Argentina: oil and gas production in 2020

Argentina: oil and gas production in 2020

Oil and gas extractions declined after two consecutive years of increases. In both segments, there is an outstanding growth in the participation of unconventionals, directly related to the exploitation of the “Vaca Muerta” Formation.

I) Oil production in Argentina

Oil production in Argentina contracted 5% in 2020, ending growth that had been sustained for the previous two years. According to data from the National Secretariat of Energy, in 2020 the country extracted 28.2 million m3 (MMm3) of oil.

Of the five originating basins, four of them obtained less oil than in 2019. The largest drop in absolute terms occurred in the Golfo San Jorge basin (Chubut, Santa Cruz provinces, and continental shelf) which, with a 45% share of the total produced oil, it reduced its extraction by 7%. The Austral (Santa Cruz, Tierra del Fuego provinces, and continental shelf) and Cuyana (Mendoza and San Juan provinces) basins exhibited interannual falls of 27% and 13% respectively, although their aggregate impact in absolute terms was less than the one of the Golfo San Jorge basin. The performance of the Neuquina basin (Neuquén, Mendoza, Río Negro, and La Pampa provinces), rich in shale oil deposits, has remained almost unchanged in 2020 compared to 2019, with a negative variation of less than 1%. Last year, the Neuquén basin, where Vaca Muerta is located, contributed 48% of Argentine oil production. Finally, the Northwest basin (Jujuy, Salta, Tucumán, Santiago del Estero, and Formosa provinces) was the only one that showed a positive year-on-year variation, although its contribution to the total is very small, barely 1%.

Argentina’s oil production in 2020 became the lowest record in the last 10 years, a period that shows a marked downward trend, accumulating a fall of 13 percentage points. It went from 32.5 million m3 in 2011 to 28.2 MMm3 in 2020. In the decade considered, the oil production of the Neuquén basin fell by 3%, proportionally less than the national aggregate.

On the other hand, in the first quarter of 2021, oil production was 6% lower than in 2020, even despite the critical price situation and falling demand registered at the beginning of last year. Oil performance so far in 2021 is 2% below the average produced in the first three months of the last 3 years.

II) Production of conventional and unconventional oil in Argentina

The year 2020 marked an all-time high for unconventional oil production in Argentina, which reached 6.9 million m3. In contrast, conventional oil extraction fell to a minimum totaling 21.3 MMm3. Last year, conventional oil represented 71% of the national total, while unconventional oil contributed 29%. Non-conventional oil is understood to be the production of shale oil and tight oil, which has been growing notably in the “Vaca Muerta” formation. In fact, in 2020, the Neuquén basin originated 99% of Argentine unconventional oil.

Analyzing the last decade, conventional crude oil production fell by 24%. In contrast to this, unconventional production multiplied by 14, growing at an average annual rate of 63% in the period 2011-2020. Unconventional oil went from having a share of less than 1% in 2011 (145 MMm3) to a share of 29% in 2020 (6,955 MMm3). In the last year, the year-on-year growth of this segment was 28%.

During the first quarter of 2021, unconventional oil production continued to show good signs, totaling 2,051 MMm3. This record is 13% higher than what was extracted during the first three months of 2020 and is 63% above the average of the last 3 years.

III) Ranking of oil producing companies

According to information published by the Argentine Institute of Oil and Gas (IAPG), YPF continued to lead the ranking of oil-producing companies in Argentina during 2020, concentrating 45% of national production. With an annual extraction of 12.8 MMm3, the company more than doubled the production of Pan American Energy (PAE), the second largest oil operator in the country. PAE extracted 6.0 MMm3 of oil in 2020, equivalent to 21% of the total. In third place was Pluspetrol (1.4 MMm3) with a 5% stake, and in fourth and fifth place were Vista Oil & Gas and Sonopec (China), with stakes of 4 and 3%, respectively.

Thus, almost 80% of Argentine oil production in 2020 was originated by the 5 leading companies, while the remaining 20% ​​was distributed among more than a dozen companies with individual stakes of 2% and even lower.

IV) Natural gas production in Argentina

Natural gas production in Argentina in 2020 totaled 45,130 million m3 (MMm3). At present, Argentina produces a lower volume of gas than ten years ago, when its production exceeded 45,000 MMm3. In a similar way to what happened with oil, 2020 – conditioned by the pandemic – marked the end of a two-year growing trend. The year-on-year drop in gas production was 9%, largely explained by the production cut in the Neuquén basin, which, with a 70% share in national production, reduced its extractions by 10% year-on-year. The Neuquen province basin, where the “Vaca Muerta” formation is located, is key in the contribution of shale gas and tight gas, its main potential, and a very important indicator for the future of the country.

V) Conventional and unconventional gas production in Argentina

When the evolution of gas production is analyzed according to whether it is conventional or unconventional, the first shows a strong negative trend while the second shows a strong growth. In the last decade, conventional gas production in Argentina went from 43,668 MMm3 in 2011 to 26,230 MMm3 in 2020, reducing by about 40%. In contrast to this, unconventional production totaled just 1,860 MMm3 in 2011, when in 2020 it reached 18,900 MMm3. Thus, in the period considered, the unconventional extraction of shale gas and tight gas multiplied by 10.

The spectacular growth of unconventional gas production led to a greater share of shale gas and tight gas in total national production. Last year the unconventional, which 10 years ago had marginal participation of only 4%, represented more than 40% of the product. Thus, Argentina is currently close to equating the share of its conventional gas production (58%) with its unconventional one.

In the challenging year 2020, the productions of both types were cut, although the fall of the conventional was proportionally greater. At an aggregate level, in the first quarter of 2021, Argentine gas production was 11% below both the record for the same period of 2020 and for the average of the last three years. If the performance of production is analyzed by type, it is clear that, while the conventional one fell 9% year-on-year in 2021, the non-conventional one had an even greater decrease of 15%.

VI) Ranking of gas producing companies

Following IAPG data, YPF is the largest natural gas producer in Argentina, originating in 2020 with 12,337 MMm3, which is equivalent to 27% of the total. The second operator in terms of gas production is Total Austral, which last year originated 11,897 MMm3, representing 26% of the gas extracted in Argentina. In third and fourth place are Tecpetrol with 4,996 MMm3 and Pan American Energy with 4,793 MMm3, each representing 11% of the national product. The company Pampa Energía completes the top 5 of gas extractors, which with an annual production of 2,216 MMm3 of gas achieves a 5% share. Similar to what happens in the oil market, the five main natural gas producers in Argentina account for 80% of the national aggregate.

Source: https://bcr.com.ar/

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