Two pilot projects in Argentina’s Vaca Muerta shale were given the green light last week, as development of the play continues despite the country’s economic crisis.
BP-backed Pan American Energy (PAE) and Canada’s Madalena Energy will invest US$124 million in a four-year pilot on Coiron Amargo Sur Este (CASE), a block in the shale oil window. In the other pilot, Argentina’s state-run YPF and Pluspetrol, another local player, said they would plough US$180 million into a pilot on La Calera in the gas window.
The announcements came after the groups secured approval for 35-year licences for developing their assets, and are a sign of the sector’s belief that the long-term production potential of Vaca Muerta is enough to outweigh the immediate concerns about the deteriorating economy.
Argentina fell into a financial crisis this year as a rout in emerging markets led to a 100% depreciation of the peso against the US dollar, leading to higher interest rates, soaring inflation and a shrinking economy. Most economists anticipate the economy will contract more than 2% this year and inflation will surpass 40%. This is raising concerns about investor appetite in the country.
Neuquen Governor Omar Gutierrez said the new pilots showed investor confidence in Vaca Muerta had not dimmed despite the “very difficult time in the country”. He said the play was attractive because it has “no ceiling” for future production growth.
At CASE, PAE, a joint venture of BP and Argentina-based Bridas, will lead the pilot project, which involves drilling an initial five horizontal wells and installing the infrastructure to handle production in the first two years. If the results are promising, they will drill another three wells over the second period, Madalena said.
CASE is near Loma Campana, the most productive block in the play, where YPF and Chevron are producing 43,000 boepd and anticipate reaching 90,000 bpd of shale oil in 2024.
If CASE advances to the development stage, PAE and Madalena will invest as much as US$1.2 billion in an 87-well programme, the Neuquen government said.
The other new pilot is in the gas window, where YPF and Pluspetrol intend to invest US$2.2 billion in the development phase with the drilling of 207 wells, the provincial government said.
It is anticipated that La Calera will reach peak production of 8 mcm per day, according to the national Energy Secretariat.