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ExxonMobil focusing on sustainable production in Argentinian shale

Buenos Aires — ExxonMobil is taking a comprehensive approach toward the exploration and development of its assets in Vaca Muerta, with the aim of achieving sustainable production growth from Argentina's biggest shale play, the company's country manager said late Wednesday.

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"We are doing the evaluation of the assets," Daniel De Nigris, CEO of ExxonMobil Argentina, said on the sidelines of the Argentina Oil & Gas Expo, which ends Thursday in Buenos Aires. "We are evaluating the options for potential developments."

ExxonMobil is working on this with XTO Energy, a subsidiary that specializes in the drilling of unconventional oil and natural gas. ExxonMobil transferred all of its unconventional assets in Argentina to XTO Energy at the start of 2015, De Nigris said.

"We still don't have a specific next step," he said about plans for shifting into the pilot production stage and then the mass development of its assets in the play, one of the world's largest and the first to produce shale oil outside North America.

"The step is the detailed evaluation of the potential of our assets, the existing infrastructure in the blocks," as well as how to achieve the efficiency and productivity needed to cut drilling and completion costs to economically viable levels, he said.

De Nigris added that the evaluation is important for understanding not only the behavior of the play for adequate well designs and locations, but also for how much capacity, for example, there is to move production out of the fields.

"This takes time," he said.

ExxonMobil has several blocks in the north of the Neuquen Basin, which is farther away from the concentration of pipeline and other infrastructure capacity in the south of the basin, where Chevron and Argentina's state-run YPF have shifted into shale oil production, Total is producing its first shale gas, and Shell is poised to start a shale oil pilot.

Nevertheless, ExxonMobil has had good results in its exploratory drilling. The company has found shale oil and gas on Bajo del Choique and La Invernada, two adjacent blocks.

While the results were "very good" on those adjacent blocks, De Nigris said "there is potential on all of its blocks" in the play, which spans all the windows, from volatile oil to black oil, wet gas and gas.

Tomas Hess, vice president of external affairs for ExxonMobil Exploration Argentina, said ExxonMobil's approach for Vaca Muerta involves comprehensive planning.

"To be efficient we have to evaluate each of the blocks and then decide how the pilot will be," he said. "But we are still in the stage of exploration and evaluation."

De Nigris said the comprehensive approach is more important than rushing into production.

"I believe that more than working to have the development of Vaca Muerta today, we have to work so that the development is sustainable for 40 years," he said.

Elsewhere in the play, ExxonMobil is working as a partner with YPF and Gas y Petroleo del Neuquen, the state oil company of Neuquen province, on Loma del Molle and Pampa de las Yeguas.

YPF, as the operator of the block, has drilled vertical wells on the blocks and is poised to drill a horizontal well on Pampa de las Yeguas, De Nigris said.

Argentina is betting on the development of Vaca Muerta to turn around a 20% decline in oil and gas production over the past decade that has slashed energy exports and pushed up imports.

Argentina holds 27 billion barrels of shale oil resources and 802 Tcf of shale gas, far more than its proved conventional reserves of 2.5 million barrels of oil and 12 Tcf of gas, according to the US Energy Information Administration.

--Charles Newbery,
--Edited by Jason Lindquist,