Argentina, known for its love for soccer, has suddenly found a new game to grab global attention. The discovery of huge shale gas reserves is inviting players from across the globe to this South American nation. The country, a net importer of natural gas, has come across gas reserves that will help it take care of future energy demand. Let's dig deeper and analyze why companies across the globe are flocking to Latin America's third largest economy.
Why Argentina?
First, Argentina, with 774 trillion cubic feet of gas, ranks No. 3 in the world in terms of technically recoverable shale-gas resources. Argentina's shale gas reserves exceed its conventional proven gas reserves, which are roughly 13.4 trillion cubic feet. The Neuquen basin is currently the largest shale gas reserve basin with more than 250 TCF. The country's largest oil and gas producer YPF
Second, the government has changed the pricing structure for gas, which was long repelling investors from the country's energy sector. The Argentinean government had put price caps on natural gas to make it affordable to consumers, industrials, and electricity generation. The rigid domestic pricing made investment in Argentina less appealing for foreign investors. However, with the surge in global energy prices, Argentina eased fuel pricing to make the energy sector environment more favorable for energy companies. This, coupled with shale discoveries, has made Argentina popular in the global natural gas market.
What's there for investors?
Argentina provides energy companies with quantifiable reserves and long field life. This allows them to continuously run production and extract gas from the field. Given the trend in the global demand for natural gas, a continuous supply source of shale gas will help the companies post solid top-line growth.
South American countries such as Brazil, Colombia, Venezuela, Peru, and Bolivia are experiencing increasing natural gas demand. Presence in Argentina also provides the energy companies opportunity to tap these markets.
Who's who in the Argentinean energy sector?
Energy giants ExxonMobil
Apache
Other conglomerates present in Argentina's shale gas market are Total SA
Presence in Argentina will also provide the energy companies a platform to overtake or keep up with their competitors. Companies such as Royal Dutch Shell, Chesapeake
Other foreign interests
Argentina is also drawing attention from Asian countries. In 2010, China Petrochemical announced its plan to buy all of the Argentinean assets of American Occidental Petroleum for $2.45 billion. China's state-owned energy firm, CNOOC
Foolish takeaway
Argentina boasts huge reserves. Given the rising global demand for natural gas, it is obvious for companies to invest in areas rich in natural gas reserves. The next 20 years might see a change in the energy mix, with gas contributing more than oil. I think the age of gas is dawning.
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