Argentina’s CGC to start Vaca Muerta drilling while boosting heavy crude output

Argentinian oil and natural gas producer Compañía General de Combustibles is preparing its first Vaca Muerta shale oil project to boost output, while betting in the short term on heavy crude output in southern conventional fields to tap rising demand — and prices — for the product, Chief Commercial Officer Emilio Nadra said June 11 in an interview.

CGC, as the company is known, farmed into a partnership in March with state-run YPF to develop Aguada del Chañar, a field in Vaca Muerta's oil window.

"It is mostly an oil field," he told S&P Global Commodity Insights on the sidelines of Econojournal's Midstream & Gas Day in Buenos Aires. "There is very little gas."

This will diversify the company's production mix, which has long been concentrated on conventional fields in the far south of the country. CGC and its CGC Energía unit produce a combined 3,000 b/d of oil and 5.7 million cu m/d of gas, according to data from the Argentina Oil and Gas Institute, an industry group.

By comparison, Aguada del Chañar is producing 12,600 b/d, while YPF's biggest shale oil blocks are producing as much as 93,000 b/d, according to the data, a sign of the potential for CGC.

"We plan to grow in Vaca Muerta," Nadra said.

Vaca Muerta is one of the world's largest shale plays, and it is attracting more investment in development activities as well as the construction of takeaway capacity, given the huge export potential. Argentina is exporting around 200,000 b/d out of a total output of 750,000 b/d, with 500,000 b/d consumed domestically on average. Yet with Vaca Muerta alone expected to surpass 1 million b/d in 2030, this is bolstering the export potential.

Heavy crude demand

CGC is also targeting production growth in the short term in southern Argentina, where it is one of the biggest oil and gas producers following the acquisition of the Argentinian business of China's Sinopec in 2021.

These fields in the San Jorge Gulf basin have heavy crude reserves yet to be developed, Nadra said.

"It is a crude that is in short supply for local refining," he said.

Argentina's refineries have been making changes over the past few years to run more light sweet crude as output grows in Vaca Muerta, Nadra said.

As part of this blend, refiners need to mix in some 30% heavy crude, and this is opening up an opportunity in the short term to meet this demand, he said. This demand, too, is driving up the price of this product, Nadra added.

"It is better to produce more now," he said.

CGC is owned by Corporación América, an Argentinian holding company with interests in airports, energy and technology.