On the vast, desolate plains of southern Patagonia, Compañía General de Negocios is stepping up drilling and exploration where few companies operate, an emerging trend of widening the search for oil and natural gas in Argentina.

“The resource is very large,” Hugo Eurnekian, president of the Argentinian company, said of southern Santa Cruz province. “If this resource was in the United States, there would be hundreds of companies working, but there are only three.”

CGC, as the company is known, has made a series of oil and gas discoveries since 2015, when it acquired more than two dozen fields in the area, part of the Austral Basin.

“In the last three years, we have more than doubled our gas production,” Eurnekian told S&P Global Platts.

CGC appears to be onto something—and willing to step up the pace. It is completing more than 100 wells drilled over the last three years, the biggest campaign in the past two decades in that part of the basin. It is also shooting 2,500 sq. km (618,000 acres) of 3-D seismic.

The efforts, however, beg the question “why?”

Most companies drilling in Argentina are focused on Vaca Muerta, a shale play in the Neuquen Basin at the northern end of Patagonia, which has so much production potential it could make Argentina a global energy supplier. Chevron, Shell, Total and other companies are plowing billions of dollars into projects there.

Asked why it’s worth betting on the Austral Basin, Eurnekian said he sees “a promising future” and the potential of another shale play on par with Vaca Muerta. His company recently teamed up with YPF, the country’s state-backed energy company and busiest player in Vaca Muerta, to explore that play, called Palermo Aike.

While the three-year investment plan is only $25 million, far less than the $5 billion-plus companies are investing as a whole in Vaca Muerta this year alone, it exposes a new trend of expanding unconventional drilling to other plays on the promise of future production growth.

“We know that there are two more Vaca Muertas in Patagonia, towards the south,” Aldo Pignanelli, a former central bank president who is working on the campaign of pro-industrialist Sergio Massa for president this year, told Platts.

This could be a boon for Argentina. In theory, the more shale plays in development, the more incentive for frackers and services companies to come to Argentina, as the opportunities for business increase. If activity wanes in one play, they can shift to another.

The end result for Argentina is a lot more investment and production.

Eyeing oil and gas exports

Argentina’s Tecpetrol, another big player in Vaca Muerta, teamed up this year with local counterpart Pampa Energia to start exploring the Los Monos shale play in the northwestern province of Salta. Others are testing Los Molles, a play below Vaca Muerta in the Neuquen Basin, and looking at D-129 in the San Jorge Gulf Basin, just north of Austral.

The initial results should come “in the next few years,” most likely first from Palermo Aike, said Danny Massacese, upstream managing director at BP-backed Pan American Energy, the country’s second-biggest oil producer.

There are advantages to developing the shale plays in the south. One is that there’s a lot of acreage, as the field of operators is slim. There is also the possibility of building petrochemical plants for using the gas output as feedstock, and for exporting oil and gas via the Atlantic and the Pacific through Chile. Many of the fields are close to the ocean.

“We can easily access a lot of markets,” Eurnekian said.

He estimates if exploration picks up pace in Palermo Aike, LNG exports from the south could start in five to 10 years.

Pipeline constraints

The search for potential in other shale plays faces challenges. There is little infrastructure capacity to meet a surge in output, a fate now stalling the growth of gas production in Vaca Muerta, with pipeline capacity expected to max out this June to August winter.

And the surge in activity in Vaca Muerta has left fewer services available for projects elsewhere.

“If it hadn’t been for Vaca Muerta, D-129 would be a lot more developed,” said Martin Cerda, the minister of hydrocarbons in Chubut, where much of that play is located. Many services companies in the San Jorge Gulf Basin, the country’s biggest source of oil and home to D-129, have moved to Vaca Muerta, hitting operators in the south with delays, Cerda said.

It also has increased the cost of hiring services to drill wells in the south, as the companies must bring equipment down from Vaca Muerta, Massacese said.

Still, he said, a bigger challenge remains.

“The main obstacle is the lack of financing and access to capital to move forward with these kinds of projects,” Massacese said. “For this reason, companies go to areas that are more certain, that are proven.”

Investment climate

With a small capital market in Argentina, foreign financing is needed for projects. But investors have been hesitant to put money in Argentina as a year-old financial crisis drags on with few signs of abating in the run-up to an October 27 presidential election.

The peso has lost more than 100% of its value over the past year, doubling the pace of inflation to 55%. The central bank has hiked interest rates to nearly 74% to try to contain the exchange rate and inflation, in the process slowing the economy’s recovery from recession and making it harder to finance projects.

“There are a lot of opportunities in Argentina,” said Paula Premrou, president and CEO of Portfolio Personal Inversiones, a leading broker in Buenos Aires. “But there is also a lot of risk, so investors are going to be cautious.”

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