Argentina shale drilling halted by road blockades

New shale drilling in Argentina has been paralyzed for a week because of road blockades by health workers demanding higher pay.

The blockades that started on 7 April are preventing workers from entering or exiting oil and gas blocks in the Vaca Muerta shale formation in Neuquen province.

The protests highlight the intersection between Argentina's chronic above-ground risks for oil companies and pressure over the government's handling of the raging Covid-19 pandemic.

Industry executives are quietly warning that the continuing blockades could start to erode production, and some fuel stations in the area are starting to experience shortages.

Although street protests are common in the southwestern province of Neuquen, blockades are usually short-lived. In this instance, the situation is more delicate because most Argentinians sympathize with the plight of the healthcare workers.

Around 40 rigs are halted in Vaca Muerta, according to the estimates of one oil company. Although existing wells can continue operating, concern is growing among producers as scheduled drilling has been forced to stop.

"If the problem is not resolved, companies will start to lose production," an official with Argentina's state-controlled YPF said.

The protest could also impede producers from fulfilling their commitments under a new gas subsidy scheme that was launched late last year to boost supply ahead of the austral winter.

YPF, Argentina's largest energy producer and refiner, is the biggest actor in Vaca Muerta, but several foreign energy companies, including ExxonMobil, Shell and Chevron, hold significant stakes there.

Provincial officials have met with protest leaders but have yet to reach an agreement.

"The only way to reach a solution is with responsibility, extreme and inflexible positions are never the way," Alejandro Monteiro, Neuquen's energy minister, wrote on Twitter.

The largest union of oil workers in the region has criticized the blockades.

Argentina produced 489,344 b/d of oil in the first two months of 2021, down by 5pc from a year earlier, according to energy secretariat data. Gas output fell by 11pc to 115.3mn m3/d in the same period.

Argentina is experiencing a Covid-19 surge, and has recorded nearly 58,000 deaths. Only about 1.6pc of the population of 45mn has been fully vaccinated, according to the health ministry.

By Daniel Politi