The world is promised a new oil production center: soon

A new center of world oil and gas production may appear on the map. Investments have flowed into the extraction of shale raw materials in Argentina, which is expected to be able to take a place between Iran and Norway in terms of production. The situation is somewhat reminiscent of the oil crisis of the 70s, when such production centers as the North Sea and the Gulf of Mexico appeared due to the embargo on the supply of Middle Eastern oil to the West. Experts note that much will depend on oil prices.

"Argentina's new market-oriented government and concerns about oil supplies from the Middle East and other countries are stimulating a boom in drilling and production in southern Argentina in Patagonia, where the giant Vaca Muerta shale formation is located, which means "Dead Cow" in Spanish, writes Reuters.

The agency notes that the government of Argentina, which is in a difficult situation, led by libertarian President Javier Miley, is pushing the production and export of oil and gas in order to earn foreign currency, and also applies incentives to attract large investments.

The shale reserves of the Vaca Muerta formation, whose territory is compared with Belgium, are estimated to be the second in the world in terms of gas and the fourth in terms of oil. In four years, oil production in the region has quadrupled to 400 thousand barrels per day.

"Vaca Muerta can easily supply 2 million barrels per day," said Jose Luis Sureda, former Secretary of Hydrocarbon Resources of Argentina. According to him, the growth is already so dizzying that the infrastructure does not keep up with the growth rate of the population.

"In order for this (even greater production growth) to happen, other things are needed: more infrastructure to deliver oil to ports, much more people and more equipment," added Jose Luis Sureda.

Reuters noted that the main obstacle to the development of a new shale production center remains proper logistics.

"Argentina still lacks LNG export capacities, the full construction of which will take years. Local roads, schools and housing in places like Anelo are still very far from what they should be," the agency writes.

In the coming years, new oil developments will outpace gas ones, because oil is easier to supply to world markets, said Jose Luis Sureda.

"Argentina, if all goes well, can become a global player by 2030," says Daniel Dreisen, director of consulting firm Aleph Energy.

The current situation is somewhat reminiscent of the oil crisis of the 70s, when high oil prices due to the oil embargo led to the opening of new world oil-producing provinces - in The North Sea and the Gulf of Mexico.

Igor Yushkov, a leading analyst at the FNEB and an expert at the Financial University under the Government of Russia, notes that new players are now appearing on the world market.

"This is Guyana, where ExxonMobil is producing offshore and the production level is already about 400 thousand barrels per day, and in the coming years it is promised to increase to 1 million barrels. The same goes for Argentina, where large investments were made," the expert notes.

According to him, much will depend on world oil prices in the coming years.

"Shale oil has a high production cost. And in Argentina, unlike the USA, there are not so many raw materials and deposits from which you can choose depending on the cost. If oil prices fall to around $ 50 per barrel, we may even see a decline in production in Argentina. Therefore, it is important for such players to maintain high prices on the world market," Igor Yushkov added.

The price of the benchmark Brent North Sea variety is trading in the second half of October at around $ 75 per barrel. To maintain this level, OPEC+ countries continue to adhere to production cuts. At the same time, non-participating mining countries are trying to increase production. Among them are the countries of South America, including the ambitious Guyana, Brazil and Argentina.