Dead Cow, hit by local measures and the global price drop

The international turbulence – with its combination of panic at the coronavirus epidemic and, in addition, by the new oil crisis – has led to a drastic change of vision regarding Vaca Muerta, the ultra-promoted “energy jewel” of Argentina that now runs the risk of falling into inactivity.

There were already domestic reasons for worry, derived from the recession and political uncertainty. But the collapse in the international price derived from the geopolitical situation in the Middle East determined that many now speak of a very uncertain future for the mega-site of Neuquén. Basically, the problem is that unconventional fuel and whose extraction requires the technique of “fracking” cannot be profitable at current values.

Already the CEO of YPF, Daniel González, had pointed out in his recent annual conference with Wall Street investors that with Brent levels below $ 50 a barrel there was no room to develop new unconventional production sites, such as those in the formation of Vaca Muerta. And now, after the collapse of 30% in the price, analysts find it feasible that the price of the Brent barrel falls even below the US $ 20.

The truth is that Vaca Muerta creaks everywhere and nothing suggests the takeoff long intended by the successive governments of Cristina Fernández, Mauricio Macri and now Alberto Fernández.

And, these days, beyond how the international market situation evolves, there is an effect of policies that oil companies understand in the opposite direction of any profitability, their most critical moment has passed since Argentina activated exploitation through controversy hydraulic fracture technique – better known as “fracking” -.

State subsidy cuts, fuel price freezes, control over foreign currency turnover, imposition of a price at the wellhead far from costs, are some of the factors that, analysts, company executives and companies told iProfessional even trade unionists, they began to paralyze the activity in that area of ​​Patagonia from August of last year.

The exploitation since then has not stopped falling and the peak, statistics show, occurs these days. Thus, and according to an NCS Multistage monitor, the fracture fell 43.6 percent last February compared to the same month but last year. He went from the 712 stages completed in 2019 to the recent 402.

Simultaneously, this decline also had a direct impact on the number of companies that perform the fractures: from five it was lowered to three. In early 2019, fracking was developed by Calfrac, Halliburton, Schlumberger, Baker Huges and Weatherford. In February of this year Halliburton, Schlumberger and Baker Hughes operated.

Of this bounded squad it is worth noting that Halliburton “ate” the market to Schulmberger since, from one year to the next, he went from performing less than 30 percent of the stages to mastering more than 70 percent of the operations.

Regarding the movements of the oil companies, NCS Multistage points out that, while in February 2019 six companies carried out drilling – YPF, Pan American Energy, Shell, Pluspetrol, Total and ExxonMobil -, last month that number dropped to four: Vista, Shell, Pan American Energy and YPF.

Work stop

In Neuquén the first symptom of discomfort before the stop corresponds to the segment of oil workers, who through their guild have been giving details of personnel suspensions, voluntary withdrawals and other measures applied by the companies that cut or directly stopped the fracking “.

In dialogue with ProfessionalGuillermo Pereyra, General Secretary of Private Oil Tankers of Río Negro, Neuquén and La Pampa, set at 3,000 the number of operators affected by the decision of the deactivating oil companies in Vaca Muerta.

“The situation of cut intensified from August of last year, when Mauricio Macri established a price for crude oil and set a freeze on the price of fuels. Those first measures generated a plateau in the activity that later deepened” he assured.

Pereyra said that the majority of the oil companies “are applying rotary suspensions,” and that if no dismissals have been made so far, “it is because the union maintains an instance of permanent negotiation with the companies.”

“The decree issued by Macri and which generated the brake is still in force, so we do not have a positive outlook immediately. We hope, yes, that Alberto Fernández will move forward with the hydrocarbons bill he announced a few days ago. It is a possibility concrete to return many workers to the activity, “he said.

Official recognition

Very close to the Ministry of Energy they recognized the least activity although they relativized the tenor exposed by the consultant.

“There are questions to explain the decline that have to do with the seasonal. In January and February the work is always a little less and the reality is that the number improved from the first month of the year to the second. But it cannot be denied that there is a stand up, “they exposed before Professional The voices consulted.

“The sector is waiting for medium and long-term definitions. Companies are showing that they require other types of policies to resume their initial exploitation plans. President Alberto Fernández has already informed that he will promote a new hydrocarbons law. There is confidence that this will boost the business in a few months, “they added.

Regarding the different oil companies questioned by this media, they pointed out that, to a large extent, the fall is a consequence of the latest decisions implemented by Mauricio Macri regarding price control at service stations and control over the management of royalties.

“So far the sector does not see positive signs, only amagues and speculation. The freezing of gasoline remains and until now there was only a promise regarding an eventual new hydrocarbons law. The least activity is visible, too, because the unconventional activity is not like the one already known. If you don’t do a fracture, there’s no oil. There’s no such thing as the pump you take out until it’s exhausted, ”an expert told iProfesional, strictly off the record.

“Without long-term definitions it is difficult to talk about recovery of activity. Today, domestic prices for oil are not attractive. In most cases, companies do not even match costs. It happens with gas, for example. , which pays very little. Those aspects, added to the control over the currency exchange and the subsidy cut became a snowball that paralyzed Vaca Muerta, “he added.

What is fracking?

The technique in question includes drilling wells by breaking underground rocks with explosives. And the subsequent injection of a mixture of water – a resource for which oil companies pay just $ 4.90 a cubic meter – and a battery of formulations that can range from 20 to 500 additives.

While it combines aspects of consolidated oil exploitation and the most questioned mining work, it currently faces the opposition of environmental organizations, local and international NGOs, and even residents of the Vaca Muerta area, for generating tremors.

Only in 2019, at that point in Neuquén there were 135 earthquakes confirmed by the Institute for Seismic Prevention (INPRES) and the Geoscientific Network of Chile -ex Chile Seismology-. At the same time, in Vaca Muerta the exploitation by “fracking” has been generating an annual volume of “flowback”, that is, water with chemicals and other industrial waste that returns each drilling, equivalent to just over 500 Olympic pools of 50 meters of long.

The “flowback” culminates housed in 60 sinkholes that house those same liquids without treatment, in permanent filtration towards the Huincul dorsal, a predominant geological fault in that area of ​​the province of Neuquén.

A particularity derived from the operational stop in the reservoir: the earthquakes around populated centers such as Sauzal Bonito were stopped after the deactivation of the fracture equipment. The seismic activity, say experts from the National University of Comahue and the Petrolero Sur Observatory, “accompanies the hydrocarbon activity” done with “fracking” in Vaca Muerta.

I knew the value of the dollar in Dollar Today and followed the price and behavior minute by minute. CLICK HERE
Find out the latest on digital economy, startups, fintech, corporate innovation and blockchain. CLICK HERE