(Reuters) – Shell (SHEL.L) plans to increase its oil production by 5,000 barrels per day (bpd) in Argentina’s Vaca Muerta shale formation to 50,000 bpd by the end of the year despite limitations on investment, its chief executive said on Tuesday.
Ricardo Rodriguez, Shell’s CEO in Argentina, said at an oil and gas conference in Buenos Aires that macroeconomic pressures were also discouraging the company from increasing its investments in Vaca Muerta.
The company is the second-largest crude oil producer in Vaca Muerta, behind Argentina’s state-run oil company YPF.
Rodriguez highlighted Vaca Muerta’s “phenomenal” quality and said the company would like to invest more than the current $500 million a year.
However, Rodriguez remarked that restrictions on accessing foreign currency and Argentine price regulations have made Shell think twice before deciding where to invest.
“To invest more we have to have those conditions … that make sense to invest more,” Rodriguez said.
Argentina decided to freeze the domestic crude oil price in August, maintaining it at $56 per barrel until the end of October in order to help tamp down triple-digit inflation.
Argentina maintains strict exchange controls as it tries to solve the country’s scarce foreign currency reserves.
“We do not have a free market price for Argentina. We do not have a price , but my colleagues in Brazil or Mexico do,” Rodriguez said.
“This generates a big difference in competitiveness.”
Vaca Muerta holds the world’s second-largest shale gas reserves and the fourth-largest shale oil reserves. The formation is key to Argentina’s ambitions to become an energy exporter, including aims to ship liquefied natural gas (LNG).