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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Argentina's Shale Boom Hits New Milestone

YPF, the Argentine state energy company, has drilled the longest horizontal oil well lateral, at 3,890 meters, or more than 12,700 feet, in the Vaca Muerta shale play, S&P Global Platts reports, citing a source close to the company.

The record-breaking lateral—the horizontal part of the well—was drilled in the Bandurria Sur area, which YPF is developing in partnership with Schlumberger. The Argentine state major now has plans for more long laterals, at more than 2,500 meters, at a project it is working on in partnership with Chevron: Loma Campana.

Longer laterals in horizontal wells enable greater production from a single well, saving the operator money. Investment concerns are serious for YPF amid political instability in Argentina and the oil price volatility on international markets.

The concerns become even more pronounced in the context of YPF’s ambition to become an oil exporter rivaling the United States, according to the S&P Global Platts source. Production costs in the U.S. shale patch are as much as 30 percent lower than they are in the Vaca Muerta play.

The cost problem in the play, which is one of the biggest in the world, is not only related to political and price instability. Unlike the U.S. shale plays, the Vaca Muerta became the focus of attention for energy companies relatively recently.

Related: OPEC Deal Could Send Oil To $70

There is no transport infrastructure developed around it for the supply of key materials such as frac sand and water for drilling. Having to bring in sand and water from sometimes significant distances raises production costs to sometimes unacceptable levels, slowing down the development of the oil and gas resources in the play.

Earlier this year, Oilprice reported that production costs at Vaca Muerta may need to go as low as US$40 per barrel of crude to make it internationally competitive. Yet such low production costs involve reducing the costs of things like frac sand, fracking itself, logistics, and related services. This would not be an easy job to do across the play, given the lack of frac sand deposits near the play or extensive logistics infrastructure.

By Irina Slav for Oilprice.com

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