Investing.com - A major new pact between the oil and gas industry, labor unions, and the political leadership in Buenos Aires is preparing the way for new investment in shale oil and gas in Argentina.
News of the new accord comes as the price of crude oil today hit $53.12 on intraday trading up, 1.67%. Brent oil also increased 1.85% to $56.11, largely on anticipation of OPEC production cuts this quarter.
The downstream deal in South America, however, has the potential to add to the world's oil production output, and demonstrates that state actors are still willing to subsidize the cost of new drilling, despite the risks.
Argentina’s government this week agreed to extend regulated natural gas prices there at high levels, a public subsidy to attract major oil and gas companies to begin exploration and production in Argentina’s prolific Vaca Muerta shale basin, according to analysts.
Prices for natural gas will be set at $7.50 per million Btu (MMBtu), much higher than market places across the globe. Natural gas prices in the U.S., epicenter of the shale gas revolution, for example, are presently trading for $3.33/MMBtu, or less than half the Argentine price.
Analysts have predicted that Argentina was the most likely place to emulate North America’s shale revolution.
Though global oil and gas companies have invested and drilled wells in locales like China, Mexico and some European countries, a new major source of shale production has not been achieved anywhere outside of North America. Until now.
Argentina holds 27 billion barrels of oil and 802 trillion cubic feet of natural gas in its shale formations, according to the Energy Information Administration (EIA) of the U.S. Department of Energy.