Mikaila Adams
Editor-News
Units of ExxonMobil Corp., Equinor, and Wintershall were among the companies that submitted winning bids in Argentina’s Apr. 16 licensing round—the first open bid round for Argentinean offshore acreage in more than 20 years—where 38 blocks were on offer, 18 of which were licensed.
The round attracted bids from 13 companies, with the winning bids totaling $718.28 million, according to Wood Mackenzie. “All majors participated in the bidding, aside from Chevron [Corp.],” WoodMac said in a press note.
The exploration blocks offered during the public tender were in shallow, deep, and ultradeep water in the Austral, North Argentina, and Malvinas West basins.
Licensed acreage
ExxonMobil Argentina Offshore Investments BV and an affiliate of Qatar Petroleum were awarded three exploration blocks in the Malvinas basin, some 320 km offshore Tierra del Fuego.
ExxonMobil will operate Blocks MLO-113, MLO-117, and MLO-118 with 70% working interest. A QP affiliate will hold the remaining 30%. The initial work program will include 3D seismic data acquisition.
“This potential play-opening opportunity will allow ExxonMobil to use its unique exploration capabilities and expertise as it evaluates this new acreage,” said Mike Cousins, senior vice-president, ExxonMobil exploration and new ventures.
The award adds some 2.6 million net acres to ExxonMobil’s existing holdings in Argentina. Through its subsidiaries in Argentina, the company holds interest in some 315,000 net acres spanning seven blocks in the onshore Neuquen basin of the Vaca Muerta formation.
In addition to the blocks with ExxonMobil, QP also was awarded the exploration rights for Blocks CAN-107 and CAN-109 in the North Argentina basin as part of a consortium comprising an affiliate of Shell (operator with 60% interest) and an affiliate of QP (with 40% interest).
Equinor adds seven offshore exploration blocks to its portfolio after presenting winning bids in the round—five as operator. With 100% interest, Equinor will operate Blocks MLO 121, CAN 108, AUS 105, and AUS 106. The company will serve as operator of Block CAN 114 in a 50-50 interest split with YPF and will participate in Block MLO 123 (25%) with Total as operator (37.5%) and YPF (37.5%).
Equinor entered Argentina in 2017 and holds a 50% interest in the Bajo del Toro license (YPF operator, 50%) and is operator with 90% equity in the Bajo del Toro Este license (partner Gas y Petroleo del Neuquen, 10%).
Wintershall was awarded for bidding on two blocks in the Malvinas basin. In addition to the CMA-1 exploitation concession, with this award, the company will participate in further offshore exploration projects in Argentina.
The exploration licenses are about 300 km off southeastern Argentina. Wintershall will hold 27% interest in Blocks MLO-114 and MLO-119. British-Irish firm Tullow will serve as operator, while the Argentine company Pluspetrol is another partner.
The two 6,000-sq-km and 4,500-sq-km blocks will be covered with 3D seismic surveys during the initial exploration period, Wintershall said.
A resolution will be issued by Argentina’s Secretariat of Energy confirming the public tender results, which are subject to customary confirmation and regulatory approvals by the Argentinian authorities.
Analysis on results
“The Argentinian government designed very competitive terms for this round, acknowledging the frontier nature of the acreage, and demonstrated its focused intent on attracting explorers that will carry out the initial derisking, rather than generating revenue,” said Horacio Cuenca, WoodMac research director.
“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,” Cuenca said.
“Low upfront payments were required, and bidding was done on work commitments. In addition, the blocks are large, which allows companies to maximize exposure to potential finds,” he said, adding, “The exploration periods are also long; a company can keep the whole block for 8 years before it has to relinquish half of it. There are no drilling commitments for the first 4 years.
Cuenca concluded, “Our analysis shows that half of all volumes discovered in a play are found before first production from the first field developed in that play. We also find that frontiers deliver the highest value creation, in part due to 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.”
