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Production from the seven most advanced developments in the Vaca Muerta play (covering only 8% of play acreage), is expected to increase by 43% in 2017 to 77 kboed, and to double 2016 levels by 2018 to 113 kboed, according to our new Vaca Muerta Development Study.
"Our scenarios from the study demonstrate that production could peak between 0.7 and 1.25 mboe/d by 2031," explains Elena Nikolova, Latin America Upstream Oil and Gas Research Analyst.
Building interest in the gas window
Since January 2017, new pilot and development agreements in the Vaca Muerta have been announced with increased frequency, demonstrating a significant uptick in interest in the play, especially in the gas window. In our latest Crude for Thought podcast, host R.T. Dukes speaks with Nikolova and Latin America Research Manager Maria Cortez about the play's productivity and how it compares to analagous US onshore developments.
Vaca Muerta Development Update with Elena and Maria
Companies with gas acreage are exposed to the greatest upside by capitalizing on gas price incentives and attractive well performance. While still in the early days of development, Vaca Muerta well performance is already on par with some US shale plays that have thousands of producing wells.
Commitments since January 2017 total over US$3.5 billion, marking an inflection point in the play's ramp up. The largest announcement this year has been from Tecpetrol at Fortin de Piedra where US$2.3 billion has been committed to drill gas wells and build infrastructure.
Horizontal wells and project economics
To fund play-wide development, we estimate that at least 15 times current annual capital levels are needed. Nikolova asserts that the government is taking steps to address several above ground concerns. The labour union and price agreements finalized earlier in the year have provided enough flexibility and pricing predictability to encourage operators to commit to new pilots.
In terms of drilling activity, the Vaca Muerta has transitioned to horizontal mode, according to the study. We expect future development to be through horizontal wells with laterals up to 2,500 metres. "Cost reductions are a key focus for operators and our type curves heavily reflect YPF's cost achievements," explains Nikolova. "YPF has significantly brought down costs to US$8.2 million in Q4 2016. New entrants may be challenged to match YPF's cost structure, but logistics and proppant improvements can help bring costs down across the basin."
Can Vaca Muerta compete with US shale?
The study also examines how the Vaca Muerta can compete with the best US shale plays. Findings show that as Argentinian operators continue to move up the learning curve, strong well performance and lower costs can unlock scale comparable to that of US shale plays. "Vaca Muerta operators are still in the early stages of the learning curve. Production gains driven by drilling speed and completion intensity in the US will materialize in Argentina, as more and more operators enter the play," concludes Nikolova.
Well Analysis Tool: filter and download tight oil and shale gas data
We prepared much of our Vaca Muerta research with data derived from our proprietary well analysis tool. It contains more than 4 billion data points, including cost analysis, historic figures dating back nearly 100 years, in-depth metrics on specific plays, and a breakdown of more than 2.6 million wells. Data and interactive mapping capabilities provide users with insights on well production and performance, potential acquisitions and opportunity valuations, competitor benchmarking, future drilling activity, and more.
Vaca Muerta development study 2017
Our Vaca Muerta development study is available for purchase. Can the Vaca Muerta compete with the best US shale plays? Findings from our latest well-by-well analysis indicate it can. As Argentinian operators continue to move up the learning curve, strong well performance and lower costs can unlock scale comparable to US shale plays. We forecast that just seven of the most advanced developments, representing only 8% of play acreage, will produce over 400,000 boe/d by 2025. Our scenarios are also informed by recent, high-performance type curves intended to showcase the further upside waiting to be realized. Improvements in logistics and service capacity can only improve well economics and further drive play scalability. An overview of current company holdings across the gas, condensate and oil windows along with drilling activity trends informs investors on the best play entry strategies. We conclude with multiple scenarios analyzing the entire play’s full production potential.