YPF, Argentine state-run oil company slashes drilling costs

YPF

Argentina’s state-run oil company YPF has drastically cut production costs and is completing wells faster.  

YPF completing wells faster, cheaper

YPF, Argentina’s state-run oil company has slashed costs for horizontal drilling and cut the time required to complete new wells, according to company chairman Miguel Gutierrez at the CERAWeek energy conference in Houston.

Gutierrez says the company cut drilling costs by almost half, from about $17 million to around $8 million per well.  The company has also more than halved the time it takes to complete a new well, from 40 days to 15.

The new efficiencies have pushed break-even costs to below $40 per barrel, significantly helping the South American country which has been struggling to attract capital since the decline in crude prices began in 2014.

Argentina is home to the Vaca Muerta formation, located in the Neuquén Basin in west central Argentina.  The area is believed to hold the largest shale deposits in the world.

The Energy Information Agency estimates the total recoverable hydrocarbons from Argentina’s Vaca Muerta formation to be 16.2 billion barrels of oil and 308 trillion cubic feet of natural gas.

To encourage industry Argentina recently changed its subsidy program to offer producer $7.5 per million BTU of natural gas produced through 2020.

 

“It’s competitive, especially compared to the United States,” Gutierrez told Reuters on the sidelines of the conference.

Despite the vast reserves in the Vaca Muerta formation, a lack of production has left Argentina short on oil and gas supplies and even if producers bumped up production, imports would still be necessary.

“For quite a considerable time, Argentina will be importing LNG,” Gutierrez added. Last year, Argentina had to significantly increase its LNG imports.

Along with the inland Vaca Muerta, Argentina is also exploring opportunities for deep-water offshore oil production. Gutierrez says the process is underway to explore a new area, with work expected to begin in April.

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