Longer, more productive laterals are driving down development costs and boosting production
Wintershall has launched its second pilot project in the Vaca Muerta shale in Argentina. The German company said it had started drilling the first of three horizontal wells on its wholly owned Bandurria Norte block in the southwestern province of Neuquen. “The Argentinian shale formations are very promising,” said Gustavo Albrecht, managing director of Wintershall Energia.
Wintershall, a unit of German chemical giant BASF, is the latest company to launch a pilot in Vaca Muerta, as the introduction this year of tax caps, pricing incentives and measures to cut labour costs improve the potential for putting the resources into production and making a profit. The Argentine and Neuquen governments, too, have vowed to build and improve highways, railroads, pipelines and ports to reduce logistics costs for moving inputs into the fields and products out.
In comments to Neuquen Governor Omar Gutierrez, Wintershall executives said the Bandurria Norte pilot would cost US$120 million. Each well will be drilled for 1,500 metres with 15 frack stages, and the results should be available in February 2018, according to a statement by the provincial government.
Bandurria Norte is adjacent to Aguada Federal, where Wintershall launched its first pilot project in Vaca Muerta in 2015. The project involves the drilling of four horizontal wells, with the results due to be published by early 2018. Wintershall could invest up to US$2 billion in developing Bandurria Norte’s shale resources if the results of the pilot project are positive, the Neuquen government said.
In its statement, Wintershall said the Vaca Muerta resources in the 107 square km block are located at depths of 2,700-3,000 metres.
The German company said it was also investigating the shale potential of the Aguada Pichana and San Roque blocks, both of which will target Vaca Muerta. These and its other blocks are located close to Loma Campana, the biggest source of shale oil and gas to date in the play.
Ten-dollar target Meanwhile, YPF is starting to drill longer horizontal wells in the play, as it looks to slash development costs by more than 20% over the next 18 months. The company has set a target of reaching US$10 per boe by the end of 2018 from a current US$13 per boe in Vaca Muerta, Pablo Bizziotto, the executive manager of unconventional resources, said last month at the SPE Latin American and Caribbean Petroleum Engineering Conference in Buenos Aires. “We are going to achieve this with longer wells after having reached a level of confidence and knowledge with horizontals of 1,500 metres,” he said.
The company has focused on 1,500-metre horizontals, spending the equivalent of US$32 per boe in 2015. But as it has gained more knowledge of the play, it has reduced the development costs to US$13 per boe, Bizziotto said. For example, he said the company had cut drilling and completion costs to US$7.5 million on 1,500-metre horizontals and with up to 20 frack stages. That is down from US$16 million in 2012, according to company data.
In the future, the company will shift its focus from drilling and completion costs to development costs based on barrels of oil equivalent. That is because it will be extending laterals, which cost more but are also more productive. Bizziotto said YPF had started drilling 2,500 metre laterals with more than 20 frack stages, and in the second half of this year it aims to do a 3,200-metre lateral with 40 frack stages. The latter will likely will cost US$12-15 million for drilling and completion.
To achieve further reductions in costs, the company is working on ways to move inputs, in particular frack sand, more cheaply to the fields, including by seeking lower taxes, Bizziotto said. YPF is the busiest operator in Vaca Muerta, where it is producing around 65,000 boepd, mostly through a joint venture with Chevron.