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YPF boosts output but sector still lags

YPF CEO Miguel Galuccio (right) greets Neuquén Governor Jorge Sapag at a meeting last year.

Nationalized firm increases gas, oil output around 9% in first month of the year

YPF increased oil and gas production by around 9 percent in January, continuing a trend that began in mid-last year in which the state-controlled firm reversed long-standing production declines. And while the rest of the sector continued to lag behind, oil production at least did experience a monthly increase, suggesting that YPF’s increases in output are starting to have a positive effect on the sector as a whole.

YPF’s natural gas output rose 9.2 percent in January, compared to the same month last year, to 948 million cubic metres. In crude oil, YPF saw an increase of 9.3 percent to 1.033 million cubic metres, according to data from the Energy Secretariat.

“YPF’s monthly production has been increasing in an uninterrupted fashion since April 2013, and in gas since May of that same year,” the company said yesterday, crediting “a strong level of investment that reached US$6 billion.”

A steady decline in production — as well as rising imports — was one of the key reasons used by President Cristina Fernández de Kirchner to expropriate a majority stake in YPF from Spanish company Repsol in 2012.

Yet so far those increases experienced by YPF have not managed to help create big increases in the sector as a whole, illustrating how while the state-controlled energy firm is an important piece of the puzzle in Argentina’s energy sector, it is hardly the only piece that matters.

Last year, YPF produced 41 percent of the country’s oil and 33 percent of its gas — numbers that will increase this year following the purchase of US company Apache’s assets in Argentina, as well as the Petrobras stake in Puesto Hernandez — a key area located in Mendoza and Neuquén.

In January, however, YPF’s increasing production did manage to at least nudge oil production up slightly. Across the country, oil output increased 0.96 percent while natural gas declined 0.4 percent.

In 2013, YPF “reversed a trend of more than nine years in year-on-year drops in gas and 10 years in oil.”

Yearly trend

Although it is premature to consider a trend out of one month’s figures, the January data could suggest the decreases in natural gas are growing smaller. At the very least, it marks a slower decline than what was seen in 2013, when natural gas production plunged 4.4 percent from 2012.

Last year, YPF’s natural gas production was 28.9 million cubic metres per day, slightly above the 28.2 million seen in 2012.

The decrease was also evident in oil production last year. YPF’s oil production rose to 31,892 cubic metres per day in 2013, up from the 30,864 cubic metres per day seen a year earlier. Yet that was not enough to have an effect on the sector as a whole, which saw oil production decline 1.7 percent to 85,829 cubic metres per day, according to Energy Secretariat data.

Hope for investment

There is increasing hope in the Argentine energy sector that a new compensation deal sealed between the government and Repsol will lure more foreign investment to what many believe to be some of the world’s most promising shale oil and gas prospects.

Last week Repsol said that its board of directors had approved a US$5 billion settlement with Argentina for its 51-percent stake in YPF that the government seized in 2012.

Argentina is betting the settlement will clear the way for Argentina to pursue investments from international oil companies to develop Vaca Muerta, a formation in the country’s Patagonia region that potentially holds one of the world’s biggest shale reserves.

Argentina is seeking financing and technological expertise to develop Vaca Muerta, but international investors, some worried about possible legal threats from Repsol before the announced agreement, have been reluctant to participate in large-scale development.

There are some hints more investment could be on the way.

Last month, YPF said it had signed a memorandum of understanding for Malaysian energy company Petronas to invest in Vaca Muerta.

Under the preliminary agreement, the companies would jointly develop a 187-square-kilometere swath of Vaca Muerta.

Herald with DyN, Télam

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