YPF, the largest oil and natural gas producer in Argentina, is focusing on shale oil for production growth as a glut slows natural gas output, managers at the state-backed company said Friday.
We have shifted our focus to accelerating our shale oil developments in Vaca Muerta, the country's largest shale play, said Sergio Giorgi, YPF's vice president of strategy and business development.
Giorgi spoke on a conference call with investors after the company reported late Thursday that its overall hydrocarbon production dropped 11.5% to 486,500 barrels of oil equivalent a day in the first quarter from 549,600 boe/d in the same quarter a year ago, dragged down by a 20.6% plunge in natural gas production to 34.7 million cubic meters a day from 43.7 million cu m/d.
Oil production also fell, but only 0.5% to 226,400 b/d from 227,600 b/d, while output of natural gas liquids dropped 11.2% to 41,700 b/d from 47,000 b/d. Despite the decline, Giorgi said YPF is sticking to its earlier target of a 2-3% drop in overall production this year. It is challenging, but doable, he said.
YPF recently started the full-scale development of Bandurria Sur with Schlumberger and La Amarga Chica with Malaysia's Petronas in the oil window, building on its experience in Loma Campana, a partnership with Chevron. Loma Campana was producing most of its net 30,500 b/d of shale oil in Q1, up 63.3% on the year, which helped it increase its total net shale output by 45.1% to 71,100 boe/d in Q1 from 49,000 boe/d, according to the company's latest financial results.
To extend the growth, the company is widening its testing in the oil window, now concentrated in the southeast of the play, and building treatment and transport infrastructure, helping to offset declines at its many maturing conventional oil fields around the country.
The good news is that our shale oil production growth is offsetting the conventional production decline, and we expect this trend to continue, said Ignacio Rostagno, manager of investor relations.
YPF is running six shale oil pilots and expects to go into full-scale development on two of them in 2020 and 2021. It is working with Shell on the Bajada de Anelo block and with a consortium of France's Total, Germany's Wintershall and BP-backed Pan American Energy on the San Roque block.
Another pilot is on its 100%-owned Loma La Lata Oeste block, which is next to Loma Campana, while two blocks in the north of the play -- Bajo del Toro with Norway's Equinor and Chihuido with Chevron -- are being tested with the idea of going into full development starting as soon as 2021.
This is leading to an increase in drilling, and the company expects to take its Vaca Muerta rig count to 18 by the end of the year, up from 14 in Q1, Rostagno said.
The target, he said, is to drill more than 100 horizontal wells this year, mostly for oil.