Qatar Petroleum acquires stake in Exxon’s shale assets in Argentina

Monday, 02 July 2018

Vaca Muerta, a shale formation in west-central Argentina, is estimated to hold 22.8 barrels of oil equivalent (boe) which makes it one of the largest shale rock formations in the world.

The Argentine shale deal between two of the world’s largest oil producers comes as Exxon CEO Darren Woods seeks to tap fresh financing from external partners in order to swiftly expand upstream operations. The agreement was signed in Doha on Sunday but both parties did not disclose the value of the investment.

Participation of Qatar Petroleum in the Vaca Muerta play is hoped to bring new drive to ongoing operations. These shale blocks are currently under “unconventional exploration licenses with active drilling plans as well as exploitation licenses with pilot drilling and production,” the two partners stated when signing the deal.

“This is an important milestone, as it marks Qatar Petroleum’s first investment in Argentina as well as its first significant international investment in unconventional oil and gas resources,” CEO Saad Al-Kaabi said in a statement. The accord gives Qatar Petroleum a 30% shareholding in Exxon’s two local affiliates in Argentina – ExxonMobil Exploration Argentina S.R.L. and Mobil Argentina S.A. – which together with other partners hold rights for seven shale blocks.

Al-Kaabi explained the venture into Argentine shale oil and gas production would help expand the international footprint of the Qatari state oil company. At home, Qatar Petroleum is planning to boost local production from the North Field in a bid to raise its LNG production from 77 million to 100 million tons per year (mtpa).

Incentives for new shale developments

Situated in Neuquén in the western part of Argentina, Vaca Muerta shale is considered among the most prospective unconventional shale oil/gas plays outside North America. ExxonMobil claims activity in the basin has picked up recently thanks to unspecified “governmental incentives”, however, progress had been slowly forthcoming for years given that the Argentine government had been keeping a lid on domestic gas prices.

President Mauricio Macri’s government, since taking to power in late 2015, is now trying to boost domestic oil and gas production in an effort to reduce costs for energy imports. Macri's right-of-center government introduced an incentive price of $7.50/MMBtu for output from new developments back in 2013 and doubled average wellhead gas prices to $5.20/MMBtu on average for existing fields. This incentive price helped advance production which rose by 6.6% last year – much of the new growth came from shale and tight plays like Vaca Muerta and Mulichinco.

Other oil majors are also eying Argentine shale plays: When BP was revising its current engagement in the US Permian basin it had been considering investing in Argentina. “There is enormous potential,” CEO Bob Dudley said with reference to recent reforms that made Argentina more attractive by simplifying the market entry of foreign companies.