PUNTA DEL ESTE, Uruguay – Argentina’s Vaca Muerta shale formation is “a good play,” but government economic controls must be lifted and costs slashed if investments are to flow into the barely tapped field, said an executive at a subsidiary of France’s Total.
President Cristina Fernandez’s interventionist policies have scared the most risk-hungry companies out of making anything but foothold investments in what is viewed as one of the biggest shale reserves in the Western Hemisphere.
“Vaca Muerta is a good play. It is sometimes better than very good plays in the U.S.,” said Sergio Giorgi, director of non-conventional resources for Total Austral.
An oil price rout has also forced explorers and producers to adjust global spending plans, and Giorgi declined to detail the firm’s investment plans for 2015.
Total Austral planned to drill about nine new wells in 2015 to take its total number of exploratory, appraisal and pre-development wells in Vaca Muerta to about 30, Giorgi said. He earlier gave a figure of 35 wells.
“If you put Vaca Muerta in the U.S., you should be producing more than 1 million barrels (per day),” he said on the sidelines of an energy conference in Uruguay’s Punta del Este resort.
Argentina’s shale production levels hover around 40,000 bpd, according to official data.
Total is drilling horizontal wells, Giorgi said. State-run energy firm YPF last year estimated the cost of perforating a horizontal well at $14 million to $15 million.
“You still have high costs. We’re working on that,” Giorgi said.
YPF has said reversing the country’s energy deficit will require $200 billion in investment over the next decade to exploit Vaca Muerta, which covers an area the size of Belgium.
Giorgi said lift-off for Vaca Muerta would not occur before Argentina removed heavy-handed controls on the economy. A new hydrocarbons law enacted last year had not gone far enough, he said.
“You need a positive climate where an investor knows he can bring money in and take it out, and send some dividends home, where you can import and export and have financing capabilities at prices that are not killing you,” Giorgi said.
Fernandez leaves office in December. The frontrunners in October’s presidential vote promise market-friendly reforms, but differ on how far-reaching or quickly changes might come.
“I hope next year we will be happier than today,” Giorgi said, adding rigid labor laws were another hindrance.
(Editing by Richard Lough, G Crosse and Ted Botha)
This article was from Reuters and was legally licensed through the NewsCred publisher network.