As the world seeks to recover from its second energy shock in less than 5 years, this time tied to the US–Israel conflict with Iran and the latter’s attempts to disrupt flows through the Strait of Hormuz, basins removed from geopolitical risk are drawing renewed attention. Among them is Argentina’s Vaca Muerta Shale, which is the top unconventional producing region outside of North America.
Argentina produced nearly 882,000 B/D of crude in April, according to government data, with about 70% coming from unconventional resources in the Vaca Muerta, which covers some 12,000 sq miles. The figure is about 11% higher than last year’s average and marks a new production record for the country.
Some analysts and government officials expect the rapid output growth may mean Argentina joins the 1-million-B/D club as early as this year.
Aside from the fact that oil consumers have learned once again how fragile regional supply chains can be, the Argentine shale play is expected to play an increasing role in backfilling the depletion of the world’s conventional resources.
Majority state-owned YPF and the country’s top producer with a total output of 271,000 B/D is making a big bet on helping that come to fruition. In May, the company announced plans to spend $25 billion over the next 15 years. The chief goal of the capital deployment plan is to boost the company’s Vaca Muerta production from around 205,000 B/D to 240,000 B/D by 2032 with more than 1,100 new wells. All the new oil from those wells is intended to support future export capacity. YPF believes that its investment will return around $6 billion in new annual revenue.
The growing production and infusion of new investments have some believing that a true “shale revolution” is on the horizon for Argentina. This includes analysts at Wood Mackenzie, who recently compared the situation in the Neuquén Basin, home to the Vaca Muerta, to Midland, Texas, circa 2010.
Despite seeing average well costs that are around 50% higher than those paid by US shale operators, Wood Mackenzie reports that the rock quality is so good that breakeven prices in the play are comparable to US plays, at around $35/bbl for crude and $2/Mcf for gas.
The drivers for the higher costs are not surprising. They include a smaller and less competitive service sector, along with higher reservoir temperatures than US operators deal with, which require higher-spec equipment and supplies.
The optimism behind the Vaca Muerta comes even as big oil companies and early entrants, including ExxonMobil, Equinor, and Petronas, have divested. Picking up the pieces left behind were mostly domestically focused oil companies.
But it should go without saying that technology and international partnerships are going to play a big part in the continued success of the region.
In April, we learned that Houston-based Halliburton was awarded a multibillion-dollar deal from YPF to supply some of its latest and greatest fracturing tech. This includes its Zeus electric fracturing systems and the company’s automated pumping service, which first debuted in the Permian Basin, where it increased stage efficiency by 17% while reducing human-directed input by 88%.
New papers from the SPE Latin American and Caribbean Petroleum Engineering Conference (LACPEC) in Rio de Janeiro held in June highlight some of the ongoing operational improvements.
Halliburton showed in SPE 231729 how the use of rotary steerable systems (RSS) can significantly improve drilling times of lateral sections. In one case study, the drilling rate averaged about 1,600 m/day. This translated to around a 30% uptick in rate of penetration (ROP) against conventional steering techniques, or a reduction of 2 days in typical lateral drilling time.
Authors from Baker Hughes also shared new insights on drilling progress in the Vaca Muerta. In SPE 231657, the service company reported that a new PDC bit design increased ROP in a horizontal well by 36% by reducing the effects of troublesome vibrations in challenging drilling scenarios. The new bit design worked in conjunction with RSS technology and was also described as a potential step toward fully autonomous wellbore placement.
Halliburton is also trying to bring autonomous drilling operations to the Vaca Muerta. Its paper on the subject, SPE 231727, outlines the deployment of automated directional drilling technology coupled with RSS, which it said improved wellbore trajectory. This, in turn, led to better casing runs and completion execution. The new technology also mitigated bottomhole assembly (BHA) problems that resulted in the ability to drill horizontal sections in a single run, which eliminated the need for planned BHA replacement runs.
Pan American Energy, the second-largest producer in Argentina, also presented new insights at LACPEC on the production end of the spectrum. SPE 231702, authored along with experts from Baker Hughes, shows how the company developed a methodology to install electrical submersible pumps (ESPs) in certain areas to accelerate early-time production and achieve better reservoir management.
Where the ESP strategy worked, Pan American reports a 46% improvement in incremental production over sucker-rod pumps; however, not all areas were ideal for early-time use of ESPs. The difference maker appears to be that the better the rock—i.e., the most productive sections and those with lower gas-to-oil ratios—were where ESPs delivered the most, with a payout period of just 2.6 months, compared with the base case.
As operational gains add up and new technologies are deployed, the profile of the Vaca Muerta appears to be on a solid trajectory for continued growth. Whether or not it becomes “Permian South” is more debatable, but it does seem clear that Argentina’s dream of becoming an important source of global crude supply is coming true, with some projections placing it among the top 20 oil exporters by 2030.
For Further Reading
SPE 231727 Automated Drilling Platform for Horizontal Wells in Nonconventional Fields Utilizing Rotary Steerable System (RSS) Technology by F. Pulgar and D.H. Munoz, Halliburton.
SPE 231729 Fast Drilling Achieving High-Efficiency Horizontal Drilling and Performance Improvement with Motorized RSS in Vaca Muerta, Argentina by N.F. Leon, Halliburton.
SPE 231657 From Theory to Field: Validating New PDC Bit Design Leads to 36% Increase in Penetration Rate and Reduces HFTO for Unconventional Reservoir in Argentina by J.A. Hernandez, Baker Hughes/La Universidad del Zulia; A. Kueck and M. Savage, Baker Hughes; and A. Belloso, Baker Hughes/La Universidad del Zulia.
SPE 231702 Lessons Learned in ESP Application in Argentina Unconventional Field by M. Ballarini and M. Vona, Pan American Energy; and M. Orozco, V. Devincenti, A. Frávega, and R. Teves, Baker Hughes.
