To the energy developments promoted in Argentina in recent years, a new potential production hub has been added: Mar del Plata may become a center for oil extraction after a Supreme Court ruling opened the possibility of exploration 300 kilometers off the coast in the Argentine Sea.
The resolution, signed by Justices Horacio Rosatti, Carlos Rosenkrantz, and Juan Carlos Maqueda, addressed amparo (protective) writs from the Greenpeace Argentina Foundation, another from the Organization of Self-Convened Environmentalists, and a third from a private individual, Rubén Oscar Godoy, which went all the way to the Supreme Court. However, the highest judicial authority in Argentina decided to dismiss these appeals and authorize seismic exploration and oil exploitation off the coast of the General Pueyrredón district.
The legal process began in December 2021 when the environment ministry declared the “suspension of the deadlines for the Environmental Impact Assessment procedure concluded” and approved Equinor Argentina’s project to proceed with the drilling of the first offshore hydrocarbon well in the Argentine Sea.
Following that, three amparo writs were filed, requesting the suspension of exploratory activities and the revocation of permits. In February 2022, Federal Court No. 2 in Mar del Plata granted the requested preliminary measures and ordered the immediate cessation of the project. Both Equinor and the National Government appealed the ruling.
Four months later, in June of last year, the Federal Court of Appeals in Mar del Plata annulled the preliminary measure and replaced it with another. Under the new measure, the progress of the project depended on the fulfillment of certain measures, such as the involvement of the National Parks Administration, municipal and national public hearings. It also required the Ministry of Environment and Sustainable Development to be involved in overseeing and enforcing the environmental impact declaration and the environmental management plan.
However, the Greenpeace Foundation led the filing of a series of extraordinary resources seeking to revoke the second-instance judgment, further delaying the project’s realization. The National Government submitted a complementary environmental impact statement in August 2022, a month in which a series of judicial requests were initiated, extending until January of this year.
Ultimately, the Supreme Court dismissed the last extraordinary appeals. The Justices found that these measures were not directed against a judgment, but rather aimed at suspending its effects to maintain preventive environmental protection. Thus, seismic exploration and oil exploitation 300 kilometers off the national coast were authorized.
Potential Mar del Plata oil production
The Mar del Plata Energy Cluster, a group of businesses advocating for hydrocarbon development in the area, estimated that drilling the first offshore hydrocarbon well in the Northern Basin of the Argentine Sea and the discovery of conventional oil could generate US$40 billion of investment in domestic materials and the creation of 125,000 jobs in the sector over the next three decades.
“The well, which will cost around US$100 million, will begin between December and June of the following year, but work in the port of Mar del Plata has already begun,” stated Marcelo Guiscardo, president of the Cluster, during a presentation at the 2023 Expo AOG. “Offshore is happening today; it’s not something that will occur in 30 years. This will continue to grow and will require many people.”
One of the challenges will be meeting the projected timelines. According to the presentation, there are eight to 10 years between the delivery of the exploration permit after the area’s auction and the start of production. Then, the operational phase begins, which can extend for up to 30 or 40 more years. “Only Exxon has managed to reduce the time to five years for production to begin, but that’s not currently a possibility,” said Diego Lamacchia, VP of Operations at Liviticus Subsea, another speaker. According to Lamacchia, during this initial period, investments will total about US$4 billion until the project’s viability is determined to extract the first drop of crude, which may not occur until 2030.
Mexican Alex Reyna, from the deepwater drilling company Valaris, stated that with international oil prices ranging between US$69-78 per barrel, there is an 83% feasibility of the projects. “These are long-term investments, and we all have good wishes. Talking with Argentine friends, I said that I already have several candles lit at home for this well to be successful and find oil, but we need to be patient because, if it goes as we all want it to, development will take time,” he cautioned.
Lamacchia stated that the country could have up to a 50% local component in Mar del Plata offshore, though he emphasized that reaching that level is not easy. “Brazil doesn’t exceed 18%. Here, jumpers can be manufactured, which are underwater structures that connect pipes, and suction piles, another type of welded steel structure that will be buried on the seabed,” the expert explained. Additionally, he estimated that the national government will receive between 58% and 62% of the total project profits.