Argentina's oil and gas production fell in 2009 compared with the previous year, marking the third consecutive annual decline since 2006. In 2009, oil production fell 4.3% and gas production dropped by 3.7%, to 622,949 barrels per day (bpd) and 48.41bn cubic metres (bcm), respectively - according to the Argentine Energy Secretariat.
Significantly, the oil production figures are worse than what was expected by industry professionals. Output figures estimated by the BP Statistical Review of World Energy, back in June of last year, Argentina's oil was forecast 682,000 bpd.
According to Daniel Montamat, former Argentinian energy secretary:
'Companies are over-exploiting mature fields whose productivity is declining.' Montamat added that he believed this has become a more pronounced problem in recent years, 'not only for geological reasons but also because of political realities affecting the [oil] sector.'
It seems constantly shifting rules, price controls, export taxes and incessant state intervention have collectively deterred investment - both domestic and foreign - in exploration and production.
Argentina's oil production levels nearly doubled during the 1990s, from 525,000 bpd to 890,000 bpd by 1998. Since then the 1998 Asian crisis, a weaker US economy and the recent domestic instability in the South American nation has led to reduced investment and volume stagnation. Although of late the industry has seen a renewed uptick in exploration, development and production activity on the part of local and foreign operators, drilling levels remain below historical highs.
Despite the headwinds it is facing, the Argentinian oil industry has strong upside potential. 'Argentina hasn't reached its own peak oil or peak gas,' continued Montamat. 'Argentina has potential. We can discover new reserves but we first need new policies, including long-term rules, a new hydro-carbons law and pricing that favours investment,' he concluded.
The announcement of the production figures come against the backdrop of Argentina protested to Britain last week over plans to begin offshore oil exploration in the disputed Falkland Islands, which the two countries went to war over in 1982. Tensions over the islands continue to simmer. Indications that there could be large oil reserves around the Falklands have raised the stakes in the sovereignty dispute.