Argentina’s Recently Announced Offshore Bidding Round is a Long-Term Game With High Exploration Risk and Still Some Above-Ground Uncertainty, Says GlobalData

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Following Argentina's Energy Minister announcement to re-launch the already scheduled but delayed offshore bid round in October 2018,

Adrian Lara, Senior Oil and Gas Analyst at GlobalData, a leading data and analytics company, offers his view on the impact on the upstream sector:

“Any big discovery in Argentina's offshore frontier area will be a great prize for companies looking into building up a portfolio for future development. However such long term strategies will compete with a current preference for exploration in offshore areas with more seismic and well information available and where logistics to commercialize production is already known. Think for instance of Brazil's pre-salt or even Mexico's deep water Gulf of Mexico.

“Argentina's offshore acreage is largely unexplored outside the Austral basin. Most of the acreage to be offered, approximately 220,000 square kilometres, will be in blocks located in the North Argentina and the Malvinas West basins. Less than 20 wells have been drilled in the Malvinas West basin and practically none has been drilled in the North Argentina basin. Taking this into account, the contract terms will surely include some combination of large block size and favorable exploration periods which could attract participants.

“It is true that with respect to the country's oil and gas sector there has been a continuous effort to attract investment since at least 2014. However with Argentina there is also an element of institutional instability when it comes to government policy. The Macri team has signalled to private and foreign investors as being a business-friendly government, but a return to a less market-oriented rule is always a possibility with a change in administration. Presidential elections will take place next year and the recent currency crisis has already spilled over the political arena with an increased challenging from the opposition to President Macri's leadership.”

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