Rystad: Vaca Muerta pulling itself by the bootstraps to expand amid takeaway concerns

Vaca Muerta, one of the world’s largest oil and gas shale reservoirs and Argentina’s most critical asset in helping propel the country’s hydrocarbons output higher, ended the year with outstanding figures. Record production and impressive well performance advances were met by short-term takeaway constraints as many ambitious commitments to increase capacity are yet to be seen. In terms of crude oil, Vaca Muerta produced 285,500 barrels per day (bpd) in December, an increase of 31% over the same month in 2021. On average, since last year’s start, the play’s shale oil output has increased by about 5,500 bpd each month, raising Vaca Muerta’s oil contribution to the country’s total output from 38% in January to 44% in December.

The narrative for gas production differs from that of oil in that it fluctuates with the seasons, decreasing during summer and increasing during winter. Gas production peaked for 2022 during the Southern Hemisphere winter, in August, reaching nearly 2 billion cubic feet per day (Bcfd). The lowest production was in February, at 1.5 Bcfd. It was the only month where volume was below the peak of 1.55 Bcfd touched in 2021. The share of Vaca Muerta’s gas production to the nation’s total production hit a high of 40% in September, remaining almost unchanged at 39% as of December.

As of the last month of 2022, YPF held a 56% share of total shale oil output in Vaca Muerta, followed far away by Vista Energy at 14%, and Shell at 11%. In terms of gas output, YPF surpassed Tecpetrol in October, with nearly 30% of the total by December, while Tecpetrol’s closely followed at 29%, while Total reached almost 16%.

Companies are adapting swiftly to new technologies, and the geologic potential of the Vaca Muerta formation is comparable to, if not superior, the top US shale fields. Both international and local operators remain optimistic about future investment prospects. As a result, it appears that Argentina will experience a production boom and may become a net hydrocarbon exporter in the short term. However, the development of adequate infrastructure for transporting hydrocarbons presents a pressing obstacle.

The PNK (Presidente Nestor Kirchner) gas pipeline is the most anticipated piece of infrastructure for 2023. It is expected to start production in June, just at the beginning of winter in the southern hemisphere. It promises to first satisfy the nation’s demand during the winter months, reducing its gas imports from Bolivia. The first phase, due by June 2023, will allow gas transportation of about 388.5 million cubic feet per day (MMcfd) (11 million cubic meters per day). The second phase, due by the winter of 2024, will increase the gas takeaway capacity by the same amount as the first phase. On the oil side, the earliest project to increase takeaway capacity is the re-opening of the OTASA pipeline, which has been inactive since 2006. It will enable the movement of 50,000 bpd to Chile in its first phase and 107,000 bpd in its second phase. The OTASA phase 1 is to start around May. A caveat here is that the Chilean refinery that will take the oil from OTASA requires oil with 35 API or lower, which the shale oil from Vaca Muerta cannot provide (40+ API). Hence, the oil flowing in this pipeline will be a mix between shale and oil from conventional reservoirs in the vicinity.
Source: Rystad Energy Shale Analytics

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