Argentina Elections May Spur Vaca Muerta Development

Argentina’s general elections may spur development of the country’s shale oil and natural gas deposits, the third-largest in the world with more than 100 billion barrels estimated to be in place.

The leading candidates running to succeed President Cristina Fernandez de Kirchner are “pro-business,” according to Alejandro Jotayan, chief executive officer of Andes Energia Plc. Andes is the only London-listed company with exposure to Vaca Muerta, a Connecticut-sized formation in southern Argentina considered the world’s second-biggest shale gas deposit and fourth-largest shale oil field.

“We have everything you could need to develop oil and gas in Vaca Muerta - flat land, water, infrastructure,” Jotayan said in an interview today. “Now we just need the government to move in the right direction.”

Argentina is a net energy importer, spending about $12 billion a year on oil and gas, according to Jotayan. A lack of financing has left domestic reserves untapped. An unofficial default on bond payments has led investors to regard the country with skepticism, tightening cash flows.

Argentinians will vote in October 2015 to choose a replacement for Fernandez, who is barred from running after serving two consecutive terms.

“The three main candidates are all pro-business,” Jotayan said. “They all have technical energy teams that are working with them as well.”

250,000 Acres

Andes holds 29 licenses in Argentina, 15 in partnership with YPF SA, Argentina’s state-owned oil producer. The explorer has six blocks in the Vaca Muerta shale region, stretching across a vast swath of land totaling 250,000 acres.

Exxon-Mobil, Chevron Corp. and Royal Dutch Shell Plc also hold licenses in Vaca Muerta. All blocks are in the early stages of development.

“An investment in Andes Energia’s shares is aligned with the Argentine government’s policy to facilitate growth in oil and gas production via YPF, ” Tao Ly, the London-based head of oil and gas research at GMP Securities Ltd., said in a research note. “As a result, we think it likely that government policy will be supportive towards Andes Energia’s goals.”

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