A handful of foreign players have followed up on finds made by Repsol YPF before its Argentine assets were confiscated by federal authorities earlier this year, leading to the recreation of YPF as a wholly state-owned company.
Private companies are treading cautiously and corroborating the upbeat assessments of potential presented by Repsol YPF before expropriation and YPF since.
Most were already in Argentina. However, some — such as ExxonMobil and Shell — have entered through farm-in operations.
Canada’s Americas Petrogas is currently fracturing and testing one of three shale oil wells drilled in partnership with US giant ExxonMobil on the Los Toldos block.
“There have been five fractures done on a vertical well there. This is an area with an extremely big pay zone, and the results are very satisfying,” said a source close to the consortium
Americas Petrogas is testing another vertical well with hydraulic fracturing at present — the Huacalera probe — in partnership with Apache.
About 100 wells have been drilled in unconventional horizons in the Neuquen basin over the last 18 months. YPF is responsible for about 80% of this number, sources said.
This is still a drop in the ocean on a shale bed measuring a third of the size of mainland UK, and containing an estimated 21 billion barrels of oil equivalent, according to a report by Ryder Scott, an oil consulting firm.
The 200 metre pay zone means that about 85% of the unconventional wells drilled so far were vertical, but the shift toward horizontal wells and more advanced techniques is beginning.
YPF has reportedly enjoyed spectacular results on two YPF wells featuring multi-fracturing, both in the northern area of Loma La Lata, a huge depleted conventional gas field, where Repsol made its breakthrough discovery in shale.
One of the wells is understood to have produced “impressive” flows of shale oil after no less than 10 hydraulic fracturing operations.
Independent analysis suggests that between $15 billion and $25 billion will be needed to develop the Vaca Muerta shale bed alone, without considering other high potential shales in the same region, such as Agrio and Los Molles.
In Agrio, a younger marine flooded shale, Madalena Austral, has drilled a well and is designing a fracturing operation targeting shale oil.
Americas Petrobras will soon do test flows from hydraulic fracturing on the Totoral block, targeting Vaca Muerta and the deeper — and thicker — Los Molles shale.
Mindful of the fears following expropriation, YPF has embarked on a charm offensive aimed at attracting the investment partners it now acknowledges are needed.
Perceptions about fiscal and contractual risks means Argentina may struggle to create the business environment for rapid growth in its unconventional production. However, any doubts about the quality of the shale beds in the Neuquen basin are receding.
Low gas prices means most efforts are focused on oil, which is especially rich on the Vaca Muerta.
Flows can typically start at about 50 cubic metres — 315 barrels — per day, declining quickly, but stabilising at about 40% of that rate, according to a manager with Baker Hughes.
Chevron, Apache, EOG Resources and Petrobras are among the companies drilling and recently testing the shales.
Shell is about to try fracturing a well, after farming into the Aguila Mora and Sierras Blancas permits last year, and partnering with local outfit Medanito.
Total Austral has also tested production on an multi-fractured unconventional well in the Vaca Muerta dry gas kitchen, north of Loma La Lata. “We tied it into conventional production infrastructure on the Aguada Pichana block, with very good results so far,” said a consortium source.
The French player’s Argentine unit is also starting production, after four hydraulic fracturing operations on a well tapping the oil window on the San Roque block.
Two more vertical wells and another horizontal well are in the budget for 2013.
YPF has held preliminary joint venture talks with Chevron, Apache and Statoil. Discussions have covered matters such as terms, investments, prices and markets, but not yet work programmes.
Some new licensing has taken place, despite the uncertainty in Argentina.
Germany’s Wintershall recently inked new contracts for the CN-V and Ranquil Norte permits in Mendoza province earlier this year.