Venezuela natural gas find

Argentina's YPF energy company said Tuesday it has discovered 4.5 trillion cubic feet of proven shale gas reserves in Patagonia, expanding the company's proven reserves from six to 16 years' worth of the fuel.

The find in Argentina's southern Neuquen province is in shale deposits, which are more difficult and costly to extract than conventional natural gas.

A horizontal well will be required to tap into the deposit, said Sebastian Eskenazi, executive vice-president of YPF, which is owned by Spain's Repsol energy company. "This is the first discovery of this kind in South America," he said.

Argentine government officials earlier Tuesday had spoken of a much larger discovery, up to 257 trillion cubic feet, but those potential deposits remain unproven.

The country's growing economy has strained against energy limits, importing as much gas as it can get from Bolivia and forcing factories and other large customers to close up shop to prevent individual consumers from suffering blackouts during peak usage times.

"We are very pleased because this will support the growth of the country, a model of economic growth, of accumulation, of generating wealth and distributing revenue," said President Cristina Fernandez, who attended the announcement at YPF's headquarters.

The discovery was made in four drilling operations in an area known as Vaca Muerte - dead cow - near the town of Loma La Lata, Neuquen, the province where most Argentine reserves have been found.

The United States is a leader in exploration for these kinds of unconventional gas deposits, producing 40 per cent of its gas through such methods, and this Argentine discovery presents similar conditions," Eskenazi said.

The company also announced that it plans to invest US$140 million in 26 other drilling operations to find more such deposits — an effort hat increases to US$1 billion the investment represented by a 50/50 exploration and production  venture YPF shares with the Brazilian firm Vale SA.

Repsol-YPF stock was trading up 3.3 per cent in Madrid at €20.4 after Tuesday's news conference.

Daniel
Kerner, an analyst with Eurasia Group in Argentina, noted that the
discovery comes just ahead of a planned initial public offering of stock
in YPF.

"The timing is — it's not a coincidence," Kerner said.

"The
important thing will be to see what exactly the price mechanism is, and
reducing some of the price distortions for producers," he added.
"Obviously the gas is going to have to be sold at a higher price or else
this is not going to be profitable."

On
the other hand, Kerner said, there's a growing perception that
Argentina has energy resources worth developing. Only a few years ago,
the general perception was that Argentina's geology didn't have much to
offer.

Now,
"there is a general perception that Argentina is attractive with shale
gas and pipe gas, and at the right price, it will be viable."

- AP