Oil & Gas - Regional - Latin America years away from shale production
Despite Latin America's estimated 1,900Tf3 (53.8Tm3) of shale resources - nearly 30% of the world's total - most countries are years away from production and face an array of challenges, according to the latest BNamericas Intelligence Series Oil and Gas report. The majority of resources lie in three countries: Argentina (41%), Mexico (36%), and Brazil (12%). However, information is speculative and little is known about shale oil or resources in countries like Peru and Ecuador, adds the study. In Argentina, there was high interest from international oil companies in developing the estimated 774Tf3 of shale gas until the renationalization of oil company YPF (NYSE: YPF) in February this year. The increased uncertainty about regulations since the takeover has kept many companies from moving forward with shale development. For now, many investors have taken a "wait-and-see" stance on shale until the regulatory wrinkles are ironed out. In Mexico, national oil company Pemex has taken the first steps to develop its estimated 681Tf3 of shale resources by drilling exploratory wells, but still lacks the expertise for the industry to take off. The report says it is important for the NOC to utilize its proximity to US shale experts to avoid slow and expensive development. But with US gas so cheap right now, the incentives for developing shale gas south of the border are low. Brazil has an estimated 226Tf3 of shale resources and that only takes into account the Paraná-Chaco basin. Petrobras (NYSE: PBR) says there are 10 other basins with unconventional potential. But it seems unlikely that shale will be developed in Brazil soon as all investment and focus is directed at the country's pre-salt reservoirs. The only development of shale expected in the near future will come from the power sector. Brazil's largest electricity company Cemig (NYSE: CIG) already has drilled two exploratory wells and three more are planned. The report also notes that Colombia, despite having relatively modest shale resources of 79Tf3, is investing heavily in development of its shale potential to become the gas hub for the Andean region. The Ronda 2012 is offering 109 blocks, 32 of which are suspected to have unconventional resources. Initial estimates say these blocks hold between 3Bboe and 151Bboe of shale oil and 34T-2,051Tf3 of shale gas. Finally, the report lays out the challenges implicit in developing such resources, the most obvious of which is the environmental impact of fracking. A single well requires 15M-20Ml of water, which is said to release pollutants, mainly methane, into water tables. In addition, the cost of developing shale in Latin America today is much higher than it is in the US. If exports from the US continue, the report says Latin America will remain at a disadvantage in developing shale. The report is available here