Natural gas production in Argentina fell by 12.2% year/year in July to 126.8 million cubic meters/day (MMm3/d), or 4.47 Bcf/d, according to the latest report by the IAE Argentine Energy Institute.
Production was essentially flat compared to June.
Analysts attributed the drop to restrictions in place because of the coronavirus pandemic. Argentina has had one of the strictest lockdowns in place globally since the pandemic began to spread in March.
In April, Argentina had zero rigs running, but upstream activity has picked up slowly since then.
Power demand on Argentina’s national grid held up and rose slightly year/year to 392.9 GWh/d in July compared to 387.2 GWh/d in July 2019, driven by a 13.7% rise in residential demand.
Thermal power, principally natural gas-fired, has accounted for 61% of total power demand on the national grid this year through July.
Gas production was down in all basins in Argentina in July including in Neuquén, home to most of the prolific Vaca Muerta formation. Neuquén, the largest gas producing province in Argentina, saw production fall to 2.79 Bcf/d in July from 3.22 Bcf/d in the same month last year.
Production from Vaca Muerta in July fell year/year to 1.14 Bcf/d from 1.23 Bcf/d. Vaca Muerta has been billed as the most promising unconventional play outside of the United States, and most major energy firms hold acreage in the formation.
The largest producers in July in Vaca Muerta were Argentina’s Tecpetrol SA (484 MMcf/d), followed by state oil firm YPF SA (261 MMcf/d), and the local subsidiary of France’s Total SE (165 MMcf/d).
In late August, Darío Martínez took over from Sergio Lanziani as the Energy secretary, the top position in the energy sector. Martínez was head of the energy committee in the lower house. He previously worked for YPF, and hails from Neuquén Province.
His first order of business is finalizing a gas tender program aimed at kickstarting production.
The proposed tender system would consist of a four-year block auction mechanism starting in October, which would differentiate offers for the peak winter season and the rest of the year, according to IAE.
Prices for offers from gas companies would be set at around $3.40/MMBtu.
These policies, while propping up upstream activity, would mean rising government subsidies in the sector, according to IAE analysts. Accumulated energy subsidies were $3.3 billion in the first seven months of 2020, double during the same period last year, analysts said.
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