WoodMac: Argentina’s Vaca Muerta production to reach 113,000 boe/d by 2018

Wood Mackenzie Ltd. forecast that production from the seven most advanced developments in Argentina’s Vaca Muerta play—covering only 8% of play acreage—will reach 77,000 boe/d during 2017 and 113,000 by 2018, which would double 2016 levels.

Elena Nikolova, WoodMac Latin America upstream oil and gas research analyst, said production could peak at 1.25 million boe/d by 2031.

Companies having natural gas acreage are exposed to the greatest upside by capitalizing on gas price incentives and attractive well performance, Nikolova said. While still in early development, Vaca Muerta production for some wells already is on par with certain US shale plays.

Nikolova believes labor union and price agreements finalized with the Argentina government earlier in the year have provided enough flexibility and pricing predictability to encourage operators to commit to new pilots.

Nearly 100 Vaca Muerta wells were completed through October 2016 of which 80% were horizontal. WoodMac expects future development will involve horizontal wells with laterals up to 2,500 m.

“Cost reductions are a key focus for operators,” Nikovova said, adding WoodMac’s type curves heavily reflect cost achievements reported by YPF SA.

“YPF has significantly brought down costs to $8.2 million in the fourth quarter 2016.” She expects more operators will enter Vaca Muerta.