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Argentina eases used rig imports to spur drilling, boost output

Argentina eases used rig imports to spur drilling, boost output

WASHINGTON: Argentina’s government said Thursday it is making it easier to import used rigs, a widely awaited measure aimed at spurring drilling activity to boost oil and natural gas production as rising investment creates bottlenecks in the oilfield services industry. Companies will be able to import used rigs and other equipment, as long as the supplies are no more than 10 years old and are not available locally “in the times and qualities required by the sector,” according to a presidential decree published in the Official Bulletin, the government’s newspaper of record. The scheme will take effect Friday and run until June 30, 2019, the government said. Importers will pay 7% import duties on the used equipment, with some equipment allowed to come in at 0% and others at 14%, according to the decree. Argentinian President Mauricio Macri announced plans for the reduced duties on used rigs in April during a meeting with oil executives in Houston. His right-of-center government is taking steps to snare investment to turn around more than a decade of dwindling oil and gas production, which has brought shortages and a surge in imports.

The initial focus is on developing huge unconventional resources in plays like Vaca Muerta, one of the biggest shale formations. YPF, the country’s state-run energy company and biggest oil and gas producer, is producing a gross 67,400 b/d of oil equivalent from the play, mostly in a partnership with Chevron. YPF plans to launch more pilot projects in the play, as do other companies including BP-controlled Pan American Energy, ExxonMobil, Shell and Total. Tecpetrol, a local player, is investing $2.3 billion to develop one block for shale gas. The rise in investment is starting to put a strain on the availability of oilfield services. Richard Spies, chief executive of Pan American Energy, said June 28 that more rigs are needed to keep up with demand.

“There are shortages of services,” he said at a Financial Times commodities conference in Buenos Aires. “I have to wait when I call service providers to provide a service on a well. The pressure is already there.” Argentina’s rig count rose to 65 in July from 60 in June and a more than five-year low of 49 in April, according to Baker Hughes, an oilfield services company. Spies said the lower duties on importing used rigs would help meet the rising demand. “We need that equipment that is idle in the United States, that could be moved down here to help facilitate the developments that are coming in Vaca Muerta,” he said. The Macri administration estimates that development of Vaca Muerta and other unconventional plays will increase overall crude output to 560,000 b/d in 2025 from 475,000 b/d in the first half of this year, and boost gas output to 185 million cu m/d from 121.7 million cu m/d over the same period.