Chris Noon
10 December 2014
European supermajors Total and Shell increased their investments in Argentina’s highly prospective Vaca Muerta shale formation last month.
Authorities in the western province of Neuquén said in late November that Shell and Total would invest $550 million with Gas and Oil Neuquén (GyP), an oil and gas company owned by the province, to develop two pilot shale projects.
Although it was initially unclear if the cash represented new or increased investment, a spokesman for the province’s government confirmed to Interfax on Tuesday the cash was “new investment in the Neuquén Basin”.
Total, Shell and GyP will invest $300 million in the Rincón La Ceniza and La Escalonada concessions, which will include the acquisition of 3D seismic, the drilling of horizontal wells and the installation of gas processing facilities. Total operates both concessions with a 42.5% stake. Shell’s Argentine affiliates control 42.5% of the blocks, with GyP holding 15%.
Four horizontal wells and one vertical well have been drilled to date in Rincón La Ceniza. One horizontal and one vertical well have been drilled in La Escalonada. No oil or gas output has been registered from La Escalonada, but Rincón La Ceniza produced 1 thousand cubic metres per day (Mcm/d) of gas in September, according to data from IAPG, a Buenos Aires-based producers’ association.
Shell’s Argentine affiliates and GyP will also invest $250 million in the Sierras Blancas and Cruz de Lorena concessions. The investments include an oil and gas treatment plant with a processing capacity of up to 10,000 barrels of oil equivalent per day. The concessions produced a combined 10 Mcm/d in August and September, according to IAPG data.
“We are pleased to enter the next phase of our operations in Vaca Muerta,” a London-based spokeswoman for Shell told Interfax on Tuesday. “The activities in this next phase – which include additional drilling and the construction of a pilot production facility – will enable us to optimise drilling costs and gather important information about the resource potential in our blocks,” she added.
Shell has been cautiously optimistic about Vaca Muerta, where it owns 20,200 net hectares and has drilled six horizontal wells since October 2012.
Up with the best
“We need more time to establish if this will be [a] commercial play. But the Vaca Muerta is up there with the best of the best,” Laurens Gaarenstroom, an unconventional exploration manager for Shell’s Latin American business, told conference delegates in Buenos Aires in September (see Shell is a convert to Latin American shale, 26 September 2014).
The supermajor is employing knowledge gained from its North American operations to explore Vaca Muerta, limiting its portfolio to what it believes to be the formation’s sweet spots in an attempt to make drilling more economic. Shell also owns 22.5% in the Acambuco joint venture in Argentina’s northern province of Salta, and its share of production is around 5,200 barrels of oil per day.
However, tensions have simmered this year between the supermajor and Argentine authorities. Buenos Aires clashed with the company over the reform of the country’s hydrocarbon laws in October.
Shell Argentina President Juan Aranguren claimed in an open letter to the Clarin newspaperthat the country’s authorities bypassed private companies during the drawing up of new laws. State-run YPF has denied the claims (see Argentina reforms decades-old petroleum laws, 19 September 2014).
Total – which is Argentina’s second-largest gas producer – has seen its average daily output slip by more than 4%, to 32.4 million cubic metres per day (MMcm/d) in 2014 from 33.78 MMcm/d in 2013 (see Argentina’s two-speed production industry, 10 November 2014).