YPF CEO: Argentina has all elements to create a shale oil boom
BY ANGEL GONZALEZ
HOUSTON -- Argentina has all the resources and manpower necessary to be host to a shale oil boom that will make the country self-sufficient in energy in five years, but it will require help from such international oil companies as Chevron," YPF CEO Miguel Galuccio said.
For the Argentine oil industry to consider itself successful, "we'd have in the next five years to become self-sufficient in terms of energy," Mr. Galuccio said in an interview at Chevron's Houston offices after signing an agreement that could lead to a potential deal with the second-largest U.S. oil company for joint exploitation of the South American country's massive shale resources.
"Can the industry of Argentina do it alone? Can YPF do that alone? The answer is no," Mr. Galuccio said. "It'll require companies like Chevron that will trust us, help us."
Chevron has four months of exclusivity to work out a deal in 300 sq km of the core area of YPF's holdings in the Vaca Muerta shale field in the Neuquen basin, one of the world's richest oil shale deposits.
YPF, which was nationalized earlier this year by the Argentine government amid a bitter dispute with Spanish energy company Repsol, is negotiating in parallel another deal with Bridas, a joint venture between Argentina oil company Bridas Energy Holdings and China's CNOOC, Mr. Galuccio said.
"I'm confident we'll come to a closure on the term sheet before the end of the year," Mr. Galuccio said.
A former executive with oilfield services giant Schlumberger, he said he had looked at shale deposits around the world, including China, Poland and India. "In Argentina, it's a place where you have the components to really ramp up, to do something similar to what the U.S. did," the executive said.
There's plenty of water, a key ingredient of hydraulic fracturing operations, and also an abundance of world-class geophysicists and reservoir engineers. Moreover, the core area of the Neuquen has been the center of previous natural gas exploitation, so some oil industry infrastructure is already in place.
Nevertheless, "when you do the big ramp-up, that is going to put our resources at a stretch," he said, and the company was looking to secure rigs. However, shale exploitation in Argentina could benefit from leap-frogging the technological evolution experienced in the U.S., and YPF and Chevron will study ways to develop more efficient operations than those seen stateside, Mr. Galucci said.
There are also technical complexities awaiting prospectors trying to translate their U.S. experience into Argentine shale development. The Vaca Muerta shale has "probably double the thickness of the Eagle Ford," Mr. Galuccio said, referring to the big shale oil field in south Texas that accounts for a big part of the growth in U.S. oil production. "Also we have much better pressures," he said.
On the one hand, the thickness means "very good news -- we are after more resources," but it also means that the horizontal wells that drive U.S. shale development are "not necessarily the answer," he said.
Ali Moshiri, Chevron's head for Latin America and Africa, who signed the letter of intent with Mr. Galuccio, said that Argentina is "only one cycle behind the United States" in realizing the potential of its oil resources. "The unconventional industry in Argentina is going to grow very fast."