Shale gas – Focus on M&A in Argentina

Shale gas – Focus on M&A in Argentina

Argentina relies on natural gas for 52 percent of its energy supplies. However, over the past few years, domestic production has declined and the country has become a net importer of energy as a result. The Argentine government is looking to reverse the trend by encouraging development of the country’s sizable, mostly untapped shale gas reserves.

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Issues

Argentina already has a well-developed gas distribution infrastructure from natural gas operations, which has sufficient spare capacity to support new investments in shale gas. However, it lacks the technology, equipment and services required to support large-scale production. The industry’s success hinges on the availability of capital, the development of a supplier base, and the growth of a skilled labor pool.

Current natural gas prices in Argentina are low, and prices will need to climb to make shale gas production economically viable. Initial investment costs are high, but margins are expected to improve over the long term. Argentina’s gas-plus regulatory framework promotes better selling prices for new offers of shale gas. 

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