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Huge oil find by Repsol in Argentina boosts country's energy potential
BUENOS AIRES, Argentina (AP) ' A huge oil discovery by the Spanish company Repsol has sharply boosted Argentina's potential to cash in on energy and will likely attract an infusion of investment to exploit the shale oil within the next few years.
Shares in Repsol YPF SA were soaring on Tuesday, up 6.5 percent in late trading in Madrid a day after the company announced the discovery.
Experts called the find very promising, but also said it's unclear how much time and investment may be needed to capitalize on the shale oil.
The announced discovery includes 927 million barrels of recoverable resources, 741 million of which is oil.
Former Argentine Energy Minister Jorge Lapena said it's a "spectacular announcement" but that the reserves have yet to be proven and that economic and environmental studies still need to be carried out.
"There's still a long path to go from resources to reserves, and then put them into production," Lapena told reporters. He said the find, if proven, appears to represent about 40 percent of Argentina's reserves.
Though potentially a game-changer for Argentina, the find is small compared to Brazil's recent deep-sea oil discoveries, which experts have estimated could represent as much as 55 billion barrels. Venezuela, South America's largest oil exporter, has a whopping 296.5 billion barrles in proven crude reserves.
Still, for Argentina the find could mean a sharp increase in oil output, and other areas remain to be explored.
"Additional oil discoveries are not just nice to have, but will be critical to meet rising global oil demand," said Jason Schenker, an energy analyst and president of Austin, Texas-based Prestige Economics LLC. "A significant oil find at current price levels is very positive for firms that can verify their size and extract them efficiently."
"Now, the questions will be: How quickly can this oil be brought into production...and at what price," Schenker said.
Those are questions that Repsol isn't immediately ready to answer with specifics.
But Kristian Rix, a Repsol spokesman in Madrid, said that because 15 vertical wells have already been drilled in the area and are producing 5,000 barrels a day of shale oil, "the development of this is uncomplicated from our point of view."
"It's a producing region, so all the infrastructure is there already, so putting new wells on line is very fast," Rix said in a telephone interview Tuesday.
He said the shale oil would be extracted by hydraulic fracturing, or "fracking," the technique that involves injecting fresh water, sand and chemicals at high pressure to force out the fuel. It's not yet clear which water sources would be used in the arid region.
The find was made in a huge shale oil deposit in the "Vaca Muerta," or "Dead Cow," basin of Argentina's Neuquen province.
Repsol YPF owns oil rights to 12,000 square kilometers (4,600 square miles) of the basin, but like other oil companies, has just begun to search them. The discovery announced Monday came while exploring an area of just 428 square kilometers (165 square miles) known as "Loma la Lata."
The company now plans to expand its drilling in a nearby area of about the same size that shows similar potential, Rix said.
Associated Press writers Ian James in Caracas, Venezuela, Bradley Brooks in Sao Paulo and Alan Clendenning in Madrid contributed to this report.