Major Offshore Discovery Bolsters Argentina's Oil Prospects

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Researched by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--A new oil discovery off the coast of Argentina is brightening the country's energy prospects. Exploration efforts by YPF S.A. (NYSE:YPF) (Buenos Aires, Argentina) and Equinor (NYSE:EQNR) (Stavanger, Norway) at the Argerich project have brought to light new oil deposits that could be as vast as the Vaca Muerta shale reservoir, one of the world's largest non-conventional oil formations.

This project, located about 300 kilometers (186 miles) off the coast of the Mar del Plata city, in the Buenos Aires province, could have the capacity to produce about 200,000 barrels per day (BBL/d) of oil, which equates to almost half of Argentina's current output.

As a result of the exploration efforts, Argentina's Minister of Environment and Development launched a public audience with dozens of energy, environmental, economic and labor experts about the prospects for Argerich. The objective of the event was to measure support for developing such large projects off the coast of Buenos Aires.

Among the most discussed topics were the environmental and economic impacts of developing such projects in the near term. Nevertheless, optimism seemed to prevail among the speakers, many of whom highlighted the economic and labor impacts that Argerich and similar projects could have for Argentina.

Based on some of the numbers offered by speakers throughout the event, Argerich could create 65,000 new jobs, as well as energy investments of about $6 billion over the next few years.

According to Argentine newspaper Pagina 12, YPF's business manager Gustavo Astie said that if the project is successful, Argerich's oil output could equal YPF's current production in all of Argentina. Additionally, the representative said that this development can bring significant flows of foreign currency to the South American nation through exports and investments: "We (Argentinians) cannot lose this unique opportunity."

Argentina's dire economic situation has been worsening over the last few years, with the reduction of foreign reserves and increasing subsidies to the nation's massive economy. As a result, inflation has risen, and the South American country is expected to finish the year with one of the world's highest inflation rates.

The government, for its part, has imposed currency controls in the economy to avoid further devaluation and reduce the depletion of foreign reserves from national coffers. Yet, such measures have impacted several industries, like the energy sector, which rely heavily on foreign currency trading.

In the past, Argentina has enacted policies to ease such controls on the energy industry to allow operations and avoid the exit of foreign multinational companies. In short, Argentina has been prompting its oil and gas sector with the hopes of higher foreign investments and oil production, especially in Vaca Muerta, to allow the energy industry to grow and become a key source of foreign reserve for the nation's starved coffers.

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