WoodMac: Vaca Muerta output to double by 2018

Production from the giant Vaca Muerta shale play in Argentina is expected to double by 2018, according to a new development study from research and consultancy firm Wood Mackenzie Ltd.

While a marked ramp-up can be expected by 2020, the study highlights that oil and gas output in 2016 should be moderate with year-over-year production at 10%. WoodMac estimates total capital spending for 2016 to reach $1.2 billion as companies prepare for full development.

Horizontal wells will become the development of choice as operators are increasingly able to target the most productive intervals of the play, the firm says, adding that it anticipates 200 wells will be brought online in 2015 and fewer in 2016 as vertical wells are phased down. Currently 460 wells are producing.

“YPF [SA] and its [joint venture] partners continue to decrease drilling and completion costs aiming to move into ramp-up and development phases,” explained Horacio Cuenca, WoodMac research director for Latin America.

In the Loma Campana block, the horizontal initial production 30-day average is 646 boe/d, up from 443 boe/d in 2014. In the Karnes trough of the Eagle Ford shale in Texas, for example, the first 100 wells’ initial production 30-day average was 420 boe/d, while the average rate today is more than double that total.

Cuenca said that more JV deals will be necessary to fully develop Vaca Muerta as YPF will need outside assistance to develop its 6.3 million acres.

WoodMac adds that the “heavy impact of unions on labor costs and political uncertainty” remain among the largest impediments to international investment.

The US Energy Information Administration estimates the Vaca Muerta to hold 308 tcf of dry, wet, and associated shale gas resources.

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