“All this has generated big expectations in the oil industry,” said Luis Pedro Stinco, a geologist and vice president for exploration for the Argentine arm of the Chinese company Sinopec. “Those who want to be in Dead Cow are now paying a fortune in acreage for a concession.”
Even so, bringing Dead Cow — so named by prospectors who apparently came upon a dead cow amid gullies and dry rolling hills — to life will be full of geological hurdles and political obstacles.
Energy officials here in Neuquen province who manage the oil and gas industry are scrambling to assure oil companies from Brazil to Canada that their investments will pay off, just weeks after Argentine President Cristina Fernandez de Kirchner shook oil markets by abruptly expropriating a Spanish-owned oil company, YPF.
The hostile takeover of a company that had been drilling in a remote corner called Loma La Lata only added to the challenges and uncertainties faced by companies here, which include price controls on gas and oil and burdensome financial regulations.
In a modest office building in this small city that houses the offices of Neuquen’s energy ministry and the local provincial oil company, executives talk about the importance of finding a middle ground between state control of the energy sector and creating a climate in which deep-pocketed private partners provide the gargantuan investments needed to develop Dead Cow.
“Everyone is convinced that the only way to advance is with foreign investments,” said Guillermo Coco, the energy minister of Neuquen province. “What companies ask is, what will be the conditions? What price will I receive for gas and oil? Will I be able to buy currency? Will I be able to take earnings out of the country once I am making money?”
American and foreign companies such as Petrobras, Chevron, Total and Apache have been discreet about their position on Argentina’s management of the energy sector. But state regulations, particularly governing what companies can charge for the oil and gas they produce, has been a central concern.
ExxonMobil, which has interests in several potentially lucrative junctures in this province, said it is prepared to make the necessary investments to develop its concessions. But the company noted in a statement that “our investment must be supported with fiscal terms and product pricing that provides a return commensurate with the risk we are undertaking.”
Argentina, which is heavily dependent on natural gas to power everything from factories to homes to cars, has some of the world’s most stringent pricing restrictions.