Fracking Abroad
Argentina’s Shale Hoping for Cash Windfall

The shale boom has thus far remained a uniquely American phenomenon (for a long list of reasons), but the issue of other countries replicating that success has always been a question of when, not if. Argentina’s Vaca Muerte formation contains the second-largest reserves of shale gas in the world behind China, and as the WSJ reports, those multitudes of hydrocarbons are attracting the keen interest (and capital) of oil and gas companies:

Oil and gas companies will be investing $15 billion a year in unconventional energy in Argentina by 2020, Energy Minister Juan José Aranguren said.

Argentine state-run oil company YPF, Chevron Corp. and others are now spending about $1 billion a year in Vaca Muerta, a massive shale oil-and-gas basin in Patagonia, Mr. Aranguren said in an interview Tuesday.

The surge in investment, which some analysts say is far from certain, would come as a result of Argentina’s effort to overhaul its energy industry, Mr. Aranguren said. The country is winding down a decade of price controls and subsidies that distorted the market so much that until recently many families here paid more for a cup of coffee than for their electricity bill.

If and when this cash does start flowing, it will be because Argentina identified its need for market reforms, and followed through on making those necessary changes. We’ve been tracking this story for many years now, and each time we’ve checked in on the Vaca Muerta it’s looked a little bit closer to fulfilling its potential. And progress has been made—labor unions have agreed to up drilling productivity and lower costs, a necessary step for Argentina’s shale ambitions to be fully realized.

But the country’s energy minister is still talking in terms of action two or three years from now, and that means that, for the time being, the United States is going to remain the only real player in the shale game. But if and when Argentina can hack away at its red tape and install more market friendly policies to attract foreign capital, the shale oil and gas could start flowing fairly rapidly.

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