Shell To Launch Major Project In Argentina’s Vaca Muerta Shale Play In 2019

(S&P Global Platts, 27.Dec.2018) — Shell plans to start a full-scale development project in Vaca Muerta next year, betting on the shale play to ramp up oil and natural gas production in Argentina, the government of Neuquen announced Thursday.

Shell Argentina CEO Sean Rooney made a presentation Thursday of the company’s 2019-25 development plan for three adjacent blocks -- Coiron Amargo Sur Oeste (CASO), Cruz de Lorena and Sierras Blancas -- in the play to Neuquen’s governor Omar Gutierrez.

Shell will target shale oil in the six-year program in the province, the government said.

Gutierrez said the three blocks have potential to reach production of more than 70,000 b/d of oil equivalent in 2025, up from output of 4,500 boe/d this year.

The more immediate target is to reach 40,000 boe/d in 2021, he added.

Shell’s program includes drilling more than 300 wells in 38 locations on the blocks, which cover a total of 400 sq km (98,800 acres). A new crude processing plant will be built as well, along with 100 km of roads, 75 km of oil and gas pipelines, power lines, and three water storage facilities and a new aqueduct for supplying the frac sites.

The project is “a new milestone in the development of Vaca Muerta, a strengthening in the structural and strategic development,” the governor said.

Shell, he added, is moving into mass development 18 months earlier than it could have, given that the field license allows it to run a pilot until 2020 before making a decision on what to do.

POSITIVE RESULTS

Rooney said “the preliminary results of the early production of our pilot projects in Vaca Muerta were positive,” adding that they are comparable to other shale plays in the world.

Shell has said that it plans to develop its oil assets in Vaca Muerta first, generating cash flow to then expand into the gas windows.

Shell has a 90% stake in Cruz de Lorena and Sierras Blancas, while the province's state oil company, Gas y Petroleo del Neuquen (GyP) holds the remaining 10%. In CASO, GyP holds 10% and Mexico's Vista Oil and Gas has 10%, while Shell owns 80%.

The project takes to seven the number of blocks in mass development in Vaca Muerta, out of a total of 34 licenses awarded so far.

Vaca Muerta, one of the world’s biggest shale plays, is leading a recovery in the country’s oil and gas production, with expectations that total output could double to 1 million b/d of crude and 260 million cu m/d of gas in 2023, allowing exports to reach 500,000 b/d and 80 million cu m/d by that time, according to an estimate by the Argentinian Energy Secretariat.

CHEVRON AND YPF

The announcement comes on the back of decisions by US-based Chevron and Argentina’s state-backed YPF to invest a total of $800 million in drilling 20 wells in 2019, targeting Vaca Muerta.

Chevron, one of the first big frackers in Vaca Muerta, will invest nearly $200 million in drilling eight wells in El Trapial, a conventional oil field it operates and which has shale potential.

YPF will invest $600 million in three blocks in the north of the province.

The companies will target shale oil, according to a December 21 statement by the provincial government.

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