BUENOS AIRES – Argentine oil company YPF and U.S. energy supermajor Chevron Corp. plan to invest $1.6 billion this year to develop non-conventional oil and gas reserves in the Loma Campana area, part of the massive Vaca Muerta shale formation.
Both companies will share equally in the investment outlay, which will go toward drilling 170 wells and building production facilities in Loma Campana, located in the southwestern Argentine province of Neuquen, YPF said in a statement Thursday.
This new investment marks the beginning of the mass development phase of that area, where a pilot drilling program was concluded in March.
YPF and Chevron signed an agreement for the pilot program in July 2013. Under the terms of the deal, the U.S. company was to evaluate at the conclusion of the program whether to remain YPF’s joint-venture partner in Vaca Muerta.
“We are pleased that they’ve chosen to continue this partnership; it’s a great demonstration of their confidence in YPF’s work and in Argentina’s non-conventional hydrocarbon potential,” YPF CEO Miguel Galuccio said in the statement.
Chevron’s decision to make new investments in Vaca Muerta is a “very important” development because it will substantially boost levels of oil and gas production in Argentina and help achieve the country’s goal of “achieving energy self-sufficiency,” Argentine Cabinet chief Jorge Capitanich said Friday in a press conference.
A total of $1.24 billion was invested in the pilot phase, which involved the development of 20 sq. kilometers (7.7 sq. miles) and the drilling of 161 wells.
In this new stage, the companies are to drill a total of 1,500 wells and invest an estimated $15 billion to fully develop the 395 sq.-kilometer Loma Campana concession.
Once full production is reached, the area is expected to yield 50,000 barrels of oil and 3 million cubic meters (105.7 million cubic feet) of associated natural gas per day.
YPF and Chevron are currently producing 20,000 barrels of oil equivalent per day at Loma Campana.
The Argentine company has production rights to 12,000 sq. kilometers (4,630 sq. miles) of Vaca Muerta, which covers a total area of some 30,000 sq. kilometers.
YPF has been under Argentine government control since Congress gave the green light in May 2012 for the expropriation of a 51 percent stake in the company from Spain’s Repsol, whose stake in the Buenos Aires-based company has been reduced to 12 percent.
YPF posted net income last year of 5.7 billion pesos ($710.1 million), up 45.6 percent from 2012.