Preliminary estimations indicate the field may hold between 1 and 2 trillion cubic feet of gas resources. Repsol is the operator of the block with a 53.84% stake. Petrobras holds the remaining 46.16%.
The Sagari find reinforces the potential of this area in Peru, home to the Repsol’s Kinteroni find, one of the five biggest discoveries made worldwide in 2008 and currently under accelerated development with first gas planned for the end of 2012.
Production tests carried out at depths of between 2,691 and 2,813 metres produced gas flows of 26 million cubic feet of gas with 1,200 barrels of condensate per day in one formation, and 24 million cubic feet of gas with 800 barrels of condensate per day in the other. The sum of both tests indicates about 11,000 boepd.
Repsol plans to carry out further exploration in the block once the production tests are complete.
Repsol in May presented its 2012-2016 strategic plan with ambitious growth targets based on the strengths of its exploration and production units, the company’s growth engine. The plan envisages investment of over 19 billion euros in the next five years and annual production growth of 7% to reach 500,000 barrels of oil equivalent a day in 2016. This is higher than the industry average. Repsol also plans to add six barrels of oil equivalent to reserves for every five barrels pumped during the period.
Repsol has made more than 30 oil and gas discoveries in the last five years, including five which are amongst the largest made worldwide, significantly bolstering future reserve and production growth prospects.
CGX Energy Inc. last week announced, along with its partners on the Jaguar-1 well located on the Company’s 25% owned Georgetown Petroleum Prospecting License (“PPL”), that drilling operations at the Jaguar-1 well on the Georgetown PPL, Guyana ended and the well would be plugged at a depth of 4,876 metres without reaching the primary objective in the Late Cretaceous geologic zone.
The decision to stop drilling at this point was unanimously agreed by all partners based on safety criteria and was taken after reaching a point in the well where the pressure design limits for safe operations prevented further drilling to the main objective.
Jaguar-1 was a high pressure, high temperature (HPHT) well which was spudded in February 2012 using the Atwood Beacon jack-up rig. Whilst the primary Late Cretaceous objective was not reached, samples of light oil were successfully recovered from two Late Cretaceous turbidite sands. The partners to the Georgetown PPL are Repsol Exploración S.A (15%), as operator, along with YPF Guyana Limited (30%), Tullow Oil plc (30%) and CGX Resources Inc. (25%).
Kerry Sully, President and CEO stated, “Based on hydrocarbons recovered during the drilling of Jaguar-1, CGX is confident that a new well targeting the same prospect would hold significant promise and is therefore committed to seek a re-drill utilizing a new well design.”
Commenting on the Company’s plans in the Guyana Suriname basin, Suresh Narine, Chairman, reiterated CGX’s near-term goals stating, “In addition to our commitment well on the Corentyne Block, we are planning a 3D seismic program later this fall with our ultimate goal being to commit to a rig for a three to five well program. Added to this would be the re-drill of the Late Cretaceous target addressed by the Jaguar-1 well.”
Russia’s Zarubezhneft is getting ready to begin its oil and gas exploration campaign offshore Cuba.
Songa Mecur, the semi-submersible rig to be used for the campaign, is expected to arrive to Trinidad next week, where it will undergo preparations work before setting sail to Cuban waters.
The drilling program is expected to start in November.
Zarubezhneft in 2009 signed production sharing contracts with the communist country’s oil company Cubapetroleo for two offshore blocks located in the Cuban sector of the Gulf of Mexico. In the upcoming exploration campaign the company hopes to unlock hydrocarbons hidden in Cuba’s offshore Block L.
Cuba estimates that its offshore fields hold approximately 20 billion barrels of oil, which could, once unlocked provide a major boost to its economy.
In May this year, the Spanish oil company, Repsol, after a failed attempt to discover oil in a well offshore Cuba, decided to abandon any further offshore drilling plans in the Caribbean nation’s waters.
Earlier this week, Cubapetróleo (Cupet) informed the local media that Catoche 1X well drilling offshore Cuba was unsuccessful. The well was drilled by a consortium established by Malaysia’s Petronas and Russia’s Gazprom. The consortium then released the Scarabeo 9 rig to Venezuela’s PDVSA which will try it’s luck at the Cabo de San Antonio 1x offshore well.
- Petronas, PDVSA Searching for Oil Offshore Cuba (mb50.wordpress.com)
Cuba’s state oil company, Cubapetróleo (Cupet) sent a statement to the country’s media saying that a company from Malaysia, a subsidiary of Petronas, had started drilling operations at the Catoche 1X well offshore Cuba.
The Malaysian company is using the Scarabeo 9, a 6th generation semi submersible drilling rig, for the operation. The Catoche 1X well was spudded on May 24. The rig had been under a contract with the Spanish oil major Repsol, who, following the disappointing results of its recent well, decided to scrap plans for further drilling off the Caribean country’s coast.
Cupet has said that Repsol’s failure to find oil doesn’t mean that the oil isn’t there and has added that the area has “a high potential for discovery of new hydrocarbon reserves, according to geological studies performed.”
Cuba estimates that its offshore fields hold approximately 20 billion barrels of oil, which could, once unlocked provide a major boost to the communist country’s economy.
Furthermore, the Cupet’s announcement says that once the drilling of Catoche 1X is completed the Scarabeo 9 will move to the Cabo de San Antonio 1x well, operated by Venezuela’s PDVSA.
Scarabeo 9, capable of operating in water depths of up to 3,600 meters, was built by Singapore’s Keppel specifically for drilling operations in Cuban waters.
Due to the United States trading embargo against Cuba, Repsol had to come up with a rig with almost no U.S. made parts in it, and according to Reuters, the only U.S. manufactured part on the Scarabeo 9 rig is a blowout preventer, a part that malfunctioned and caused the Deepwater Horizon disaster in the U.S. Gulf of Mexico in 2010.
Thursday, May 10, 2012 – by Staff Report
Argentine Vice President Amado Boudou on Tuesday urged US companies to invest in YPF, the nationalized oil company that Argentina recently expropriated from Spain’s Repsol … “We are very optimistic in terms of what is coming for the Argentine economy in general and the hydrocarbons sector specifically” Boudou said at a Conference on the Americas at the US State Department in Washington. Far from scaring off foreign investment because of the expropriation, the government of President Cristina Fernandez has set the framework for “excellent opportunities for those who want to invest in joint ventures and possibilities of joint work in the energy sector,” he said. The Cristina Fernandez administration is gambling that the discovery in May 2011 of a giant oilfield in Argentina’s Patagonia would be too tempting for foreign oil giants to ignore. YPF needs the know-how and the capital to fully exploit the oil fields in the south-western Nequen province, known as Vaca Muerta (Dead Cow), which according to official estimates holds 150 million barrels of oil. YPF is “open to capital and the possibility of working together with public or private companies in Argentina or abroad,” Boudou said. – Merco Press
Dominant Social Theme: Don’t cry for Argentina. It’s all under control …
Free-Market Analysis: Are Argentina’s top officials having second thoughts about their expropriation of Spain’s Argentine oil-producer? It would seem that way from the above news report via Merco Press.
If the move was as wildly destructive as people think it may have been, then this posture would tend to confirm the idea that one of the world’s more powerful and influential states is simply spinning out of control.
The results may be truly catastrophic, not just for Latin America but for the larger, struggling world.
This boom may well be ending – or certainly growing long-in-the-tooth after a decade or more.
Although the Argentine expropriation of Repsol made major shock waves, the Argentine government under President Cristina Fernandez has portrayed it as a judicious and necessary gambit.
Many other observers regardless of political affiliation have branded the move as a shallow populist one that will bring disaster to Argentina and environs.
As the predictions of damage mount, there is more speculation that Fernandez’s action may bring down not only her own government but other regional governments as well.
These predictions involve inevitably a peso devaluation that will set off a dollar-withdrawal frenzy in big regional banks. Real estate prices – radically inflated after a decade of monetary expansion – may well plunge. The results could affect large swaths of South America.
Countries that could be affected include Uruguay, Brazil, Chile and Peru among others – all countries that have pursued moderate market-based policies and have benefitted from the South American industrial and monetary boom.
Meanwhile, Repsol doesn’t seem apt to surrender. Here’s more from the article.
YPF is “open to capital and the possibility of working together with public or private companies in Argentina or abroad,” Boudou said.
Last week the Argentine president signed a bill expropriating 51% of YPF stock from Repsol, its majority shareholder, sealing a measure that has roiled the country’s trade ties with Europe.
Cristina Fernandez has argued that the move was justified because Argentina faces sharp rises in its bill for imported oil, and Repsol has failed to make agreed investments needed to expand domestic production.
In Madrid, a Repsol spokesman Tuesday said the company has warned its competitors that they will face legal action if they invest in YPF.
“The idea is to protect the assets that were confiscated in Argentina until the situation is resolved in a satisfactory way for the parties that are involved,” the spokesman said.
Conclusion: A cascading crisis in South America may still seem likely …
- Argentina: Vaca Muerta – Argentina’s oil and gas seizure poses new dilemma (mb50.wordpress.com)
- Incensed Spain threatens Argentina after YPF seizure (mb50.wordpress.com)
- Leftist economist masterminds Argentina’s YPF grab (mb50.wordpress.com)
- This Is Why President Cristina Kirchner Is Not Good For Argentina (businessinsider.com)
- Argentine Congress easily approves YPF takeover (fuelfix.com)
- BOOM: Argentine Parliament Votes To Nationalize YPF (YPF) (businessinsider.com)
- Leftist economist behind Argentina’s YPF takeover (sacbee.com)
- Argentina Backs Nationalization of YPF Oil Firm (theepochtimes.com)
- Incensed Spain threatens Argentina after YPF seizure (mb50.wordpress.com)
By Vladimir Hernandez BBC Mundo
It is a grim name, though it has nevertheless brought hope of a better future for many in Argentina: Vaca Muerta – translated from the Spanish – means “Dead Cow”.
Vaca Muerta’s barren landscape covers some 30,000 remote sq km of the Patagonian province of Neuquen, in the west of Argentina.
And it was here where energy giant Repsol-YPF struck gold last year. Black gold.
Buried in 250-million-year-old rocks, almost 3km beneath the surface here, are some of the world’s largest reserves of shale oil and gas.
According to the Spanish energy giant Repsol, there are prospective resources equal to more than 21 billion barrels of oil underneath the ground in Vaca Muerta.
Much of it could be shale oil, rather than gas, according to an independent Ryder Scott audit commissioned by Repsol, though this has yet to be proven.
But the presence of shale gas is proven, and it is clear that the reserves found here will make up a big proportion of the country’s estimated 22 trillion cubic-metre total.
That makes Argentina the world’s number three in terms of shale gas reserves – hot on the heels of the US, which has reserves of some 24 trillion cubic metres, and China, which has reserves of some 36 trillion cubic metres, according to the American Energy Information Administration.
Failure to invest
Getting the reserves out would obviously require massive investment.
Argentina’s government believes Repsol – which has been active here ever since it took over YPF when it was privatized during the 1990s – should have done this.
But instead, it says, Repsol has been dragging its feet, invested too little and thus failed to get the resources out of the ground as quickly as it should have done.
The government has even accused Repsol of pulling YPF’s profits out of the country to finance its businesses abroad.
President Cristina Fernandez said:
“If such a situation continued, we would have had big energy problems in the country because of the drop in production and the increasing reliance on fuel imports.”
So the government has stepped in to take control of what it sees as a vital, national asset.
Rodrigo Alvarez Argentine economist:
This is the real reason behind the renationalization of YPF”
Renationalizing YPF has in effect helped the government regain control of the Vaca Muerta energy reserves, since the rights to exploit more than a third of the area were held by Repsol-YPF.
The move, and the manner in which it was made, has obviously created a great deal of controversy.
Repsol and others believe the government was motivated by a desire to secure the country’s energy requirements for decades to come, and thus reduce its gas import bill which shot up to $10bn in 2011 and is expected to surge to $14bn this year.
“This could help cope with between 30% and 40% of the gas demand within Argentina, which has been covered with costly imports in the last two years,” says Eduardo Barreiro, an energy consultant and a director at the Society of Petroleum Engineers in Argentina.
Argentine economist Rodrigo Alvarez Litre agrees:
“This is the real reason behind the renationalization of YPF,” he wrote in a column in the Argentine newspaper, Perfil.
“With such shale gas reserves, Argentina could position itself as a nation with cheap and abundant energy, and profit from the high prices in the international market.”
Argentina’s government might describe its move as a step towards self-reliance, which it believes is clearly in the nation’s interest.
“Vaca Muerta could be a very important area in the future,” Mr Barreiro says.
“But it needs investment.”
Some $3bn would be required over the next three years to get the shale gas extraction started.
And then, he added: “You’ll need to be excavating constantly to keep the production levels high enough to justify the investment and to make a profit.”
According to Repsol, more could be achieved with more investment. The firm insists that some $25bn per year would be needed to exploit Vaca Muerta’s shale oil and gas potential. This, the company believes, could double the Argentine production in 10 years.
But this would require some 3,000 shale oil and gas wells in an area where there are only 28 at the moment.
Without Repsol, the government might well look to other foreign investors for help to make it happen.
But Daniel Kokogian, a geologist who works as an advisor for several foreign energy companies in Argentina, said some companies would be concerned about how they might be treated in the future, following the renationalization of YPF.
“What private investor would put money into a business where national interest will come first, then profits?” he asks.
Others are far more optimistic about Argentina’s chances to attract foreign investors.
The government says it has already had talks with energy giants such as Total of France and Petrobras of Brazil – and local energy analyst Victor Bronstein expects deals to be struck.
“Oil companies are constantly operating in turbulent environments, in problematic countries,” he says.
“If they think there’s a business opportunity, that there’s a possibility of resources, they’ll dive in.”
Besides, cash-rich states may well be keen to get involved, according to Mark Routt, a senior consultant with KBC Advanced Technologies in Houston, Texas.
“Argentina is going to have to look for government-government relationships, particularly with China,” he says.
But Mr Kokogian says he believes the main concern of most investors will be whether or not Vaca Muerta is going to deliver decent margins.
“The main issue here is to determine if these estimated resources can actually be called reserves,” he said.
“A resource becomes a reserve when it is proven that the investment can be recovered with an acceptable profit. In Vaca Muerta, I don’t think that has happened yet.
“If this area was truly the main reason behind the nationalization of YPF, then Argentina may have shot itself in the foot over an unproven source of energy,” he adds.
And if that turns out to be the case, the Argentine efforts to control “Dead Cow” could be a bit like flogging a dead horse.
- Repsol YPF ups Argentine shale potential (mb50.wordpress.com)
- Incensed Spain threatens Argentina after YPF seizure (mb50.wordpress.com)
- Is Cristina Fernandez destroying Argentina’s economy? (business.financialpost.com)
Drilling of the first well in the long-awaited exploration of Cuba‘s offshore oilfields has gone slower than expected, but should be completed by mid-May, according to reports.
Reuters quoted sources close to the project as saying drillers had encountered harder rock beneath the sea bed than expected, which combined with other minor problems, had slowed progress.
When drilling began on 1 February Spanish oil giant Repsol YPF said drilling of the deep-water well was anticipated to take about 60 days to complete.
A Repsol spokesman could not confirm on Friday the projected mid-May completion date, when contacted by Reuters.
This well, which is in 1706 metres of water off the communist-run island’s north-west coast, is the first of five currently planned, Cuban officials say.
Cuba has said it could have 20 billion barrels in its offshore fields. It needs the oil to end its dependence on Venezuela, which ships it 114,000 barrels a day.
Cancer-stricken Venezuelan President Hugo Chavez is Cuba’s top ally, but island leaders worry that the oil flow could stop if he dies or loses his bid for re-election later this year, Reuters reported.
The US Geological Survey estimated Cuba may have 5 billion barrels of oil and 10 trillion cubic feet of natural gas offshore, but its study covered only part of the Cuban zone.
Reuters cited various unnamed sources as saying Repsol had been encouraged by its findings thus far, but the company has said results will not be known until the well is finished and studies are conducted.
Oil experts say it will take three years or more to bring the Cuban oil on line, if enough is found to justify production, according to Reuters.
After Repsol completes its well, it will hand the Scarabeo 9 drilling rig over to Malaysia’s state-owned Petronas and its Russian partner Gazprom Neft for a second well.
Then it will go back to Repsol, which has a consortium with Norway’s Statoil and ONGC Videsh, a unit of India’s ONGC, for another well, Reuters reported.
The massive Chinese-built rig, which is more than 32 kilometres offshore but visible from Havana, is being leased from owner Saipem, a unit of Italian oil company Eni.
Due to the longstanding US trade embargo against Cuba, no American oil companies are involved in the project.
Repsol drilled a well in Cuban waters in 2004 and found oil, but said it was not commercially viable. Technological limitations imposed by the embargo made it difficult to find another rig for work in Cuba, industry sources have said.
The project has raised environmental concerns in the US, particularly in Florida, which is 145 kilometres north of Cuba and fears its shores could be damaged if there is an accident similar to the BP oil spill in the Gulf of Mexico in 2010.
April 14, 2012 10:27 pm by Jude Webber
Any hostile moves on YPF, the Spanish-controlled oil company, by the pro-nationalisation government in Buenos Aires could have implications that go way beyond the companies and investors at the heart of this bitter tug-of-war.
Why? Because Argentina is sitting on what geologists and energy experts widely agree is one of the world’s most attractive reserves of unconventional gas and oil – known as shale – which are trapped deep in the bedrock below ground.
Shale is potentially a very big deal indeed. It turned the US from energy importer to exporter – something that Argentina, which spent $9bn importing fuel last year, ought to take note of.
Argentina has about a third of the US shale reserves, but they are less deep (which makes them cheaper and easier to access), seams are two to three times thicker than in the US and, for now at least, Argentine shale is concentrated in the Vaca Muerta (Dead Cow) formation, rather than being spread out across the country.
So all other things being equal, shale producers should be brushing up their Spanish and heading south. Several big players – including ExxonMobil, Total and Apache – and smaller companies already have. But it is YPF which has the biggest acreage, and it estimates that as much as $250bn will be needed to develop a viable shale industry over the next decade.
No one’s pockets are that deep, so partnerships are the way to go. Except that regulatory concerns are raising red flags before investors’ eyes now.
YPF has been publicly criticised, stripped of a string of concessions after being accused of underinvestment and now the government is analysing how to give the Argentine state a bigger role in the company – something that, according to some proposals circulating in the government, could translate into the expropriation of as much as 50.01 per cent of the company.YPF is currently controlled by Repsol of Spain, which has 57.43 per cent, and 25.46 per cent is in the hands of the Eskenazi family’s Petersen Group. Just over 17 per cent is traded on stock markets.
So enthusiasm among potential new players in the shale sector – where some were prepared to invest as much as $10,000 to $12,000 per hectare, according to industry sources – is screeching to a halt. “This is damaging shale (prospects), of course,” Alieto Guadagni, a former energy secretary, told beyondbrics.
The government has been berating YPF for what it perceives as a failure to invest enough, yet the concerns its nationalization dream are raising risks reducing investor appetite – which is perverse. And if concerns over contracts were not enough to dampen investors’ spirits, the prospect of partnering with a state that likes fast results and dislikes repatriation of dividends may give pause for thought.
What is worse is that the shale prospects represent energy that Argentina badly needs. Underinvestment in the sector, analysts and industry players say, is the direct result of a regulatory regime that keeps prices in Argentina well below the international market.
As Guadagni put it, Argentina pays domestic gas producers some $2.8 per million British Thermal Units, yet shells out some $11 per million BTU for gas from Bolivia (produced, ironically, by Repsol YPF), and some $17 for liquefied natural gas to plug its huge energy deficit.
Meanwhile, the cost to Argentines for their domestic gas is about 50 US cents per million BTU of gas, and drivers of vehicles that run on compressed natural gas pay around $1.
“The big question is whether these plans for YPF will improve or worsen Argentina’s prospects for recovering its energy self-sufficiency,” Guadagni said.
Argentina had a $3bn energy surplus in 2006. This year, Guadagni reckons the deficit will be $6bn to $7bn, ballooning to $12bn in 2013. Argentina’s policy of cheap domestic energy to stoke demand and economic growth worked well after the country’s default of nearly $100bn in 2001. But it isn’t working now.
- Repsol YPF ups Argentine shale potential (mb50.wordpress.com)
- Spain warns Argentina over energy nationalisation (1oneday.wordpress.com)
- Argentina plots next moves in bid to control YPF (sfgate.com)
- Repsol YPF ups Argentine shale deposit potential (seattlepi.com)
- YPF Said to Lose Oil Partners as Government Cracks Down (businessweek.com)