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Argentina's Tecpetrol plans 150-well Vaca Muerta gas program

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Supply and demand

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Buenos Aires — Tecpetrol, the fifth-biggest oil producer in Argentina, plans carry out a large scale development program in the Vaca Muerta shale play, targeting natural gas, the country's government said Thursday.

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The country's president, Mauricio Macri, said he would meet with Tecpetrol CEO Carlos Ormachea at 4 pm local time (1900 GMT) in Buenos Aires to announce the plan, according to a brief statement.

The plan is to drill 150 wells over the next three years on Fortin de Piedra, a block in the wet gas window of Vaca Muerta, one of the world's biggest unconventional plays.

The government said the proposed investment comes on the back of a hydrocarbon reform program that has extended licenses for developing unconventional plays by 10 years to 35 years, and the extension of gas pricing incentives program.



Earlier this year, the government extended the pricing incentives so that producers with approved investment plans would receive $7.50/MMBtu at the wellhead for output through 2018, $7/MMBtu in 2019, $6.50/MMBtu in 2020 and $6/MMBtu in 2021, before market pricing takes effect in 2022.

The average wellhead price in 2016 was $4.76/MMBtu for YPF, the state-run company that produces 34% of the country's 124 million cu m/d of gas, according to company records.

Since taking office in December 2015, the Macri administration has sought to rebuild gas production by improving the profit potential for producers.

The goal is to end shortages and narrow an around 30% deficit in the 130-185 million cu m/day consumption that has been met by swelling imports over the past decade.

The government has set a target of increasing production to 185 million cu m/d in 2025, making it possible to scale back imports and increase exports.

In response to the pricing incentives and other efforts to cap tax pressure, lower drilling and completion costs and build up infrastructure capacity, Chevron, YPF and four other companies vowed early this year to invest a combined $5 billion in Vaca Muerta this year, followed by $15 billion a year for an undisclosed period.

Total was the first to announce its spending plans, at $500 million/year. Shell has committed investments of $300 million/year through 2020, including in a proposed new pilot in Vaca Muerta. YPF has said it plans to invest $450 million in exploration this year, including in launching 10 new Vaca Muerta pilots.

Tecpetrol produces 2.7% of the country's 511,000 b/d of oil and 2.9% of its gas, according to the Argentine Oil and Gas Institute, an industry group.

--Charles Newbery, newsdesk@spglobal.com

--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com