Argentina's YPF to widen drilling to north of Vaca Muerta shale play

Argentina's state-backed energy company YPF plans to drill its first two wells in a northern section of Vaca Muerta, a move aimed at widening development of the shale play to fuel oil and natural gas production growth over the long term, CEO Sergio Affronti said May 31.

"We have many development opportunities in the province," he said after meeting with Mendoza Governor Rodolfo Suarez in the western province, according to a statement by the provincial government.

Affronti said the investment of $17 million in the two exploratory wells is part of the $335 million that YPF, the country's biggest oil and gas producer, will invest this year in Mendoza, the brunt of which will go into conventional fields.

The exploratory drilling, which is due to start in October, will be on YPF's CN-VII and Paso de las Bardas Norte blocks in the south of Mendoza province near the border with Neuquen. If the results are promising, the company will drill 150 wells in the blocks.

YPF is the busiest developer in Vaca Muerta, with most of its hydraulic fracturing so far concentrated in the oil window in the central eastern section of the play in Neuquen province. YPF's three biggest projects in that hub are now among its biggest sources of oil, led by Loma Campana, a joint venture with Chevron. Loma Campana is producing about 62,000 b/d of crude, or 28% of its total oil output of 222,000 b/d in the first quarter of this year, according to company data.

Affronti said he told the governor of Mendoza that Loma Campana's development has helped prepare YPF for "what we are going to be drilling this year in the Vaca Muerta in Mendoza."

Governor Suarez said he wants to replicate the Vaca Muerta development in Neuquen in his province.

"If the exploration yields positive results, it will lead to an investment that will generate a very important transformation for all Mendoza," Suarez said.

Vaca Muerta is driving oil and gas production growth in Argentina. The formation's output, which began in 2012-13, now accounts for 38% of the country's total oil output of 578,000 b/d and 32% of the 127 million cu m/d in gas, according to Energy Secretariat data. YPF is the biggest oil and gas producer in Argentina, with a 47% share of crude output and 29% of gas, the data show.