(Bloomberg) --Exxon Mobil Corp.’s historic decision to pursue large-scale shale drilling outside of North America ushers in a new era for Argentina’s most-promising oil and natural gas prospect.
The world’s biggest oil explorer by market value unveiled a five-year plan Tuesday to extract the equivalent of 55,000 barrels of crude and gas a day from Argentina’s Vaca Muerta region. What’s more, if those barrels turn big enough profits, Exxon said it’s prepared to pursue a second phase that would lift output to 75,000 barrels a day, a quantity with an annual value of $1.7 billion at current oil prices.
Until now, intensive shale drilling has been confined to the U.S. and Canada in places like Texas, New Mexico, North Dakota and British Columbia, as attempts to transplant American shale expertise to overseas theaters failed. For Argentina, a boom in shale production would inject billions of dollars into Latin America’s No. 3 economy and begin to weaken its dependence on imported energy.
Exxon didn’t disclose a cost estimate but said development of a tract known as Bajo del Choique-La Invernada will include construction of a production facility and infrastructure to connect the region to pipelines and refineries. The company plans to drill 90 wells during phase one.
Two Years of Work
Argentine Energy Secretary Gustavo Lopetegui foreshadowed Exxon’s blueprint in late April when he said in an interview that the American oil titan was on the cusp of an $800 million-a-year development plan for the region.
Exxon’s announcement was the culmination of more than two years of exploration and assessment work under a 35-year government concession. Exxon rose 0.3% to $75.16 at 3:15 p.m. New York trading. The shares have risen 10% this year.
To be sure, Exxon’s Argentine prospects are a far cry from its ambitions in the Permian Basin of West Texas and New Mexico. The company is targeting daily output of 1 million barrels by 2024. By comparison, a successful ramp up to 55,000 barrels a day in Argentina would account for just 1.4% of the driller’s total worldwide output.