Argentine Subsidy Changes Force Tecpetrol To Drop Rigs
Tecpetrol, which two years ago announced investments of $2.3bn in the Fortin de Piedra shale gas project in Argentina, plans to halt work at three rigs due to recent changes in the country’s gas subsidy scheme, according to local media reports published February 6.
Buenos Aires-based Tecpetrol said it would idle three of the four rigs it is using at Fortin de Piedra, affecting an estimated 300 employees, online media outlet LM Neuquen reported.
Tecpetrol didn’t respond to requests to confirm the reports or whether it would layoff workers or relocate them to other projects.
Tecpetrol has already sunk close to $1.6bn into the project, which has increased unconventional natural gas production to 15mn m3/day as of November 2018 from about 1.4mn m3/day in October 2017. The remaining investment was to be spent this year, according to the company.
Argentina is home to the world’s second largest accumulation of recoverable shale gas, estimated at 802 trillion ft3, primarily located in the Vaca Muerta formation. Initiatives announced by the government of Argentina’s president Mauricio Macri, including the unconventional gas subsidy pricing scheme, have attracted investors like Tecpetrol to develop the resources.
But changes to the subsidy could represent a decline in projected cash flows for producers during 2018-2021, online media outlet La Nacion reported, citing comments from rating agency Moody’s in a report on February 6 to clients.
“There is a risk that such a change in regulation will lead to a slowdown in the growth of Argentina’s unconventional natural gas resources,” Moody’s report said. “The change in policy could weaken investor confidence and the business environment for the sector.”
Oil giant YPF warned in late January that it also faces losses due to changes to the subsidy scheme.