Total set to start production from tight gas sands

Thursday, September 17, 2009

French oil firm Total (NYSE: TOT) and partners YPF, Wintershall and Pan American Energy were set to begin producing from tight natural gas sands at the Aguada Pichana block in Argentina's Neuquén province on September 17.

Initial production from the tight sands is expected to reach 1Mm3/d, according to a statement issued by the province.

The gas is expected to hit the market at US$5/MBTU, well above the price of regulated gas in Argentina.

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Current regulated production from the Neuquén basin, which accounts for 51% of the nation's total gas output, sells for US$0.60/MBTU and US$1.6/MBTU for residential and industrial consumption, respectively.

Neuquén province is looking to increase output from tight gas sands to make up for falling production and provide additional royalties, as some new output can be sold on unregulated markets under Argentina's Gas Plus program.

Regulated gas typically sells for around US$1/MBTU in Argentina, while the country sometimes pays as much as US$20/MBTU to import LNG.