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Goldman Sachs sees Vaca Muerta among ‘most promising’ rivals to US shale

Published: 10:45 19 May 2015 BST

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“Like the Eagle Ford, Bakken and Permian, the Vaca Muerta is also seeing significant costs savings and efficiency gains.”

Argentina’s Vaca Muerta is one of the most promising international shale basins and it could rival those in the US, according to Goldman Sachs.

The American investment bank has, in a note, highlighted that Vaca Muerta is in the early stages of development but is showing potential for production to be scaled up economically.

“The core area of the play is largely oily - 77% oil, 5% wet gas, 18% dry gas - and resource wise, the Vaca Muerta is comparable to the Bakken with the potential for resources to be upgraded as further areas are de-risked,” Goldman said.

“Like the Eagle Ford, Bakken and Permian, the Vaca Muerta is also seeing significant costs savings and efficiency gains.”

The cost of drilling a vertical well has reduced to US$7.6mln from around US$11mln, and is expected to reduce further through into 2016, the bank added.

“While production in the Vaca Muerta averaged 45kbls/d since the start of 2015 from 290 wells, we believe that a ramp up of production and increase in wells drilled will allow producers in the basin to reap the same rig productivity gains from a roll-out of the well manufacturing process and also see an improvement in type curves as the shift to horizontal drilling takes place.”

“We believe that the ramp-up could be faster if more rigs can be added, and the pace of development accelerated.”

Vaca Muerta’s most advanced fields are operated by national petroleum group YPF and its American partner Chevron, and the play has also drawn investment from other international majors such as ExxonMobil, BP, Total, Petrobras and Wintershall.

AIM’s Andes Energia (LON:AEN) is the only London listed firm with exposure to the high profile region. It is an early mover, that’s already made discoveries in the basin, and it currently has a larger net acre position than Exxon, Chevron and Shell.

Andes Energia has 250,000 acres in the Vaca Muerta and has so far made four discoveries. The plan is to bring in a development partner for the projects by 2017.

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