Falling Oil Prices - Good For Argentina?

[Joe]

The answer is Yes, oil developers know that there is a very good chance that oil will be back up to a $100 and probably before Vaca Muerta is completed. So lower oil prices will not delay expanded oil production development in Argentina.

It's a Win-Win for Argentina. Quite possibly oil will start another big rise once Vaca Muerta oil starts to come on line.

 

[GS_Dirtboy]

With all due respect that's not what the experts are saying. I had dinner two weeks ago with the Chevron exec who heads the Argentina negotiation / exploration team. The economic break-even price for exploration in Vaca Muerta is about U$80 per barrel. The Saudi price war does not bode well for Argentina. That's also the consensus of the round-table discussion of business execs and oil producers that I attended last Wednesday.

Most of the bullish comments about Argentine oil attribute the current drop in price to supply overhang but point to long-term demand going up. Once the overhand is used then supply and demand stabilize and prices rise. A more nuanced perspective takes into account the economies of different types of Oil production, the proliferation of cheaper NG production, and regional and political risks such as Russia.

The simple answer is that as prices drop there are other places in the world they can get oil that have lower risk (economic and political) than Argentina.

GS (The Bear)

 

[Joe]

He may well have just been talking his book out of habit. These oil exploration companies want to wrangle the best deal possible out of Argentina.

 

[Rich One]

Agree with GS comments. Drop in Oil prices delays the Vaca Muerta Project.

Oil companies base their feasibility studies on current oil prices and some educated guesses. At the moment the prudent decision would be to wait-and-see, no oil company decision maker would approve for full investment in shale on Argentina with an oil price way below the break-even price for shale of $80 dollars a barrel...! Who can predict the situation 5 years from now.

Clarin reports today the Argentina gasoline prices are the highest in Latam, with Uruguay , much higher that USA. The prices of gasoline will not come down even if oil prices have dropped 40 % . Provincial Governments are against gasoline price decreases for fear of reduction of their tax share....!!

http://www.ieco.clar...1260474001.html

Argentina has the most expensive price of Latin America for gasoline, along with Uruguay. In the city of Buenos Aires, where gasoline prices are the most baratos-, a liter of super dispatched to $ 1.39 ($ 11.91) and the premium is US $ 1.57 (13 USD , 41). In Chaco, the super is from September to US $ 1.61 ($ 13.79) and the premium to $ 1.75 ($ 14.91). In Chile, the liter is between US $ 1.27 (super) and 1.32 (premium). In Bolivia, ranges from 54-69 cents. Brazil, which comes from applying a aumento- stood at US $ 1.10 to 1.17 (depreciation affects real). In Peru and Colombia, prices fell, the super is just a dollar or less, while in Ecuador is located at 55 cents. In America, the range is 66-83 cents.

 

[GS_Dirtboy]

Sure, he said himself that they have Argentina in a corner. If they don't get what they want they'll just wait. I wasn't just referring only to the Chevron exec. There are plenty of other O&G guys a lot smarter than me who think that Vaca Muerta has a better than even chance of just becoming Muerta (at least in the next 3 - 5 years). In the long-term all oil guys are bullish. The oil isn't going anywhere and so far Lockheed hasn't produced it's Fusion Reactor for the kitchen yet.

From what I know oil exploration assets are pretty flexible. You can be drilling a project and if you see the economies are not working you can pretty much stop drilling and just wait. I think if the barrel prices drop the O&G guys will just hang out, eat some more asado, and wait until the weather clears.

 

[Dublin2BuenosAires]

Leaving aside the dead cow fossils, lower prices is a definite strategic advantage when your major defecit by a long shot is the bil for importing energy. Second biggest is transport costs, I'd say oil prices affect those two.

Is Vaca Muerta good for Argentina? Not sure. I wouldn't bet the ranch on it. Sounds to me like we're teeing up Petrobas the sequel. Someone will get rich, probably not the state.

Beyond the frontera. What does a de-stabilised Venezuela mean for Argentina? Will Birdy Maduro call in his loans if he doesn't like the cut of the gib of the next govt. Does it last long enough (price drop) to oust Birdy?

The response is probably a moving target, I wouldnt want to answer in concrete terms but there are some short to mid term fiscal positives and some medium term regional risks which may destabilise more than bad Argentine govt ever did.

 

[GS_Dirtboy]

Here is another part of the equation. This is a Dollar index of Europe, Asia, and LATAM currencies to the price of oil. As the price of oil drops what do you expect to happen to the Dollar/Peso index? (sorry the colors aren't better)

 

[Rich One]

He may well have just been talking his book out of habit. These oil exploration companies want to wrangle the best deal possible out of Argentina.

Oil price drops will reduce by 3 billion dollars the total Argentina Energy imports in 2015. However will delay the development of Vaca Muerta..!

 

[Rich One]

The answer is Yes, oil developers know that there is a very good chance that oil will be back up to a $100 and probably before Vaca Muerta is completed. So lower oil prices will not delay expanded oil production development in Argentina.

It's a Win-Win for Argentina. Quite possibly oil will start another big rise once Vaca Muerta oil starts to come on line.

Looking at the excellent map presented by Joe one can only guess that Chile will be a natural export market for shale products...! Pipelines already exist...!

 

[Hybrid Ambassador]

Amongst the OPEC, every one but the Saudis wanting to cut production so to stipulate oil prices. Why is the Saudis is the only one opposing to production cut?
The aim is America's shale oil production shut out. If oil price keeps at current low prices, all the shale oil excavation start up companies
forced to suspend/halt their shale oil production due to incompetent-non profitable oil prices.

Next round of OPEC meeting, the Arabs will have to yield to other oil producing countries despite their pleadge to fight the US shale oil production. Russia, Indonesia, Ecuador,Venezuela,Algeria, Angola,Iran,Iraq,Quait,Lybia,Nigeria,Qatar etc.etc wants the "cut production" but the Saudi Arabia. In mean time, Iam enjoying the low oil prices!

World gas prices, Argentina price is right there with Japan and Chile. http://www.bloomberg.com/visual-data/gas-prices/