Oil & Gas - Argentina - Falkland Islands

Offshore could be key to reversing production decline - expert

Offshore could be key to reversing production decline - expert

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Argentina should up offshore exploration to reverse declining production, Víctor Bronstein, director of Ceepys, an energy research center, told BNamericas.

"The current challenges for Argentina are to develop unconventional resources and to continue exploring offshore," Bronstein said.

The country should look to the example of the US, where declining production has been reversed since 2008 by unconventional and offshore development.

In one offshore success story, French major Total (NYSE: TOT), Germany's Wintershall and Argentine firm Pan American Energy (PAE) have produced gas since 2005 from a project in the Austral basin offshore Tierra del Fuego, from the Carina and Aries fields, discovered in the 1980s, on block Cuenca Marina Austral-1 (CMA-1).

However, further development of any potential offshore resources has stalled.

Historically, exploration in the Salado, Colorado, Rawson and San Julián offshore basins came up empty, while resources in the offshore area of Golfo San Jorge are awaiting the injection of funds necessary to transform resources into reserves, according to a report from Argentina's oil and gas institute (IAPG).

Last year, Spanish firm Repsol YPF (NYSE: REP), Brazil's Petrobras (NYSE: PBR) and PAE halted an offshore campaign in the Malvinas basin after disappointing results from a well 300km off the coast of Río Negro province.

State oil firm Enarsa had reportedly planned a tender for 32 offshore blocks for August last year but postponed the auction citing global market instability.

Argentina's lack of offshore development is contrasted by drilling success offshore the disputed Falkland Islands, where UK-based Rockhopper's (AIM: RKH) Sea Lion discovery, estimated to hold at least 450Mboe, was declared commercially viable in 2010.

The diplomatic dispute over the Falklands Islands has worsened in recent months, following a December move by members of the Mercosur trade bloc to deny Falkland Island-flagged ships access to their ports in solidarity with Buenos Aires.

By using its influence to set logistical obstacles for the British companies, Argentina's government is angling for a share in the natural resources to be extracted from the disputed waters, according to Bronstein.

Bronstein sees the attitude of the Argentine government as "while we discuss sovereignty - which could go on forever - in the meantime we can at least share the resources which are extracted."