To Profit From The Next Shale Boom, Investors Should Look To…Argentina?

Todays top stocks to buyWith all the attention being focused on the US shale bonanza, savvy investors are turning their attention to a potentially more lucrative part of the world…

Admittedly, we Americans are a little biased when it comes to which country has the upper hand in energy resources.

Without looking too closely at the hard numbers, many of us would like to believe that our great nation holds the key to global energy supremacy.

From oil to natural gas, coal to nuclear power, even solar and biofuels, we have a diverse and abundant energy mix that other countries only wished they had.

So naturally, when it comes to shale gas…most Americans would draw similar conclusions.

But according to the EIA, the US does not hold the title. It actually ranks fourth in the world with approximately 665 trillion cubic feet (tcf) of technically recoverable shale gas resources.

The US trails top ranked China (1,115 tcf), Argentina (802 tcf), and Algeria (707 tcf).

So while Americans are still the most active shale drillers by a wide margin — several thousand wells are drilled every year — there are significant growth opportunities elsewhere as global resources remain relatively untapped.

According to a report by energy consultants Wood Mackenzie Ltd., 2014 could be the year that we begin to see a ramp up in international shale drilling.

Approximately 400 shale wells are slated to be drill outside of the US, half of which will be taking place in Argentina alone.

While Argentina has had its share of economic troubles recently, the doors are opening widely for energy extraction in the South American nation.

Drilling activities in the region will be primarily focused in Vaca Muerta, or the “Dead Cow” formation. It is said to contain some 23 billion boe, making it the fourth richest shale in the world.

If the results from the wells are positive, Vaca Muerta could easily become the next Marcellus of the world.

The drilling program in Argentina will be more than three times larger than in China, which has 60 wells planned, while Australia has 25.

But the 200 wells is merely a feeling out process.

You see, energy giant Chevron Corp. (NYSE:CVX) has recently joined forces with state-run company YPF SA (NYSE:YPF) to develop Vaca Muerta.

Chevron is the first major to invest a significant amount of money into Argentina’s energy sector. The two firms announced a $1.5 billion JV that would be split into two phases.

Phase 1 will involve the drilling of over 100 wells through 2014.

Upon completion of Phase 1, a further 1,500 wells will be drilled in Phase 2, with an ultimate production goal of 50,000 bpd of oil and 106 million cfd of gas.

Argentina is hopeful that like the US, it too could someday become an energy exporter. But they have a long road ahead.

YPF CEO Miguel Galuccio has said that “many Chevrons” are needed for Argentina to fully tap all of its oil and gas potential and become energy independent.

With its economic climate still in flux (though showing small signs of stabilization), no other energy company besides Chevron has made a large-scale investment in Argentina thus far.

All that may change soon as the Phase 1 drill results come back from the Chevron/YPF project.

On a slightly smaller scale, China is also ramping up its shale drilling activities.

The Fuling district of Chongqing province is a rich shale formation, and more drilling is expected in the area by the end of the decade.
State-run Sinopec (NYSE:SNP) plans to produce around 63.6 billion cf of gas in 2014. Output is expected to climb to 176.6 billion cf by next year, and 353.1 billion cf come 2017.

Of course, with both Argentina and China being emerging markets, they aren’t expected to catch up with the US shale business anytime soon.

The US has a significant advantage in terms of technology, infrastructure and political and economic stability that allows its shale industry to flourish.

That said, should more giant energy companies make the move into foreign territory to exploit their massive resources, our domestic shale revolution could rapidly spread to the rest of the world very soon.

Stay tuned.

Yours in profits,
Todays top stocks to buy
John Holt
for Top Stock Millionaire
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