FT – Argentina’s ambitious drive to emulate the US shale boom is moving ahead after the country delivered its first-ever exports of light crude oil and liquefied natural gas from its massive Vaca Muerta shale deposit in Patagonia earlier this month.
Two private-equity firms — the UK’s Riverstone and Argentina’s Southern Cross Group — unveiled plans on Thursday to invest $160m in a 78.4 per cent stake in the first exclusively midstream company to operate in the Vaca Muerta, or “Dead Cow”, rock formation.
The newly created company, called Aleph, is being spun off from Vista Oil & Gas, which sent the first cargo of light oil from Vaca Muerta on June 10 at about the same time that the Argentine oil giant YPF sent the first shipment of LNG from the deposit, which has been billed as the most promising shale oil and gas basin outside the US.
Recently, oil majors Shell and Exxon Mobil have announced their intent to ramp up operations in Vaca Muerta. A gradual rise in exports is expected, with Argentina’s light oil shipments forecast to reach 70,000 barrels a day next year.
“Today the wells in Vaca Muerta have reached a level of production that is the same or better than the Permian [in the US]. The market recognises that,” says Miguel Galuccio, who runs Vista and was previously chief executive of YPF where he led the initial development of Vaca Muerta.
As the only independent public company producing oil in Vaca Muerta, Vista is blazing the trail for others. That could allow Argentina to replicate the US shale revolution, which was driven by independent companies, said Mr Galuccio.
“I have no doubt that that will happen,” said the chief of Vista, which will keep a 21.6 per cent stake in Aleph. Specialised midstream companies such as Aleph also played a key role in the US shale boom, he said, adding that by handing over control of midstream activities, funds will be freed up for Vista to invest more in its capital-intensive core business upstream.
Vaca Muerta is one of the few bright spots in Argentina’s economy, which is struggling to recover from the impact of a currency crisis last year and has failed to attract the levels of investment promised by President Mauricio Macri when he came to power in 2015.
Although significant advances have been made in drilling, there are still major barriers to raising shale production to US levels. They include the need to build more infrastructure, such as pipelines and an LNG terminal, and restrictions on exports. The uncertain outcome of elections in October is also a concern for investors.