Argentina's Senate Approves Bill to Expropriate YPF

by OGJ editors, OGJ, Houston, Apr 26, 2012
Argentina’s Senate voted in approval of Argentina President Cristina Fernandez de Kirchner's bill to expropriate YPF SA, and the Lower House of Congress is expected to vote on the measure next week. YPF was a state-run company until it was [fully] privatized in 1999. [Please see remarks below -- D.R.]

Kirchner asked Congress to renationalize YPF by expropriating 51% of it from Repsol YPF SA, which holds 57% of the company [thus slashing Repsol's stake to 6.4% -- D.R.]. She has said YPF underinvested in exploration and production, forcing Argentina to become a net energy importer. [Please see remarks below -- D.R.]

Repsol has vowed to take legal action, saying YPF invested about $3 billion in 2011 and that the company was the biggest investor in Argentina’s oil and gas industry.

“The unlawful expropriation of YPF does not affect the growth capacity of any of Repsol’s businesses outside Argentina,” Repsol said (OGJ Online, Apr. 17, 2012).

The Argentina Senate voted 63-3 in favor of expropriating YPF with 4 members abstaining from the vote. [Full story]

(The full privatization of YPF was completed in 1999 when Repsol of Spain acquired controlling stock from the Argentine state and the stock market---please see Sang-Hyun Yi, "The Political Economy of Privatization of YPF in Argentina," paper, Pusan University of Foreign Studies. For Argentina's crude oil production during the last years, please see "Top 6 Oil Producers in Central & South America, 2006-Feb. 2011 -- EIA." There has been a gradual erosion of Argentine crude oil output from its peak in 1998: in 1998 Argentina produced a record 846,700 barrels per day, but production has declined since, falling to 587,200 barrels per day in 2011---please see U.S. EIA data. The EIA attributed this decline to relatively low levels of exploration activity, combined with natural declines from maturing fields---please see EIA, Argentina Country Analysis Brief. ExxonMobil's Argentinean operations were so far unaffected by YPF takeover: The Argentinean government's decision to take control of Spanish-owned YPF didn't affect ExxonMobil's first-quarter operations in the country. The U.S. oil major said it finished drilling two unconventional wells in that period and will complete or frack those wells in the second quarter. Exxon said it will continue to observe developments in the region---please see SmartBrief, Apr 27, 2012. Update: The Chamber of Deputies [The Lower House of Congress] voted 207 to 32 in favor of expropriating YPF [...], clearing the way for President Cristina Fernandez to sign the bill into law---please see The Telegraph, May 4, 2012 -- D.R.)

Top 6 Oil Producers in Central & South America, 2006-Feb. 2011 -- EIA

by Aaron and David Rachovich

Production of Crude Oil including Lease Condensate (Thousand Barrels Per Day), 2006-Feb.2011

Rank	Country	Feb 2011	Jan 2011	Full Year 2010	Full Year 2009	Full Year 2008	Full Year 2007	Full Year 2006
1.	Venezuela	2,240	2,240	2,146	2,239	2,394	2,433	2,511
2.	Brazil	2,062	2,122	2,055	1,950	1,812	1,748	1,723
3.	Colombia	862	840	786	671	588	531	531
4.	Argentina	631	627	642	654	661	679	696
5.	Ecuador	509	500	486	486	505	511	536
6.	Trinidad & Tobago	100	96	98	107	114	121	143
Top 6 countries		6,404	6,425	6,213	6,107	6,074	6,023	6,140
Central & South America total		6,598	6,622	6,414	6,300	6,281	6,236	6,355
All Countries (World*)		74,604	75,393	74,049	72,282	73,670	72,985	73,428

*Updated figures for June 1, 2011, i.e., at the time of writing this post.

Source: U.S. Energy Information Administration (EIA), International Energy Statistics, here and here.

(Figures above may be updated again at any time by EIA. Update: please see my post "Argentina's Senate Approves Bill to Expropriate YPF," Apr 27, 2012, including remarks and explanations for Argentina's decline in oil production since its peak in 1998. Also, please see our post "World's Top 22 Oil Producers, Full Year 2010 (including OPEC and plus 2009 production)," here coupled with our posts "Top 8 Oil Producers in Asia & Oceania, 2006-2010," and "Africa's Top 8 Oil Producers, 2006-2010." And our post "Top 25 World Oil Consumers, 2009-2010," here. -- D.R.)

US Horizontal Rigs Drift past 1,000 Mark on "Shale Sail"

By Starr Spencer, Platts oil blog - The Barrel, May 13, 2011
Apologies to Bob Seger, but it seems just about everyone in the oil and gas industry these days is following the sentiment in this song, or at least doing a reasonable facimile.

There are all sorts of statistical goodies buried in the Baker Hughes weekly rig count. Here is one of them:

Apart from the fact that the US oil rig count is soaring and has now surpassed the number of rigs drilling for natural gas, which happened last month , US rigs drilling horizontal wells also passed the 1,000 mark in April [data showed on April 1st -- D.R.] for the first time.

And it continues its upward march. This past week ended May 13, 1,041 rigs were drilling horizontal wells, out of a total 1,830 total rigs. [Horizontal rigs now make up about 57 percent of the total rig count, up from a low of less than 4 percent in Sept 1998. Also, for the total drilling rigs in historical perspective, please see remarks below -- D.R.] That is the highest number since Baker Hughes began keeping track of such data in 1991, and probably [sic] is an all-time record.

The surge in horizontal drilling can only be traced to the shale explosion, which is truly one of the energy industry's Biggest Things. Everyone seems to be exploring for or at least reading about shale oil and gas these days, and in the process the purses of oil operators and also national economies are reaping the benefit.

Once companies hit on the idea, sometime in the early 2000s, that they could get a lot more natural gas by not only drilling down vertically, but then taking the well sideways or horizontally once they reached total depth, it was one of those "Eureka!" moments.

They then coupled that with fracture-stimulating or forcing fluid into rock at high pressure, and drilling increasingly longer laterals to access more of a reservoir from a single wellbore. The greater cost of a horizontal well was offset by more output. Once oil prices began to climb, they applied these notions to oil wells, with similar results.

Rig numbers tell the story. Horizontal drilling before the early 2000s wasn't unknown, but at that point it was more in the experimental stage. When Baker Hughes began keeping track of horizontal versus vertical wells starting the first week of January 1991, 100 rigs were drilling horizontally out of a total 1,108 rigs that week. Another 81 rigs were drilling directionally while the vast majority--927 rigs--worked on vertical wells.

In the succeeding years, horizontal drilling largely stayed below--sometimes well below--100 rigs. That is, until 2004, when the Barnett Shale [in Texas] began to glitter things up and everyone wanted to ride the shale trail. Then kicked off an upward trend of horizontal drilling that, except for the economic pullback of late 2008 to late 2009, continues to this day. [Also, horizontal rigs comprised less than one-third of oil-directed rigs in September 2008, and with a tripling of horizontal oil rigs since then, that share has increased to about 46 percent---please see my post "Domestic Oil Production Reversed Decades-Long Decline in 2009 and 2010," here. -- D.R.] 

Now the excitement of shale drilling is becoming an international phenomenon. Canada is several years into several shale gas and oil plays there; places such as Poland [please see my post "Marathon, Nexen to Jointly Explore Shale in Poland," here -- D.R.] and Germany are exploring their potential, and even Mexico has begun drilling its northern regions for shale gas which it regards as an extension of the US' frenzied Eagle Ford Shale in South Texas, a bonanza which contains both oil and gas [please see remarks below -- D.R.].

Still, not all shales require horizontal drilling. Small oil-focused Venoco, which held a nearly two-hour conference call this week and spoke at length about its pioneering Monterey Shale operation onshore southern California, said it expects vertical wells are the most likely way to develop that oil pool. However, with only one rig drilling Venoco's slice of the Monterey for the rest of the year, it appears to be the exception that proves the rule. [Full story]

(Since 1944 the highest weekly U.S. rig count was 4,530 recorded on December 28, 1981, the height of the oil boom. The lowest rig count of 488 was recorded on April 23, 1999. In Canada the highest weekly rig count of 718 was recorded on February 17, 2006. The lowest weekly rotary rig count of 29 was recorded on April 24, 1992---please see my post > remarks, here. Separately, please see my post/table "Estimated Shale Gas Technically Recoverable Resources for Select Basins in 32 Countries -- EIA," including China, Argentina, Mexico, Australia, Canada, Poland, France, etc., here. Also, please see my post "China Plans to Exploit its Shale Gas Resources," here.  Mexico's state-owned oil company Petróleos Mexicanos/Pemex, said in March it had produced its first shale gas from an exploratory well at the Eagle Ford Shale formation in the northeastern state of Coahuila in February. -- D.R.)

Estimated Shale Gas Technically Recoverable Resources for Select Basins in 32 Countries -- EIA

Extracted from the EIA's overview, World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States, April 5, 2011

Table 1. Estimated Shale Gas Technically Recoverable Resources for Select Basins in 32 Countries, Compared to Existing Reported Reserves, Production and Consumption during 2009 -- EIA 

	2009 Natural Gas Market1                             (trillion cubic feet, dry basis)			Proved Natural Gas Reserves2 (trillion cubic feet)	Technically Recoverable Shale Gas Resources (trillion cubic feet)
	Production	Consumption	Imports (Exports)
Europe
France	0.03	1.73	98%	0.2	180
Germany	0.51	3.27	84%	6.2	8
Netherlands	2.79	1.72	(62%)	49.0	17
Norway	3.65	0.16	(2,156%)	72.0	83
U.K.	2.09	3.11	33%	9.0	20
Denmark	0.30	0.16	(91%)	2.1	23
Sweden	-	0.04	100%		41
Poland	0.21	0.58	64%	5.8	187
Turkey	0.03	1.24	98%	0.2	15
Ukraine	0.72	1.56	54%	39.0	42
Lithuania	-	0.10	100%		4
Others(3)	0.48	0.95	50%	2.71	19
North America
United States(4)	20.6	22.8	10%	272.5	862
Canada	5.63	3.01	(87%)	62.0	388
Mexico	1.77	2.15	18%	12.0	681
Asia[-Pacific]
China	2.93	3.08	5%	107.0	1,275
India	1.43	1.87	24%	37.9	63
Pakistan	1.36	1.36	-	29.7	51
Australia	1.67	1.09	(52%)	110.0	396
Africa
South Africa	0.07	0.19	63%	-	485
Libya	0.56	0.21	(165%)	54.7	290
Tunisia	0.13	0.17	26%	2.3	18
Algeria	2.88	1.02	(183%)	159.0	231
Morocco	0.00	0.02	90%	0.1	11
Western Sahara	-	-		-	7
Mauritania	-	-		1.0	0
South America
Venezuela	0.65	0.71	9%	178.9	11
Colombia	0.37	0.31	(21%)	4.0	19
Argentina	1.46	1.52	4%	13.4	774
Brazil	0.36	0.66	45%	12.9	226
Chile	0.05	0.10	52%	3.5	64
Uruguay	-	0.00	100%		21
Paraguay	-	-			62
Bolivia	0.45	0.10	(346%)	26.5	48
Total of above areas	53.1	55.0	3%	1,001[*]	6,622
Total world	106.5	106.7	0%	6,609

 Sources [and Notes]:
¹Dry production and consumption: EIA, International Energy Statistics, as of March 8, 2011.
² Proved gas reserves: Oil and Gas Journal, Dec., 6, 2010, P. 46-49.
³Romania, Hungary, Bulgaria.
⁴U.S. data are from various EIA sources.

[*Excluding the United States – D.R.]

(Please see my post "World Shale Gas Resources Outside US Assessed," here. -- D.R.)