(Chevron, Clay Neff, 23.Sep.2018) — ‘A stable and predictable business environment is essential to draw the investment capital needed,’ says Chevron Africa and Latin America Exploration and Production Company President Clay Neff.
Argentina is one of the few nations outside North America that has the potential to replicate its neighbour’s shale revolution.
The unconventional oil and gas resources in Argentina’s Vaca Muerta shale formation are world class. As such, their level of productivity can compete with any of the shale formations at the centre of the US oil and gas boom — and that includes the prime US area of the Permian basin in Texas.
The Argentine government has taken important steps toward creating an environment that encourages investment in Vaca Muerta.
We at Chevron believe that, if the right conditions continue, this large resource will bring additional investment, continued employment and economic growth to the country while helping to meet the growing global demand for affordable, reliable energy.
Vaca Muerta’s current production of about 160,000 barrels of oil equivalent a day could grow to almost 900,000 boe/d by 2024 if the country can attract $4bn of investment a year, according to consultancy Wood Mackenzie.
A stable and predictable business environment is essential to draw the investment capital needed to ensure Vaca Muerta reaches its potential. A key task for industry executives is to analyse how a country’s risk-reward calculus matches up against others competing for investment. It will be particularly important for Argentina’s government to adhere to free market principles.
Reducing drilling and production costs by increasing efficiencies is also important to attract more investment to Vaca Muerta. A key reason the shale revolution has seen such success in the US in the past few years is that companies have become highly efficient in their operations through process improvements and new technologies.
In partnership with Argentina’s national oil company, YPF, Chevron has made great strides in improving hydrocarbon recovery and lowering drilling costs at our Loma Campana joint venture in the Vaca Muerta shale. Horizontal wells and advanced completion techniques are leading to recoveries competitive with areas of the Permian basin.
Last year, our unit development cost, the cost per barrel, decreased 25 per cent compared with 2016. Furthermore, we expect costs to go even lower and close to the levels seen in areas such as Permian’s Midland basin.
Sustaining lower production costs will require better infrastructure. The Neuquén basin, where Vaca Muerta is located, has enough infrastructure to support the production levels of old as far as conventional oil and gas resources are concerned. However, more is required to achieve the large-scale development that will fulfil its much greater potential.
Significant steps in the right direction have been taken with the planned construction of new railroads and pipelines. But more is needed to ensure the area is internationally competitive.
Chevron, one of the largest foreign investors in the Vaca Muerta shale, continues to do its share to advance the development of this resource. In partnership with YPF, we have increased drilling from two to three rigs at our Loma Campana project. We are seeing continued improvement in performance thanks in part to the use of best practices from unconventional oil and gas areas in the US.
We are also looking at the Vaca Muerta shale in other parts of the Neuquén basin. In our El Trapial field, for example, we will be executing an eight-well appraisal programme to assess the potential of its unconventional reserves.
Argentina is on the right path to make the large-scale development of Vaca Muerta a reality. The responsible development of the extensive unconventional oil and natural gas resources has the potential to be an once-in-a-lifetime economic engine for the country.
Clay Neff is the president of Chevron Africa and Latin America Exploration and Production Company
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