Argentina Sees Steady Growth In Light Crude Exports From Vaca Muerta

(S&P Global Platts, 9.Apr.2019) — Argentina’s state-led YPF is preparing a shipment of light crude from Vaca Muerta, a trend the federal government expects to gain as production increases from the shale play, Argentinian Energy Secretary Gustavo Lopetegui said Tuesday.

“This year for the first time in many years we have started to export light oil from the Neuquen basin,” where the play is located, Lopetegui said at the Argentina Gas and Oil Summit in Buenos Aires.

The biggest producer in the play, YPF has made a first shipment already and will make the second in the next few weeks, he added.

Argentina’s energy department has estimated that Vaca Muerta, one of the world’s largest shale plays, will lead a doubling of the country’s oil production to 1 million b/d in 2023 from 500,000 b/d this year. With domestic demand at less than 500,000, that means around half will be available for export.

“For all of the new oil from Vaca Muerta, its destination will be the world,” Lopetegui said. “This is starting to happen today.”

With the export potential, as well as the quality of the shale resources, companies like Chevron, Shell and Mexico’s Vista Oil & Gas are pushing ahead on projects in the plays’s oil window that are each estimated to plateau at 60,000 to 100,000 b/d of oil equivalent between 2023 and 2025.

Indeed, Vaca Muerta’s oil production is expected to reach 200,000 b/d by the end of 2021, Ryan Carbrey, senior vice president of Rystad Energy, said at the conference.

The play produced 78,000 b/d in February, up 70% year on year, Lopetegui said on the sidelines of the event.

The growth has halted crude the country’s imports since May 2018, meaning that refineries are buying all locally and so producers can export any additional output, he added.

To export the crude, Lopetegui said there is capacity on a pipeline to a port in Bahia Blanca, Buenos Aires province, due east of Neuquen. The government is working on a project to put back in service a pipeline to take supplies to ports in Chile for export via the Pacific.

Without much effort, Argentina can start exporting 100,000 b/d, and with minor investments it can double that to 200,000 b/d, he said.

Lopetegui said it could take “a couple of years” to reach 100,000 b/d.

Roberto Brandt, one of his advisors, said there are four oil pipeline private projects in the proposal phase. He added that as shale oil production grows, the potential increases to export other types of crude for export from the southern basins of Austral and San Jorge Gulf. Those basins produce mostly heavier crudes, of which some is exported on a regular basis.

While there are no immediate threats of bottlenecks for starting exports, Gabriel Lopez, the deputy secretary of energy in Neuquen, where most of Vaca Muerta is located, warned that midstream projects are needed to sustain the production and export growth.

“We cannot sleep on this,” he said.

If new oil pipelines are not put into construction soon, the province’s production could peak at 350,000 b/d in 2022-23, up from 135,000 b/d currently, limiting export growth.

“In two or three years the pipelines will be filled if we don’t have new pipeline capacity in place,” Lopez said on the sidelines of the event.

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