Chevron to build shale pilot in Neuquen Province
The California-based super major Chevron Corporation (Chevron) and YPF from Argentina signed Heads of Agreement to spent $1.24 billion capital expenditure to explore and develop the shale oil and gas in the Vaca Muerta Basin within the Neuquen Province in Argentina.
Chevron is operating in Argentina for many years where it produces currently 21,000 barrels of crude oil and 4 million cubic feet of natural gas per day.
This agreement comes at a critical period for Argentina as it should start to import natural gas and refined products although it is recognized to hold ones of the largest reserves in the world for unconventional oil and gas.
With 774 trillion cubic feet (tcf) of recoverable reserves of unconventional gas, according to the US-based Energy Information Administration (EIA), Argentina has joined the top three largest countries in the world after USA and China.
Unfortunately the nationalization of Repsol interests in YPF in March 2012, the export tax policy have delayed all the investments to develop these reserves while the domestic consumption of oil and gas was growing and leading Argentina to plan import of natural gas and refined products in order to meet the local demand.
In order to move out of this situation, Argentina made major decisions.
In January 2013, YPF signed a first agreement with China National Offshore Oil Corporation (CNOOC) through its 50% owned Bridas subsidiary to invest $1.5 billion in the Vaca Muerta Basin.
In parallel, Argentina voted a new export tax system to motivate foreign companies to come back and speed up the exploration of the shale gas and tight oil, especially in the Neuquen Province.
In following, in April 2013, Dow Chemical (Dow) introduced a new business model in proposing to YPF to partner upstream in the development of the shale gas and downstream in the petrochemical sector.
Chevron and YPF to develop Vaca Muerta in phases
With Chevron, the deal is to invest $1.24 billion capital expenditure in two phases.
The first phase is at Chevron expenses to spend $300 million in a pilot project to drill 100 wells in 5,000 acre of the 96,000 acre of the Loma La Lata and Loma Campana concession in the Vaca Muerta Basin of the Neuquen Province.
If successful, Chevron and YPF will then invest jointly in the second phase and ramp up the number of wells in their Loma La Lata and Loma Campana concession.
To become self-sufficient, Argentina should drill between 2,500 and 3,000 additional wells.
By 2017, YPF is targeting to drill with BP, CNOOC, Chevron, and Sinopec, more than 1500 wells to produce 50,000 b/d of crude oil and 3 billion cf/d of natural gas.