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Shale plays

Heightened activities in Canadian and Argentinian shale projects.

2017-10-12

Shale developments so far remain Western Hemisphere affairs as the US dominates hydraulic fracking technologies and has successfully developed shale plays (such as Bakken, Eagle Ford, Marcellus, Niobrara, Permian). In meantime, investors are seeking opportunities in Canada and Argentina and hopefully to replicate the success in the US.

Major Canadian shale formations include basal Banff and Exshaw (also known as the Alberta Bakken), Duvernay, Montney, Muskwa, and Nordegg Member. Recently, a number of firms have acquired land and begun drilling activities in the Clearwater shale and sandstone formation, located in the Canadian oilsands region of Alberta between Nipisi Lake and an area called Marten Hills about 200 km (125 miles) southwest of Fort McMurray. According to Roger Tang—CEO of Deltastream Energy Corp. one of three firms drilling in the area along with Cenovus Energy Inc. and Spur Petroleum Ltd.—Clearwater holds pockets of oil 600-700 m (1,970-2,300 ft) below the ground that can be produced for about C$10/bbl ($8/bbl). Mr. Tang says the low production cost of the Clearwater play makes it more attractive than the oilsands, which have seen a number of foreign companies sell assets in recent months due to the high investment and production costs in the oilsands. The low production cost comes from the use of multilateral drilling, in which multiple bores are drilled out of a single well hole. Deltastream estimates that each well costs C$1.1-1.5MM ($0.9-1.2MM) to drill, and produces as much as four times more crude as a conventional horizontal well. Mr. Tang commented, "It's definitely an emerging play. It's new and the production is quite respectable at this price." He went on to add, "Although it's still early stage, you get some indication that it’s very exciting."

According to Housley Carr of RBN Energy, the 12K-mi2 (31K-km2) Vaca Muerta shale play in Argentina continues to attract investment from foreign firms. The play is estimated to hold 27B bbl of technically recoverable shale oil and 802 trillion cf (23 trillion m3) of technically recoverable shale gas. State-owned YPF is currently the largest producer in the Vaca Muerta at 67.4K boe/d, with most of this output coming via a partnership with Chevron.

YPF is planning other projects in the play as are a number on international oil companies. ExxonMobil will invest $200MM in the Los Toldos I Sur block in the Vaca Muerta shale play to boost shale gas output. ExxonMobil has asked the government of Neuquen province for a 35-year unconventional production concession in the block. Statoil has signed a deal with YPF, agreeing to jointly invest $300-500MM in the formation. Under the deal, Statoil and YPF will each take a 50% stake in the Bajo del Toro exploration block in the Neuquen Basin. Tecpetrol announced a $2.3B investment though 2019 to develop a shale gas block in the Fortin de Piedra area of play. As part of the investment Tecpetrol will drill 150 wells at a total cost of $1.6B, an average of just over $10.0MM per well.

On July 18 YPF, together with Total, Wintershall Energyia, and BP's Pan American Energy, announced a joint investment of $1.15B in the play. As part of the deal, the government of Neuquen province has agreed to split the Aguada Pichana block into two parts, combining one of them with the Aguada de Castro area. Total will operate the eastern part of Aguada Pichana, taking a 41% stake, while Pan American Energy will operate the western part—combined with Aguada de Castro—with a 45% stake. Pan American Executive Director Marcos Bulgheroni said it was still necessary to lower logistics costs, but added that "the development of Vaca Muerta is on a path of no return."

The push to develop Vaca Muerta is part of a wide plan by the current Argentine government to boost crude output from 475K b/d currently to 560K b/d by 2025, and gas output from 121.7MM m3/d (7.4B cf/d) to 185.0MM m3/d (6.5B cf/d. According to data from Baker Hughes Argentina's rig count rose to 67 in Aug. from 65 in July, with 56 of those rigs said to be crude-focused. (Oct 4, RBN/Sept 28)


Source: Worldwide Refining Business Digest Weekly.e, October 9, 2017.


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