Two of the main private companies in the Vaca Muerta basin – Tecpetrol and Shell – coincided in forecasting a vast development of the Neuquen unconventional hydrocarbon fields “for decades to come,” with the subsequent favorable impact in the province and the nation’s economic growth, according to a report published by lacomunidadpetrolera.
Carlos Ormachea, CEO of a company part of the Techint holding, remarked that there is “a great opportunity in terms of world-class resources that will generate cheap energy to improve the competitiveness of all activities in the Argentine economy,” the executive said speaking at a seminar organized by newspaper Rio Negro in Neuquen.
For his part, upstream venture manager for Shell Argentina Maximiliano Hardie stated that Vaca Muerta “as big as Permian (the Texas basin), but with a much higher thickness levels with regards to conventional shales, which is very important and provides very high resource density of 16 trillion recoverable barrels of oil equivalent.”
Ormachea assured that “Vaca Muerta could have a multiplying effect that provides one or two growth points a year for many years to come.” “It is not a single impact, as is the case of the Belgrano Plan, and this added to the investment in infrastructure to lower logistics costs: ports, routes, railways, housing, and gas and oil pipelines,” he added.
The Tecpetrol executive encouraged “developing the gas market because the problem right now is not a lack of resources, that was 4 years ago and the scene has radically changed.”
“The challenge – continued the executive – is determining where to put all the gas that Vaca Muerta can give once the oil barrel hits a price under US$4. At that point, the market will have to think of a more efficient energy source to supply the entire Southern Cone. And being even more ambitious, I see no reason that we cannot compete with the world’s best alternatives, even providing liquefied natural gas.”
Ormachea warned, however, that “for Vaca Muerta to be huge we need to lower costs, without cutting prices and salaries, but rather with a management model that involves more efficiency.”
Along this line, the nation will have to “continue the path toward labor productivity” and improve logistics, given the “huge volumes of material towards the field and then towards consumption centers.”
Hardie also highlighted the need to generate “cost efficiency” in order to develop Vaca Muerta, in addition to “good risk management” (especially in terms of access to capital) and improving security, health, environment, and social license performance.
Vaca Muerta to boost activity levels in 2019
“We stand before a wonderful business potential if these conditions are met,” the Shell directive concluded.
He later anticipated that Vaca Muerta will increase activity levels in 2019-20, both for our industry and the industry overall, which means that we will go from 15 machines to 100 or 150 in 6 to 7 years, and we will have to resolve logistical bottleneck.
Hardie also alluded to the “non-technical risks linked to social conflict” where there is still “much to do”. “We cannot afford to shut down equipment for one day due to cuts, that is unacceptable,” he warned.
Similarly, the Shell executive added, “there is room for improvement with regards to environmental challenges since we are doing things that are not sustainable, as the use of oil blankets (absorbing blankets in case of oil spills) and the disposition for drilling operations cuts.”