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In partnership with Qatar Petroleum

ExxonMobil said Tuesday it will proceed with a long-term oil and natural gas development project on a block in Argentina, targeting the Vaca Muerta shale play.

The US-based company plans to drill 90 wells to take production to 55,000 b/d of oil equivalent in five years from the Bajo del Choique-La Invernada block in the Neuquen Basin in the country's southwest, the company said in a statement.

As part of the project, it will build a central production facility and export infrastructure.

"We are encouraged by the excellent results of our Neuquen pilot project and look forward to increased production through this significant expansion," said Staale Gjervik, ExxonMobil senior vice president of unconventional.

ExxonMobil is the latest company to take the step from pilot to mass development in Vaca Muerta, one of the world's biggest shale plays. The development of the play, still in less than 4% of the total acreage, is already driving a recovery in the country's oil and gas production after years of decline, building a surplus that is leading companies like Argentina's state-backed YPF, Shell and Total to start export.

Argentina's total oil production rose 4% to 507,000 b/d in April year on year, led by a 64% surge in shale oil output, while gas output increased 2% to 132 million cu m/d over the same period, driven higher by a 107% surge in shale gas, according to the latest Energy Secretariat data.

LONGER-TERM PLANS

ExxonMobil said that if this first development in the play is successful, it could take production to 75,000 boe/d in a second phase, the timing of which it said would depend on business and market conditions.

The company got a 35-year concession for the block in 2015 and its exploration since has yielded three producing wells, with another three moving into production. The company put a production facility, oil terminal and gas pipeline into operation in 2017, and recently connected its gas production to the Pacific Gas pipeline by a 16-inch-diameter pipeline.

ExxonMobil, which is working on the project in a 70/30 partnership with Qatar Petroleum, didn't provide estimates on potential oil and gas exports. However, with the country already meeting most of its demand out of current production, exports are expected to gain.

Most of the producers in Vaca Muerta are starting to export to Chile, which has increased its imports to around 6 million cu m/d this year from virtually zero last year. Chile is expected to continue importing more gas as it seeks to phase out the use of coal for power generation.

The other regional markets are Brazil and Uruguay, but there is so much potential production in Vaca Muerta that companies are looking at exporting LNG over the long term, targeting expected demand growth in Asia. YPF sold its first LNG cargo -- 30,000 cu m -- this week on the spot market, and plans to take shipments to a regular 2.5 million cu m/d in the second half of this year.

The Energy Secretariat has estimated that Vaca Muerta could lead a doubling of the country's oil production to 1 million b/d and gas to 260,000 cu m/d in 2023, allowing oil exports to surge to 500,000 b/d and gas to 80 million cu m/d by that year.

-- Charles Newbery, newsdesk@spglobal.com

-- Edited by Gail Roberts, newsdesk@spglobal.com