Argentina’s first national offshore licensing round took place on 16 April 2019, in Buenos Aires. Of the 38 blocks offered in an open bid round, 18 were licensed. The round attracted bids from 13 companies, with the winning bids reaching a total of US$718.28 million. All majors participated in the bidding, except from Chevron.
The acreage is located in the Austral Marine, Western Malvinas and Argentina basins.
Commenting on the licensing round, Horacio Cuenca, Research Director at Wood Mackenzie, noted that there were competitive terms, as Argentina acknowledged the frontier nature of the acreage, and also demonstrated its intention to attract explorers to perform the initial de-risking, rather than generating revenue.
The terms were appealing enough to attract the companies with the technical capabilities and deep enough pockets to chase this high-risk acreage: the Majors. Most of the bidders already had a presence in the country, having taken significant positions in the Vaca Muerta shale play
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What is more, low upfront payments were required, and bidding was carried out on work commitments. In addition, the blocks are large, which enabled companies to maximise exposure to potential finds.
Moreover, the exploration periods are long, with the companies able to keep the whole block for eight years before it has to release half of it. Additionally, there are no drilling commitments for the first four years.
According to Wood Mackenzie’s analysis, half of all volumes discovered in a play are found prior the first production from the first field developed in that play. It also finds that frontiers deliver the highest value creation, in part because of attractive fiscal terms.
It will be a few years before we see the first well. Most of the blocks were won with seismic commitments – the acquisition and processing of seismic are likely to take a few years. And companies can delay the potential drilling of these expensive wells to a time where we expect to have consistently higher oil prices
