While oil production has been going strong in Argentina’s Neuquén Basin for the past 100 years, geologists with Shell and YPF say the region’s true hydrocarbon potential has yet to be discovered.
“In the Neuquén Basin today, our team is 100-percent focused on Vaca Muerta, which is what is progressing most strongly in development. There is potential in other shale plays in Argentina, but they are still in the exploratory phase,” said Luciano Monti, shale studies manager at YPF.
“In recent years, activity has been focused on the Vaca Muerta unconventional play; however, there are many other plays still to be exploited. Many plays of the Agrio and Los Molles petroleum systems have been only lightly explored and would seem to offer promise,” said Robin Hamilton, general manager for unconventionals portfolio and growth at Shell Upstream Americas.
Hamilton recently presented, “Argentina: Vaca Muerta and Emerging plays of the Neuquén Basin” at the AAPG Global Super Basins conference held earlier this year in Sugar Land, Texas.
The Joy of Unconventionals
Hamilton has worked with unconventional exploration for 12 years and, in his position with Shell is responsible for identifying and capturing new unconventional basin opportunities in North America and international regions.
When asked what he likes about working in unconventional exploration, he said “just about everything.”
“From understanding the fundamental geotechnical drivers that underpin all good unconventional plays, through the busy, fast-paced operational challenges of exploring and developing successful plays, including the necessary careful management of the industry footprint – our ‘license to operate’ – to the stunning macro effects of this new upstream wave in the global energy matrix-transforming region and country prosperity, altering the geopolitical balance of energy supply and markets,” he said. “Overall, it is fascinating and very, very relevant, and I feel lucky to have been part of it.”
Hamilton and his new ventures team in Shell started working on the Vaca Muerta 10 years ago. It is the largest play in the Neuquén Basin, a sedimentary basin located in the Patagonia region of Southern Argentina and Chile.
“Neuquén geology is interestingly varied with multiple plays of interest, together with significant geotechnical challenges in unlocking the primary Vaca Muerta play,” he said. “It has also been great to have been part of the discovery wave from around the earliest phase, offering a lot of opportunity as an early mover.”
A Century in the Neuquén Basin
Shell entered Argentina more than 100 years ago and started conventional operations in Neuquén in 1959.
The Argentine government drilled the first discovery well in 1918. YPF, a private company with strong state support, was founded in 1922. The company has worked in the Neuquén Basin ever since.
Monti described Vaca Muerta geology.
“The formation consists of marine deposits in the Neuquén Basin. The formation’s bituminous marls have high quality organic content with thickness ranging from 30 to 400 meters. One of Vaca Muerta’s distinctive features is the high overpressure occurring in much of the basin. These characteristics are notable when compared to shales from the United States that are already in active development,” he said.
Monti has worked in the Neuquén Basin since 2008 and has focused on Vaca Muerta since 2011. In his current position, he oversees all technical studies related to shale development.
Opportunity for Argentina
Monti described the Neuquén basin as a “marvelous place to work in hydrocarbons.”
“The Basin has several petroleum systems with very good outcrops in the western sector, near the Andes, where many of the production levels can be seen on the surface,” he said. “Additionally, Patagonia is very beautiful, both in the mountains and on the plains. There is a lot of space and very few people.”
Hamilton noted how activity in the Neuquén Basin has evolved over 100 years, from 2-D seismic based conventional oil and gas targets to 3-D seismic based tight gas and enhanced recovery.
He noted that, while all attention has been on Vaca Muerta in recent years, there are other plays in the region that have yet to be explored.
Monti said the Neuquén Basin presents tremendous growth opportunities, both for YPF and for Argentina, if plays like the Agrio and Los Molles petroleum systems turn out to have similar production potential as Vaca Muerta.
“We are extracting hydrocarbons from a basin that has been explored and developed for 100 years. There is an established market for oil services and a lot of existing infrastructure that makes it easier to start new fields. The big business behind Vaca Muerta can also bring new life to smaller conventional plays previously set aside because they were smaller or far away,” he said.
Hamilton said the short-term outlook for the Neuquén Basin is positive.
“I believe the outlook is good with multiple pilot projects currently underway up and down the Vaca Muerta play fairway, whilst development continues apace in the more mature field areas,” he said, citing examples that include Loma Campana (YPF), Sierras Blancas/Cruz de la Lorena (Shell), El Orejano (YPF) and Fortin de Piedra (Tecpetrol).
Monti said projects like these will enable Neuquén Basin production to double, both in oil and gas.
“Vaca Muerta has a strong potential. Several companies are raising their level of activity in the short term and continuing exploration in the acquired blocks,” he said. “Production growth will be limited in the next three years due to the existing bottlenecks in the transportation and processing systems, but there are several other significant projects being launched that will allow us to have different expectations in four to five years.”
Exports Are Essential
Monti noted that Argentina’s domestic energy market will saturate soon.
“We can only continue to have growth in the oil and gas sector if we export or industrialize the hydrocarbon sector. This will require us to continue building infrastructure,” he said.
Hamilton offered additional suggestions for longer term success in the Basin.
“I believe in the predicted subsurface potential, but it will need continued progress on all of the key sustaining factors – including rapid geotechnical and operational learnings, responsible expansion of the supply chain, mid-stream expansion, excellent social, safety and environmental performance, fiscal stability and price support,” he said.
“Key to long term success will be the continued collaboration between oil and gas companies and key stakeholders – the Argentine government, the Neuquén Province, unions, service companies, mid-stream providers – to meet the challenges of an expanding Upstream segment in the Neuquén setting,” Hamilton added.
How to Be Successful in Argentina
Monti agreed that “local knowledge” is key for companies that want to work in any part of Argentina.
“Knowing how to do business and how to build relationships with authorities, unions, etc. is important when setting up work and making contacts in the Basin,” he said.
He added that, to be successful, companies need to know what existing infrastructure is available and understand the commitment and capacity of local transportation companies and vendors.
“Large projects may take longer to complete than anticipated. There has been a lot of demand in recent years, and contractors are limited. You have to plan very well what is going to be done, the resources that will be needed and where you will get them,” he said.
Hamilton focused on both operations and the financial terms and infrastructure needed to support them.
“Firstly, operators must deliver excellent safety and environmental performance so that the governments and communities around our operations remain supporters of development,” he said. “In addition, reduced costs, access to international commodity pricing, stable fiscal terms and development of midstream infrastructure will be needed for Neuquén Basin to stay competitive for unconventional investment capital. In the medium/long-term, full development of the gas potential will require creation of new demand sectors such as petrochemical, LNG and pipeline exports.”
Highlights of the Super Basin Presentation
Hamilton said he was pleased to participate in the AAPG Global Super Basins session and reinforcing the concept that super basins are indeed defined by a collection of “special,” key circumstances involving both geological and above-ground factors.
“Whilst all these factors appear to be in place in the Neuquén, they need to be nourished and sustained for the basin to reach its full potential,” he said.
“The corollary is that there are many promising petroleum basins globally that currently lack one or two of the key elements (e.g. infrastructure, supply chain, supportive fiscals) that would allow them to achieve a tertiary phase of unconventionals activity and development. The Neuquén has made a very promising start and will need sustained efforts from all stakeholders to reach full potential,” he said.
Both Shell and YPF are supporting the publication of AAPG Memoir 120, highlighting the Vaca Muerta play. The publication, featuring 96 authors from 21 companies and seven universities is expected to be released next year in conjunction with the AAPG International Conference and Exhibition in Buenos Aires.
For more information about ICE Buenos Aires, visit ice.aapg.org.