A formal resolution to the Repsol/YPF dispute has removed a major barrier to international oil companies looking to enter the Argentine oil and gas sector. However, BMI’s oil and gas production forecasts remain comparatively cautious, largely due to the legacy of a poor business environment and the substantial operational risks inherent in the country.
Thankfully, Argentina’s operating environment is improving slowly. The government has continued to reform its fiscal regime, with a cut in the export taxes levied on domestically produced oil in an attempt to increase its attractiveness to foreign investment. The country’s massive shale potential has also encouraged a slow return of investment to the country. This includes a US$ 1.6 billion investment by Chevron and a US$ 120 million investment from Dow.
Conventional oil volumes are however expected to remain under pressure in the short term, thought the plan to increase production from marginal fields could provide some respite if implemented as envisaged by YPF.
BMI see natural gas growth as relatively modest, thought slightly higher than liquids, and expect natural gas production to reach 42.9 billion m3 by 2018 and 49.6 billion m3 by 2023. The country is also expected to remain a net gas importer over the forecast period, with import dependency growing as domestic consumption growth outpaces production growth.
BMI also anticipate Argentina’s refined fuel import burden to remain considerable and exacerbated by the recent sharp depreciation of the Argentine peso. The country’s refining capacity is failing to keep pace with the fast domestic consumption growth, supported by state regulated fuel prices that are kept below market levels. Combined with sluggish crude output, BMI estimate that the country has been a net liquids importer as of 2013 and the trend is expected to continue this year.
BMI believe that Ecuador faces considerable above ground challenges with regards to increasing its crude production. In the short term BMI expect increased output from state owned Petroamazonas, though with production from acreage owned by the private sector will likely stagnate this and temper gains.
BMI have forecast that through to 2018, oil production will grow, but gains will be incremental, offset by natural depreciation rates. Also, a poor above ground environment, including unattractive contract terms and uncertain environmental regulation will act as significant deterrents for greater foreign investment. When it comes to gas in Ecuador, BMI believe that most activity is bolstered by the Gulf of Guayaquil.The entire of Ecuador’s petroleum sector, according to BMI seems to have China in mind. Beijing has been the country’s primary foreign lender since Ecuador’s debt default in 2008, underwritten through oil for loans deals. Also, a cooperation agreement between China and Ecuador has confirmed that CNPC will take an investment position in the Pacifico refinery. The refinery is a partnership between state owned Petroecuador and PDVSA of Venezuela as well as CNPC.
Trinidad and Tobago
BMI see the outlook for the oil and gas sector in Trinidad and Tobago remaining strong. Exports of LNG are anticipated to remain under pressure as the country continues to adjust to changing realities in the global gas export marketplace and the country has adjusted to falling demand for LNG in the US by securing new European markets, as well as in Asia.
In recent years, crude, natural gas liquids (NGLs) and other liquids production have declined significantly, falling from 178 236 bpd in 2006 to 118 950 bpd in 2012. Yet, production is beginning to level off, and BMI forecast a modest increase in output over the coming decade. BMI see moderate production growth of 126 860 bpd in 2017 and135 569 by 2023.
Domestic gas demand in T&T is estimated at 23.5 billion m3 for 2012. Development of gas based industries is a priority for the domestic government, which aims to maximise the use of its gas reserves to create value added products for export. The upward trajectory in gas demand is expected to continue, reaching 32.6 billion m3 by 2023 if the development of gas intensive industries continues.
T&T continues to expand imports to higher priced Asian markets where global demand growth will be concentrated over the coming decade. The country will benefit from the expansion of the Panama canal, which will be able to accommodate 90% of the worlds’ LNG carriers compared with the current 4%. BMI expect T&T cargoes to reach East Asia more economically with a 30% reduction in sailing times to Japan. Exports to regional customers such as Chile will also be facilitated by the expansion and competitors will benefit, with fellow LNG exporter Peru having easier access to European markets.
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