ShaleTech: Argentina/Mexico Shales ///

Argentina and Mexico may share an oblique geographic connection, but their respective unconventional sectors are poles apart when it comes to near-term prospects: The former is going full speed ahead; the latter finds itself in a holding pattern. As the only nation outside the U.S., Canada and China, with significant shale production, Argentina is in the throes of a government-induced, and atypical for the times, increase in activity. It is primarily targeting the world-class Vaca Muerta shale, which covers more than 7.4 million acres in the Neuquén basin. The active rig count is up from the beginning of the year and has held relatively steady (Fig. 1), thanks largely to a government-enacted oil price benchmark that is expected to average $76/bbl in the third quarter, while federally subsidized gas prices for new developments are said to average around $5.30/MMbtu. On the downside, the higher benchmarks also come with well-documented fiscal and logistical challenges, ranging from spiraling inflation and correspondingly high well costs, to tight currency controls, including restrictions on the free movement of cash.

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