Vista, YPF Win Vaca Muerta Licenses

(S&P Global Platts, 3.Dec.2019) — Argentina’s Neuquen province awarded development licenses to Vista Oil & Gas and YPF in Vaca Muerta, a giant shale play that has seen investment and production growth slow this year on economic and political uncertainty.

Mexico City-based Vista won a license to develop Aguila Mora in the north of the province, where it plans to invest $32 million in a pilot to drill two horizontal wells with 2,000 meter laterals and reactivate three existing wells, the provincial government said in a statement late Monday.

Vista will operate the block with a 90% stake, with the other 10% held by the province’s oil company, Gas y Petroleo del Neuquen.

The other license went to Argentina’s YPF, for Loma Amarilla Sur, which is also in the north of the province and wholly owned and operated by the state-backed company. YPF, the country’s biggest oil and gas producer, will invest $60 million to drill four horizontal wells with 2,500 meter laterals in the pilot phase, according to the statement.

The two licenses take the total to 38 for developing Vaca Muerta in an area covering 29% of the play’s 30,000 sq km.

The play, one of the world’s largest, has been driving a recovery in Argentina’s oil and natural gas production after more than a decade of decline, with the national government forecasting the country’s overall output could double compared with 2018 levels to 1.1 million b/d of oil and 260 million cu m/d of gas by 2030. That would allow Argentina to increase its exports to 500,000 b/d of crude and more than 80 million cu m/d of gas by then or even before, up from less than 60,000 b/d and 10 million cu m/d, respectively, this year.


Despite this potential, a financial crisis over the past year and political uncertainty ahead of a new left-of-center national government taking office December 10 are slowing investment in the play.

President-elect Alberto Fernandez has yet to announce his policies or his cabinet with only days before he takes power.

The concern about what could await the energy sector was palpable at an Americas Society/Council of the Americas conference Monday in Buenos Aires, where executives said they fear policy changes like price controls could hurt profit potential and drive away investment, slowing development of the play and its export prospects.

At the event, Neuquen Governor Omar Gutierrez said investment in the play will reach $5 billion this year, only half of the $10 billion that must be invested each year to fully develop Vaca Muerta.

To attract such a large amount of investment, he said the country must provide economic and legal stability, pointing out that the federal government has not been good at doing this. The outgoing conservative government of President Mauricio Macri imposed a 90-day freeze on diesel and gasoline prices from August to November that led to a pullback on investment, slowing production growth, Gutierrez said.

“When there is uncertainty in an industry, there are setbacks,” he said.

The number of hydraulic fracturing stages in Vaca Muerta plunged nearly 40% to 312 in October from nearly 500 in September, according to data compiled by Houston-based services company NCS Multistage.


Gutierrez said stability is needed not just for fracking in the play, but for the construction of pipelines and other infrastructure required to sustain production growth.

“We have 60,000 b/d of oil waiting to be exported to Chile,” he said in reference to investment needed to rehabilitate a cross-border oil pipeline.

With gas, the play already came up against a bottleneck in transportation capacity this year that is slowing production growth, Gutierrez said.

To remove the bottleneck, the governor said a pipeline must be built as well as a liquefaction terminal to export supplies.

The key to attracting the investment – estimated at $2 billion for the pipeline and $5 billion for the terminal – is that there are “clear rules of the game,” Gutierrez said. Otherwise, the industry will be “tensely waiting.”


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