Aero Latam Argentina

Vaca Muerta: the challenge of being “alive”

Argentina’s most important oil region is not only an opportunity for the energy sector, but its location makes it attractive for air services.

 

By Florencia Lucero Heguy

 

Argentina is the second country in the world with the largest reserves of unconventional gas and the fourth in regards to oil, where the most optimistic projections estimate that these assets would amount to 27,000 million barrels of oil and about 308 billion cubic feet of gas, worth about 10.5 trillion dollars today.

Currently, only 4% of the area is exploited, out of a total of 35,000 km2. This means great income opportunities, although not all the reservoir could have the same productivity.

The operational center of Vaca Muerta (Dead Cow) is located in the town of Añelo, name with which the aboriginal Mapuches baptized the area. Day by day between 5000 and 6000 people cross the town going up to the fields to work in the extraction of gas and oil. In 2012, there were only 2500 inhabitants and, seven years later, the population increased to eight thousand.

It is important to emphasize that, when making an analysis on the fruit of Argentina’s economy, not only would the agriculture and cattle be the engine of the incomes. Vaca Muerta became one of the desires, understanding that thanks to it there is a great challenge for the growth of the country, since it is a treasure buried in Patagonia that cannot be taken advantage of.

A fact not less relevant is that approximately 50 countries in the world exploit unconventional hydrocarbon resources and there are only four that do so on a large scale; United States, Canada, Australia and Argentina.

 

Opportunities for everyone

Vaca Muerta generates great expectations among various sectors of the country, especially politicians, who see in the reservoir the opportunity to attract investments that will create employment and income. Another of the sectors that look at it are the entrepreneurs, since they would have a great opportunity to make large investments, while it can be expected that in the domestic market there will be an impact on the lowering of the cost of energy, both for companies and for domestic users.

According to economist Ricardo Arriazu, of the Institute for Argentine Business Development (IDEA), Vaca Muerta will have a long-term macroeconomic impact, such as, for example, an increase in the sector and total GDP, employment in the energy sector, improvement of external accounts, increase in provincial and national taxes and fall in the internal price of gas, encouraging the production of intensive goods in that input. On the other hand, indirect impacts that depend on the importance of the non-tradable sector and the use that governments make of the additional income.

 

Challenges

The sector still has several challenges, among which are the improvement of competitiveness and attract greater investments to advance in the bottlenecks, which are the creation of more pipelines to extract oil and gas, and build a plant that allows pass the gas to a liquid state and so it can be exported to other non-bordering countries.

One of the key challenges presented by the development of Vaca Muerta, in the long term, is the need to reduce logistics costs for the hydrocarbon operation. The construction of the Norpatagónico train would be an essential tool so that the transport of cargo contributes to the efficiency in the administration of resources and to reactivate the economy of diverse zones of the region.

This investment of 780 million dollars would create 10 thousand jobs, between direct and indirect, and a construction period of four years is expected. On the other hand, the Norpatagónico train will have a favorable impact on regional economies, since the formations are expected to go to Patagonia loaded with inputs for the activity of Vaca Muerta (sand, seamless pipes, construction materials, methanol, etc.) and return to the port of Bahía Blanca in Buenos Aires with minerals, fruits and other local productions to facilitate the departure to foreign markets.

For aviation

A very important challenge and opportunity that exists for Vaca Muerta is the development of aviation, since today hundreds of vehicles travel every 100 kilometers that separate the city of Neuquén with Añelo. It is almost two hours of one-way trip and another two back between the provincial capital and Vaca Muerta.

To this is added that the road infrastructure is quite poor between Añelo and the different wells, which is very complicated when it rains or there is snow, since the roads in many cases are not paved. This means that there is often a demand that has not yet been satisfied to move personnel and loads from the wells to the town by means of helicopters.

In addition, the expansion that production is expected to have, as it covers other areas within the field, will generate demand for air services in other areas of the province of Neuquén and in the south of the province of Mendoza.

In the past, a large part of the Neuquen towns were served by LADE, the airline operated by the Argentine Air Force, but the contraction of its capabilities has made it disappear from the province. Also, the airport infrastructure developed over the years, in many cases it was practically abandoned and, in any case, it was quite rudimentary. In the case of Añelo, there was only a 900-meter track in the nearby Loma La Lata, a few kilometers away, but now a 1800-meter runway and a small platform have been built, although without any additional infrastructure.

 

There are some companies that began to see it as an opportunity, such as Jasfly, now ready to fly over the Neuquen sky. The company is the first to offer helicopter service in the area and has its own fleet of five Bell units (407, 407GX, 407GXP, 412 and 206B Jet Ranger III), highly qualified pilots and all the necessary elements and equipment to meet multiple requirements. It arrived in 2018 with the aim of “being a useful operative piece in the Vaca Muerta puzzle”, said Gabriel Ciezar, commercial manager of air operations of the company. In January of this year they finished the works in the hangar and thus closed the circle to bring their first helicopter permanently to the Presidente Perón airport in Neuquén: a Bell 412EP, which can transport up to eight people in a VIP configuration and up to thirteen passengers in the transport version. In addition, can use a stretcher and become an ambulance with everything needed for medical evacuation or incorporate a bambi bucket for firefighting. In this way, the company can bring Vaca Muerta companies a multipurpose offer such as executive flights, external cargo, firefighting, rescue, evacuation and sanitary operations, among others. Jasfly passed the audits and already has all the authorizations to operate with oil companies; a sector that bans the transport of people in aircraft with a single engine.

On the other hand, the Modena Group has begun to carry out medical evacuation missions, with MBB Bo.105CBS helicopters, providing a fundamental service in an activity that has its risks and in an area where there are few facilities for emergency medical care.

Another of the companies that entered this market is American Jet, with a fleet consisting of four Fairchild Metro 23, an ATR 42-500, a Dornier Do-228 and two Learjets, with which operates charter flights for the oil industry from its base at the Neuquén airport. The company has the potential of having the necessary number of people so that their fixed costs do not exceed their income from the marketing of those tickets and offer regular services that take into account needs and advantages for the oil sector by offering good service at a good price.

If the expansion of Vaca Muerta continues, the potential of the growth of the air sector is immense. With low costs, plus a good offer of schedules to interconnect that region of the country, could become a great development of the air sector where there will be a captive public eager to save on rented airplanes to be able to take regular flights with reasonable prices.

Importantly, to achieve this, a very important public / private agreement is essential where the state would have to promote measures that benefit this possible expansion. That is to say, with lower costs and greater schedules to interconnect Patagonia with the rest of the country, the expansion of this sector could develop. It should be noted that an investment in technology and infrastructure is necessary to increase the sector.

In this way, it can be affirmed that both the national government and that of the province of Neuquén will be a key actor for this opportunity offered by Vaca Muerta.

 

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