Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

$67 Crude Oil Price Has All The Majors Converging Here

Commodities / Crude Oil Mar 12, 2016 - 04:25 PM GMT

By: OilPrice_Com

Commodities

Argentina offers one of the few places on earth where oil companies are not suffering from the full force of the collapse in prices.
Argentina regulates oil prices, a policy originally intended to insulate the public from the whims of the market, protecting people from triple-digit crude prices. But with the crash in prices since mid-2014, the effect of the regulation has reversed: motorists are now effectively subsidizing the oil industry.


Prices for light oil are set at $67 per barrel and natural gas prices fixed at $7.50 per million Btu (MMBtu). That means consumers are not reaping the benefits of cheap fuel. The higher prices they pay offer a huge lifeline for the oil industry.

From the consumer's standpoint, that may not sound like a great deal. But it may help Argentina's shale industry keep their momentum going. Argentina holds some of the largest shale potential outside of the United States. According to the EIA, Argentina has over 800 trillion cubic feet of unproved technically recoverable shale gas reserves (more than the 622 tcf located in the U.S.) and 27 billion barrels of shale oil, which is less than only the U.S., Russia, and China.

The bulk of Argentina's shale reserves are located in the Vaca Muerta, a vast shale basin in central Argentina. The Vaca Muerta has attracted companies from around the world, including ExxonMobil, Chevron, Royal Dutch Shell and Gazprom.

Drilling activity has continued to grow, but high costs and infrastructure constraints have prevented production levels from rocketing skywards as they did in places like Texas or North Dakota.

But regulated oil prices could also prevent Argentina from suffering the effects of the bust that are now clearly visible across the well-known shale areas of the United States.

"This is so important, strategically," said the outgoing CEO of state-owned YPF, Miguel Galuccio, referring to regulated prices, according to the WSJ.

Last week, Galuccio announced that production from the Vaca Muerta continued to inch upwards, having reached 50,000 barrels of oil equivalent per day (boe/d), up from 44,000 boe/d last year.

But Argentina faces profitability challenges even with regulated oil prices. Galuccio said that the profit from YPF's shale oil and gas production was "marginal." YPF announced spending reductions as well as the decision to reduce its rig count. The company spent only $4 billion in 2015, down from the original $6 billion it had planned on spending. YPF will trim another 25 percent from its budget for 2016.

Galuccio argued, though, that the economics will improve as drilling scales up, techniques are refined, and operators learn more about the basin. He said that YPF has already reduced costs from the average shale well from $16 million to $13 million a piece. He expects that costs will decline to $10 million per well in 2016.

Regulated oil prices can buy YPF – and other companies, including YPF's joint venture partner, Chevron – some space to continue to drill and bring costs down. "We are doing this to sustain activity and employment," said Argentina's labor minister, Jorge Triaca, referring to artificially high prices.

"You've got to incentivize people to do exploration and development, especially when prices are low," said Ali Moshiri, the top Chevron official in Latin America said. "If Argentina carries on with these incentives, it will encourage others to come to the country."

Meanwhile, a corporate makeover is also underway. Argentina's new President Mauricio Macri pushed YPF's CEO Miguel Galuccio out the door last week. The FT reported that Argentina's new energy minister, Juan José Aranguren, was not fond of Galuccio. In particular, he was critical of ballooning debt levels that took place under Galuccio's management. Galuccio will be succeeded by a former JP Morgan executive.

But Galuccio is also credited with turning YPF's fortunes around. Since taking the helm in 2012 after the government of former President Cristina Fernandez de Kirchner nationalized YPF, he improved the company's operations and achieved production increases.

President Macri and the new YPF CEO hope to keep the momentum going. Whether or not having the Argentinian public subsidize oil prices is smart policy, it offers the shale industry a rare bright spot for the energy industry.

Article Source: http://oilprice.com/Energy/Energy-General/67-Oil-Has-All-The-Majors-Converging-Here.html

By Nick Cunningham of Oilprice.com

© 2016 Copyright OilPrice.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in