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The development of potentially significant shale gas reserves in Argentina's Neuquén basin will only occur with changes to current pricing structures, Gustavo Albrecht, managing director of Germany's Wintershall Energía, told BNamericas.
"We see great potential for unconventional resources in the Neuquén basin, but it will require a long-term vision to unlock these resources. Shale gas and oil exploitation is a capital intensive activity which will require a price level much higher than the one observed in the local market," Albrecht said.
Wellhead price freezes in Argentina have hurt investment in oil and gas over the last decade. The issue is more relevant in the case of unconventional reserves, the exploration and development of which come at a higher price than conventional resources.
Reforms have been made through the Gas Plus program. Some companies targeting shale reserves now have production contracts for over US$5/BTU, double the standard for conventional gas output. Industry leaders insist that further concessions must be made in order to make shale exploitation economically attractive.
Wintershall will begin exploration work on its Neuquén acreage later this year, in conjunction with its partners.
"Our first wells will be drilled in 2011, which will then be followed by appraisal wells in 2012," the executive said.
Wintershall also holds interests in neighboring Chile, and Albrecht confirmed that exploration work on the previously unexplored Otway block will commence next year.