Boston, MA -- (ReleaseWire) -- 10/04/2012 -- BMI View: The renationalisation of YPF and subsequent 'aggressive but realistic' strategic investment plan set out by the company is the new driving force behind Argentina's energy sector. Vaca Muerta is the main E&P focus of YPF's five-year plan. The main challenge that the company will face is attracting the capital (technological, financial and human) to commercialise these resources. It could go either way for YPF and the government, and at this early stage we have only made a minor intervention in our forecasts for hydrocarbons production, pencilling in a small rise. We expect nationalisation to prompt the company to increase production at existing fields over the remainder of 2012 and into 2013. Further changes to our forecasts, including reserves and refining capacity, will come when the implementation of the five-year plan begins in earnest.
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The main trends and developments we highlight in the Argentine Oil and Gas sector are:
- The fiscal regime needs work if Argentina is to secure adequate long-term investment and harness the country's apparent potential.
- An audit carried out by US consultant Ryder Scott to assess potential of the Vaca Muerta formation in Argentina's Neuquen Province has led to a substantial increase in estimated reserves. The formation is now considered to hold prospective resources of 21.2bn barrels of oil equivalent (boe), contingent resources of 1.5bn boe and booked proven, probable and possible (3P) reserves of 116mn boe net to YPF. This is a considerable increase on a November 2011 contingent resources estimate of 927mn boe. In one of Repsol's last investor presentations as the parent of YPF it noted that Argentina has the potential to replicate the shale revolution witnessed in the US, while the CEO of US independent EOG Resources said that the Vaca Muerta play 'could be bigger than [the 5.7bn bbl] Eagle Ford', a formation located in south Texas, US.
- YPF's new investment plan envisages US$7bn in capex each year to 2017, focusing on the unconventional plays at Vaca Muerta and marginal fields. The aim is to increase production to 216boe by 2017, a rise of 35% on current production levels, by implementing ten and twenty-fold increases in oil and gas production respectively. Repsol-YPF had previously estimated that it would invest US$25bn per year to double the country's current oil and gas production.
- Conventional oil volumes will continue to come under pressure, though the plan to increase production from marginal fields could provide some respite if implemented as envisaged by YPF. Our current estimates assume oil output falling in 2012, but recovering in 2013/14. By 2016, we expect Argentina to be pumping an average 744,000 barrels per day (b/d).
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