The fourth shale oil field (shale oil) largest in the world and the second shale gas is experiencing a true revolution. However, this large oil reserve faces a relatively common problem in the crude oil market: this oil is located far from large consumption points. In a perfect and efficient world, the ideal would be for large oil fields to be close to large consumption points, that is, large cities. This large field faces this problem, and although its oil reserves are counted billions, production still faces significant limits. In the world of oil, it’s not just enough to have a lot of oil. First you have to have technology to extract it and this usually requires a powerful investment, whether public or private. Second, you have to have a decent geographical location to be able to export it without incurring huge costs. Third… if you don’t have the second, you have to make large investments in pipelines to take the oil from its point of extraction to where it can be exported on a large scale, usually ports. These are some of the challenges that Vaca Muerta faces and that, if overcome, can take crude oil production to unsuspected heights.
Today, Vaca Muerta is producing just over 400,000 barrels of crude oil per day and it is expected that if everything follows a linear projection, this field can pump more than 1 million barrels of oil per day in 2030, once the planned pipelines and infrastructure are built and inaugurated. However, there are those who believe that all these calculations could be overlooking something fundamental: the increases in efficiency and productivity of the fracking (hydraulic fracturing) and the oil industry. With this and good infrastructure, Vaca Muerta could produce up to 2 million barrels of crude oil per day.
“Vaca Muerta can produce 2 million barrels.” This is the projection made by Gustavo Medele, Minister of Energy of Neuquén at AOG Patagonia and reported by the newspaper ‘Más Energía’. Medele explained that the process behind the production estimate in Vaca Muerta that is often carried out by large energy firms and consultancies does not take into account the efficiency improvements of the exploration, drilling and extraction process. According to Medele, the calculation of two million barrels per day is the result of a model based on current capacities and potential improvements in operational efficiency.
For example, when the Permian Basin began to be exploited, no one would have said that its production would have reached even four million barrels per day. However, today the US Permian Basin produces more than 6 million barrelsyes of oil every day. Productive and efficiency improvements in the industry have allowed much more crude oil to be extracted than expected, which, together with a network of pipelines well connected to the country’s most important refineries, is allowing the US to approach energy independence in terms of oil. . The US is the largest crude oil producer in the world. Now, Argentina will seek to emulate the results of the Permian Basin with Vaca Muerta (saving the distances), but to do so it needs a large investment, because as explained below, this shale oil field has to overcome several obstacles before approaching the 2 million barrels per day that would make Argentina one of the largest crude oil producers in America.
Vaca Muerta oil
The Vaca Muerta oil and gas field is located in the Neuquén basin, in the Argentine Patagonia region, far south of the globe. This vast deposit of unconventional hydrocarbons extends mainly in the province of Neuquénalthough it also covers smaller areas of the provinces of Mendoza, Río Negro and La Pampa. Geographically, Vaca Muerta is located in a semi-desert and mountainous region, far from the large consumption centers and main export infrastructures of Argentina, which presents significant logistical challenges for the transportation of its resources.
Given the distance of more than a thousand kilometers between Vaca Muerta and the main consumption points in the center and north of Argentina (image the distance with the large consumption points in the rest of the world), such as the metropolitan area of Buenos Aires and the ports of export in the Atlantic, it is necessary to build pipelines to transport the extracted oil and gas. Pipelines allow large volumes of hydrocarbons to be transported efficiently and continuously, minimizing transportation costs and reducing dependence on more expensive and less sustainable means of transportation, such as trucks or trains.
The construction of pipelines from Vaca Muerta to demand centers is essential not only to supply the domestic market, but also so that Argentina can export its resources competitively. Without this infrastructure, the cost of transportation would increase significantly, affecting the profitability of Vaca Muerta and limiting the country’s ability to position itself as a relevant exporter of hydrocarbons in the global market.
For now, what Argentina has achieved is to ‘reverse’ a gas pipeline. A few weeks ago, Argentina inaugurated the work of reversing the Northern Gas Pipeline, which for almost two decades allowed imports of natural gas from Bolivia and which will now make it possible to supply the north and center of Argentina and export gas extracted from the colossal hydrocarbon formation to Brazil. non-conventional Vaca Muerta.
The work, started last year and completed two months ahead of schedule, involved the expansion of the North Gasduct by 62 kilometers, the reversal of the direction of gas injection in four existing compressor plants, and the construction of a 122-kilometer gas pipeline. in the province of Córdoba (center).
Argentina will be an energy power
But with oil, the situation is a little slower. Obviously, pipelines already exist and some of them are being expanded. But there is by no means the capacity to transport Vaca Muerta’s full potential, although work is being done on it. For example, a new southbound pipeline is scheduled to reach the city of Allen, 130 kilometers away, later this year. A second stretch, scheduled for completion in 2026, would transport crude oil another 440 kilometers to Punta Colorada, on the southeast coast.
“This is the country’s first major pipeline designed entirely for export,” says Manuel Castillo, who manages the project for Argentina’s state energy company YPF. “Over time, we will increase the transport capacity of the basin by 70%,” he told the Financial Times.
Vaca Muerta is about to deliver on the promise that successive governments have been touting over the 14 years since its discoveryas new infrastructure promises to ease transportation bottlenecks that have long hampered production. Oil production from Vaca Muerta is expected to generate an energy export surplus of $5 billion for Argentina this year, despite major constraints.
One of the few active pipelines, completed last year, has allowed oil exports to Chile to restart after 17 years. Another, scheduled for completion in 2025, will increase flows to the coast of the province of Buenos Aires. The basin’s daily oil production has multiplied by five in the last five years, from 90,000 barrels per day in 2019 to about 400,000 in September, and could exceed 1.1 million per day in 2030, according to the local business chamber. of CEPH hydrocarbons. That would allow exports of almost 700,000 bpd.
Vaca Muerta Oil Improvements
However, Medel believes that if the infrastructure supports, the potential is much greater. “If one analyzes the installed capacity today (36 drilling rigs and between 7 and 8 fracturing rigs), and projects without considering improvements, that capacity would take us to around 800,000 barrels per day by 2028,” says Medele. This would be in line with the forecasts of the large energy consultancies. “But the thing is, we’re not stagnant; we’re seeing constant improvements,” he said. From this basis, a projection is made through a mathematical model, considering both current capacity and possible optimizations and improvements in operational efficiency. “The objective of 2 million barrels per day represents a theoretical maximum without restrictions,” Medele clarifies to Argentine media. This calculation is made thinking that there will be no limits regarding the infrastructure to transport crude oil, that is, that there will be no bottlenecks or other limitations that currently affect production.
The International Energy Agency (IEA) itself foresees that crude oil production will continue to increase in the short term: “Next year’s supply is expected to average 860,000 barrels per day. The president of Argentina, Javier Milei, has implemented a reform of the sector energy with the publication of a broad general legal modification in July That law has also created a new mechanism for large-scale investment (Large Investment Incentive Regime or RIGI) that will provide 30 years of legal and regulatory stability for projects larger than 200 million dollars.”
The IEA itself highlights these positive modifications for the industry and highlights that the tax changes that are already stimulating gas and oil production in the country: “Additional tax exemptions, export tax exemptions and access to foreign currency for projects will be included. of more than $1 billion. These reforms are likely to allow for greater production from Vaca Muerta as large international players analyze the details and determine future investment plans.
But the great hope is to reach those two million. The main improvements noted by Medele have to do, for example, with the time it takes to drill a well, which has gone from 25 days to an average of 17 days, with some specialized companies even managing to drill wells in 11 days. “These are some of the assumptions that were built into the model. Each process improvement represents progress toward the production goal,” Medele said.
Another factor that is within the calculation of Medel’s 2 million barrels is the development of several extraction layers in Vaca Muerta. Currently, most projects are limited to two layers (crude is extracted from only two layers), although some companies have begun to explore a third layer and are studying the possibility of expanding to a fourth. Medele comments excitedly that the potential to develop more layers varies according to the specific conditions of each area, but represents a crucial factor in projecting maximum production. “Today most projects develop two layers of Vaca Muerta. Could we go to four layers? We still don’t know,” commented the minister.
However, while waiting for the great revolution, the latest IEA report pointed out that “the supply of Argentina remained stable at 860,000 barrels in October after increasing 20,000 barrels in September. The annual increases (more than 85,000 barrels per day) have been driven by continued developments in the oil sections of the Neuquén (Vaca Muerta) Basin. In fact, according to the latest official data, Neuquén crude oil and Argentine shale oil have reached new historical highs for eight consecutive months, and the shale oil It alone now represents about 60% of the country’s crude oil production. Growth this year of 60,000 barrels is forecast, followed by an increase of 80,000 barrels per day next year, bringing total supply to 910,000 barrels by 2025,” the report states.
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