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Chevron joins Vaca Muerta stampede

US supermajor joins hunt for Argentine shale bounty

US supermajor Chevron is set to kick off its Argentine shale exploration programme this year with two wells targeting unconventional oil and gas prospects in the Vaca Muerta shale formation.

The drilling plans indicate that Argentina’s shale potential is tempting Chevron to start reinvesting in the country. Over the past few years, Chevron sold hefty stakes in its Argentine acreage, reducing its presence in the country. Chevron’s production in the country has reflected this, slipping from 38,000 barrels of oil equivalent a day (boe/d) in 2009 to 27,000 boe/d in 2011. Chevron now holds stakes in four blocks in the area covering the Vaca Muerta shale, but did not say in which blocks it plans to drill this year.

Chevron’s drilling plans add to what is shaping up to be a busy year in the Vaca Muerta. Repsol, the largest acreage holder in the area, will lead the way with plans to drill 20 wells. French major Total plans to drill 10 wells, as does Canadian independent Americas Petrogas. ExxonMobil, Apache and Shell are among others planning to drill in 2012. In total, nearly 100 wells could be spudded in the formation this year.

Talking about a revolution

In early February, Repsol released the results of a Ryder Scott assessment that estimated Vaca Muerta’s reserves and prospective resources to be over 22 billion boe. Repsol said the resource base was large enough to “to reproduce the revolution in non-conventional hydrocarbons seen in the US”. Getting there, however, would require a sustained investment of $25 billion a year over the coming decade to build a new shale-focused industry, according to Repsol. Few see that as achievable, given the challenging operating environment and price controls in place on oil and gas sold in the country.

Nevertheless, explorers are under intense pressure from the government to start shale development. Cristina Fernandez de Kirchner’s government has blamed the industry for falling oil and gas production, which has led to an increasing fuel import bill that topped $9 billion in 2011. Repsol’s Argentine unit YPF has borne the brunt of the government’s campaign against the industry. YPF has been accused of overcharging the government for diesel and jet fuel and has been the subject of nationalisation rumours in government-friendly media.

But YPF is not the only company feeling the heat. Last week, the Federal Organisation of Oil-Producing Provinces warned oil and gas producers in the country that if they didn’t boost output by 15% in the next two years they could lose their licences. The president of the organisation and governor of Chubut province Martín Buzzi said: “We demand an increase of 15% in production. If operators do not comply, we have no problem taking charge of their areas.”

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