Total to lead $1.2 billion Argentine offshore gas project


Total to lead $1.2 billion Argentine offshore gas project


PARIS (Bloomberg) -- Total will lead a $1.2 billion project to produce natural gas off the coast of Tierra del Fuego in southern Argentina.

In partnership with Wintershall and Pan American Energy, Paris-based Total will drill as deep as 5.5 km in the Vega Pleyade field, Javier Rielo, who heads the project, said in a televised announcement in Buenos Aires attended by Argentina’s Vice President Amado Boudou and Planning Minister Julio de Vido.

The project’s go-ahead comes as Argentina is striving to reduce what state-owned YPF SA Chief Executive Officer Miguel Galuccio calls a “serious” energy deficit, which was $5.4 billion through August, according to the National Statistics Agency. The Total venture will save Argentina $1.6 billion a year in fuel imports, de Vido said.

“This is by far the largest natural gas offshore investment Argentina has ever made,” Rielo said. “As operators, we will make it produce as we are gas experts.”

The venture, owned 37.5% each by Total and Wintershall and 25% by PAE, plans an initial investment of between $1 billion and $1.2 billion, which may rise to as much as $1.5 billion if more wells need to be drilled, Rielo said.

The partners plan to start producing at Vega Pleyade in the third quarter of 2015 at about 6 MMcmd, ramping up to 10 MMcmd. The venture will also increase the Carina field production, which currently is 8 million cubic meters a day. Output is set to rise by 1.5 million meters cubic a day in 2014’s second quarter.

Additionally, the venture secured new concessions in an area called Leo. Total, which will operate the fields, is Argentina’s largest gas producer.

Argentina’s President Cristina Fernandez de Kirchner, whose term expires in 2015, raised gas prices to $7.50 per million British thermal units in January to boost investments.

“Total is making an strategic decision ahead of the 2015 Fernandez farewell to the presidency by investing such an amount not seen since the 1980s,” Mauricio Roitman, an analyst at energy consultant Montamat & Asociados, said in a telephone interview from Buenos Aires before the announcement. “We will see many other companies starting to make investments like this knowing they will be able to sell gas and oil at much better prices once this administration is gone.”

BP owns 60% of PAE with the remainder in the hands of Bridas Corp., a venture between the Argentine billionaire Bulgheroni brothers and China’s Cnooc Ltd.

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