/s320/Shale.jpeg.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><a href="http://en.wikipedia.org/wiki/Shale"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">http://en.wikipedia.org/wiki/Shale</span></a></td></tr></tbody></table><div class="MsoNormal" style="color: red; line-height: normal; text-align: center;">read also <a href="http://news-these-days.blogspot.com.ar/2012/03/malvinas-30-years-on_30.html">http://news-these-days.blogspot.com.ar/2012/03/malvinas-30-years-on_30.html</a></div><div class="MsoNormal" style="color: red; line-height: normal;"><br /><span style="font-size: large;"><b>ARGENTINA: OBSTACLES TO SHALE GAS PRODUCTION </b></span></div><div class="MsoNormal" style="color: black; line-height: normal;"><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;">Via Stratfor Global Intelligence </span></i></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><b>SUMMARY</b></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">ARGENTINA relies heavily on fossil fuels for its energy needs. They account for roughly 89 percent of the country's overall energy consumption, and more than 40 percent of that consumption can be attributed to natural gas. ARGENTINE natural gas production peaked in 2006 at roughly 46 billion cubic meters (bcm), but since then production has not kept pace with demand. In fact, production has declined by 10 percent since 2006 while overall demand has increased by 4 percent. This trend culminated in 2008, when ARGENTINA became a net importer of natural gas after having been a net exporter since 1999. As of 2010, natural gas consumption outweighed production by approximately 3 bcm per year.</span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">But the future of natural gas in ARGENTINA may be more encouraging than recent production suggests, especially if Buenos Aires can harness the country's shale gas reserves. Estimates indicate that ARGENTINA has the third-highest recoverable shale gas reserves in the world -- roughly 22 trillion cubic meters (tcm). In addition to these potential reserves, ARGENTINA meets several other criteria that would enable it to quickly develop its resources and become a significant shale gas producer.</span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">The problem is that the ARGENTINE energy market operates under tight government control. This control is seen most visibly with government policies that have reduced the ability and will of energy companies to invest in new production. These policies have also placed a heavy financial burden on Buenos Aires, which in the past week revoked oil concessions for Repsol YPF, the country's largest energy company, accordingly. </span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1QSy96DGYkDCTBKvZGdULCmDF0vbUb3GfOstJ9xihGOVrxY8sjE73frmqNWgPVJvxo4NagTrPAMa62S4LmBiAHPYIMQ-5DgrvGe5ptT6z3W-tAh-Y30AX_uI2TbNxFccPULfE43CT0s5L/s1600/shale-gas-south-america.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1QSy96DGYkDCTBKvZGdULCmDF0vbUb3GfOstJ9xihGOVrxY8sjE73frmqNWgPVJvxo4NagTrPAMa62S4LmBiAHPYIMQ-5DgrvGe5ptT6z3W-tAh-Y30AX_uI2TbNxFccPULfE43CT0s5L/s320/shale-gas-south-america.jpg" width="246" /></a></div><div class="MsoNormal"><i style="mso-bidi-font-style: normal;"><span style="color: blue; font-family: "Times New Roman","serif"; font-size: 12pt; line-height: 115%;">Comment by Geopolitical Analysis and Monitoring: The model of Government control over the energy market has proven rather successful in countries such as AUSTRIA and formally state owned oil and energy company OMV, not to mention GERMANY and other EUROPEAN countries. Privatization of state assets is an IMF doctrine which has proven negative in many parts of the word. Government interferences in energy markets did prove to be a successful concept in Europe. The results of such interventions are still visible in Europe’s energy market which has been partially privatized but where the state still has the final decision making power.</span></i></div><div class="MsoNormal"><br /></div><div class="MsoNormal"><span style="font-family: "Times New Roman","serif"; font-size: 12pt; line-height: 115%;"></span><a href="http://www.jamestown.org/single/?no_cache=1&tx_ttnews%5btt_news%5d=33704"><span style="font-family: "Times New Roman","serif"; font-size: 12pt; line-height: 115%;">http://www.jamestown.org/single/?no_cache=1&tx_ttnews[tt_news]=33704</span></a></div><div class="MsoNormal"><br /></div><div class="MsoNormal"><a href="http://www.contrafedpublishing.co.nz/Energy+NZ/Vol.4+No.4+July-August+2010/Time+to+consider+State-owned+petroleum.html"><span style="font-family: "Times New Roman","serif"; font-size: 12pt; line-height: 115%;">http://www.contrafedpublishing.co.nz/Energy+NZ/Vol.4+No.4+July-August+2010/Time+to+consider+State-owned+petroleum.html</span></a></div><div class="MsoNormal"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">The volatility of ARGENTINA'S regulatory environment makes the country a risky opportunity for foreign companies that could provide much-needed capital and technological investments. Given the promising geology and infrastructure associated with ARGENTINA'S shale gas basins, this regulatory environment is perhaps the only impediment for quickly producing shale gas on a large scale. If the current negotiations with YPF can be brought to a mutually acceptable end, ARGENTINA could once again achieve energy self-sufficiency and become a net exporter of natural gas.</span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">ANALYSIS</span></b></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">ARGENTINA has four shale basins, the most promising of which is the NEUQUEN BASIN in central-west ARGENTINA, where a portion of the country's conventional natural gas is produced. According to a 2011 U.S. Energy Information Administration assessment, this basin contains approximately half of ARGENTINA'S recoverable shale gas reserves.</span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><b><span style="font-family: "Times New Roman","serif"; font-size: 13.5pt;">Conditions for Recovery</span></b></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">To recover these reserves quickly, five conditions must be met. There must be high concentrations of shale gas; technical expertise in extraction techniques and working knowledge of the local geography; established pipeline infrastructure; access to fresh water (to complete the hydraulic fracturing treatments); and huge amounts of capital.</span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhoYmevoaB9xU8zInP0K3jQE3UPPdjYn2uT-GO9FIH0MzRXegWoDaL4dEnIJoKcDjBgN_QC1_pTc9SelZULi9g2KHt3R9Bl9YGoB-Wqafi2lgSoHTSjiwKUTCPJ94YCJWJ2Djdmzlfa_VKO/s1600/EIA_World_Shale_Gas_Map.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="348" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhoYmevoaB9xU8zInP0K3jQE3UPPdjYn2uT-GO9FIH0MzRXegWoDaL4dEnIJoKcDjBgN_QC1_pTc9SelZULi9g2KHt3R9Bl9YGoB-Wqafi2lgSoHTSjiwKUTCPJ94YCJWJ2Djdmzlfa_VKO/s640/EIA_World_Shale_Gas_Map.png" width="640" /></a></div><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">ARGENTINA appears to be in good shape on most of these fronts. Though exploration is not complete, the shale formations of the NEUQUEN BASIN are believed to contain 11 tcm of recoverable reserves. Moreover, ARGENTINA has a robust pipeline system. Decreased conventional natural gas production has left ARGENTINA with extra pipeline capacity, and the NEUQUEN BASIN, where the preliminary shale gas exploration efforts are taking place, is already a production site for traditional natural gas extraction. In other words, most of the necessary pipeline infrastructure is already in place. Also, several rivers, including the Limay and Neuquen rivers, are close enough to the NEUQUEN BASIN to provide the requisite fresh water for hydraulic fracturing.</span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">To gain the necessary expertise and technology for exploiting its shale gas resources, ARGENTINA likely will need both domestic and foreign companies to participate in exploration. Already REPSOL YPF and CANADA'S AMERICA PETROGAS have drilled several exploratory wells in NEUQUEN. Additionally, EXXONMOBIL, TOTAL SA and ROYAL DUTCH/SHELL have invested or plan to invest in ARGENTINE basins but have not drilled any wells. Notably, the geology of the NEUQUEN BASIN is thought to be similar to several U.S. basins, likely making the adaptation of current extraction techniques a simpler task.</span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">Getting financing may be the most difficult condition for ARGENTINA to meet. YPF has stated that developing the NEUQUEN BASIN'S VACA MUERTA field alone will cost $25 billion per year. To that end YPF is seeking foreign partners, including EXXONMOBIL, ITALY'S ENI and major CHINESE and RUSSIAN companies, to finance the operations. <b style="mso-bidi-font-weight: normal;">But YPF is the major player in existing oil and natural gas production, and regardless of new investment, it will remain important for the development of the energy sector, both as a partner and as the company that controls the majority of ARGENTINA'S energy infrastructure.</b></span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">But the nature of Argentina's energy markets will complicate YPF's ability to attract investment partners. Low consumer prices have cut into energy companies' revenues, and in YPF's case, the company has been allowed to return 90 percent of its profits to stockholders, leaving little for investment into more exploration at a time when domestic production is in decline. Because demand outstrips production, the government has been forced to subsidize natural gas and fuel oil to ensure that domestic demand is met. As a result, the government has directly engaged YPF in a battle to push the company to invest in new energy production, most recently using the provincial governments to revoke oil concessions.</span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">The ultimate goal for the ARGENTINE government is to keep fuel prices low domestically while forcing companies to increase energy production. Buenos Aires may be willing to provide some money to achieve that goal, but the majority of technology and financing will have to come from foreign sources, including YPF. Some foreign companies may be put off by price controls and the ARGENTINE government's erratic behavior. <b style="mso-bidi-font-weight: normal;">However, with only 2 bcm of additional natural gas needed to satisfy domestic consumption, the prospect of being able to export the natural gas may be enough of an incentive for foreign companies to brave the political winds of ARGENTINA. </b></span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><b><span style="font-family: "Times New Roman","serif"; font-size: 13.5pt;">Regional Implications</span></b></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">It is unclear whether ARGENTINA can overcome its own regulatory environment and produce shale gas on a large scale. If successful, the implications for ARGENTINA and the region are extensive. Shale gas has the potential to eliminate ARGENTINA'S natural gas deficit, which means the SOUTH AMERICAN country could resume exporting its natural gas -- if it can garner enough investment to move beyond the current stage of basic exploration. </span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">Buenos Aires would apply any initial production toward meeting domestic consumption. This will take at least an additional 3 bcm per year of production from the shale gas fields to eliminate the natural gas deficit and at least another 3 bcm per year from shale gas to increase overall natural gas production back to peak levels. Over the past decade, the UNITED STATES has increased shale gas production by more than 100 bcm per year. ARGENTINA would have to produce less than 10 percent as much as the UNITED STATES to regain export status.</span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">CHILE and BRAZIL are natural gas importers, and much of the natural gas they import comes from BOLIVIA and ARGENTINA. Given ARGENTINA'S decline in production and the 2007 nationalization of the natural gas sector in BOLIVIA, BRAZIL and CHILE have supplemented their natural gas imports with liquefied natural gas (LNG) from global markets -- a much more expensive operation than piping natural gas. CHILE would welcome lower natural gas prices brought on by increased ARGENTINE production, and BRAZIL would likewise benefit from increased production in the region.</span></div><div class="MsoNormal" style="color: black; line-height: normal;"><br /></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">If ARGENTINA produced enough shale gas to exceed its own demands and the demands of neighboring states, ARGENTINA could look toward the global LNG market. Argentina already has two import terminals, which could be expanded to include export capabilities with time, planning and money. It is the opportunity for global expansion that will attract foreign capital.</span></div><div class="MsoNormal" style="color: black; line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">Despite ARGENTINA'S potential reserves, the extent of ARGENTINE shale gas production will not be realized for at least five years. Additional natural gas production would first liberate ARGENTINA from its own energy dependence and eliminate its natural gas deficit. From there, Buenos Aires could begin looking outward. But to do so, ARGENTINA must overcome its own obstacles to attract and then retain foreign investment.</span></div><div class="MsoNormal" style="line-height: normal;"><br /></div><div class="MsoNormal" style="line-height: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"> </span><b style="color: blue;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">Reading headlines such as: </span></b></div><div class="MsoNormal" style="line-height: normal;"><br /></div><div class="MsoNormal" style="color: red; line-height: normal;"><b><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">The Next Big Shale gas Boom </span></b><b><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"></span></b></div><div class="MsoNormal" style="line-height: normal;"><b><span style="color: red;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">How To Invest in Argentina</span></span></b><span style="font-size: small;"><b><span style="color: red;">’s Emerging Shale Oil & Gas Play</span></b></span></div><div class="separator" style="clear: both; text-align: center;"></div><h1 class="entry-title" style="color: black; font-weight: normal;"> <span style="font-size: small;">indicate that energy demand and subsequent investment opportunities will  have oil companies accept even government control, simply because there is too much money involved and the profit margins big enough for all parties involved the rest is a  "tug of war" between politics and oil companies. </span></h1><h1> <a href="http://www.investmentu.com/2011/October/shale-gas-boom-in-argentina.html"><span style="font-size: 11pt; font-weight: normal;"><span style="color: windowtext;">http://www.investmentu.com/2011/October/shale-gas-boom-in-argentina.html</span></span></a></h1><h1><a href="http://www.blogger.com/%20http://oilandgas-investments.com/2011/oil-stocks/how-to-invest-in-argentinas-emerging-shale-oil-gas-play/"><span style="font-size: 11pt; font-weight: normal;"><span style="color: windowtext;"> </span></span></a></h1><h1 class="entry-title" style="font-weight: normal;"> <span style="font-size: small;"></span><span id="pronsetspell"><span class="pronsetspell" style="display: inline;"><span class="prondelim"></span></span></span><span style="font-size: small;"> </span></h1><div class="separator" style="clear: both; text-align: center;"><a href="http://oilandgas-investments.com/2011/oil-stocks/how-to-invest-in-argentinas-emerging-shale-oil-gas-play/"><span style="font-size: small;">http://oilandgas-investments.com/2011/oil-stocks/how-to-invest-in-argentinas-emerging-shale-oil-gas-play/</span></a></div><div class="MsoNormal"><br /></div><div class="MsoNormal"><br /></div><br />

Argentine Shale Gas Production could alter the Southern Cones Geopolitical Landscape

http://en.wikipedia.org/wiki/Shaleread also http://news-these-days.blogspot.com.ar/2012/03/malvinas-30-years-on_30.htmlARGENTINA: OBSTACLES TO SHALE GAS PRODUCTION Via Stratfor Global Intelligence SUMMARYARGENTINA relies heavily on fossil fuels for i…

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