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Americas Petrogas find extends Vaca Muerta potential

Argentine focused explorer has discovered a light find at the Totoral Block

Americas Petrogas, an Argentine-focused independent explorer, has opened up a previously unproven section in the south-west of the multi-billion barrel Vaca Muerta shale play with a light oil discovery at the Totoral Block. “This new exploration discovery is very exciting for Americas Petrogas as it adds significant exploration upside to a very large area where the Vaca Muerta formation could be produced at relatively shallow depths,” the company’s chief executive Barclay Hambrook said in a statement.

The LHo.x-1 well, which was drilled in the less-explored Picun Leufu sub-basin area of the shale play, was drilled in mid-2012. The well encountered a 666-foot oil-rich section of the Vaca Muerta shale. After a three-stage hydraulic fracturing operation, the well flowed at between 300 and 600 barrels a day (b/d) over a 20-day period, in line with production tests in other sections of the Vaca Muerta shale. The well has now been shut in for further testing, the company said.

Americas Petrogas operates the project with a 90% stake, and province-owned Gas y Petroleo del Neuquén owns the remaining 10%.

The announcement comes as Americas Petrogas, which has built up the third largest acreage position in the Vaca Muerta, behind YPF and Pluspetrol, is on the hunt for new joint-venture (JV) partners and has said that it is open to takeover offers. “We are looking at potential joint ventures with some pretty big companies,” Hambrook told Bloomberg last month. “Our biggest risk is probably staying an independent company.. I think the writing is on the wall,” he added.

The company signed a joint venture agreement with US independent Apache covering the Huacalera Block in January 2011. In August 2011 it signed a farm-out deal with US supermajor ExxonMobil that covered the Los Toldos 1 and Los Toldos 2 blocks.

Americas Petrogas said the discovery proved the potential of a region that covers not just Totoral, where the discovery was made, but the nearby Yerba Buena and Bajada Colorada blocks as well. The company is likely looking for partners to help explore the area, which covers about 1.13m acres in the Patagonian province of Neuquén.

New investors in the Vaca Muerta play, though, have been hard to come by since the government nationalised Repsol’s majority stake in YPF in May last year. A host of major international players piled into Vaca Muerta in 2011, but there have been no new deals since the nationalisation and investment has slowed to a trickle.

YPF and government officials have made high-profile trips to China, the Middle East, Europe and North America in search of partners to help it carry out an ambitious $40bn development programme, but it has struggled to find backers. Chevron and the Chinese-British-Argentine joint venture Pan American Energy have signed preliminary shale development agreements with YPF, but have not finalised those deals yet.

The government hopes that recent moves to raise regulated domestic oil and gas prices will help attract new investors. In January, it raised the amount oil companies could earn from oil exports from $42 a barrel (/b) to $70/b of oil exported, assuming oil prices remain above $80/b. And in February the government tripled the amount producers could earn for natural gas production, from around $2.50 per million British thermal units (Btus) to $7.50/m Btu. Foreign investors have long complained that low prices had discouraged investment in exploration and development.

In 2011 the US Energy Information Administration said the Vaca Muerta shale could hold 774 trillion cubic feet of technically recoverable gas resources, the third largest in its survey behind the US and China. And before its majority stake in YPF was nationalised, Repsol said that its section of the shale play, which covered about a third of the formation, could hold as much as 22.8bn barrels of oil equivalent, most of which was light oil and condensate.

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