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Chevron Close To Meeting Spending Goals At Vaca Muerta

Chevron and its partners at the Vaca Muerta site in Argentina are close to meeting their spending goals due to a 20 percent annual drop in well drilling.

Ali Moshiri, Chevron President for Latin America and Africa, said in an interview with Bloomberg News on 23 June that drilling costs at the Loma Campana field in Vaca Muerta dipped from $14 million per well in the last quarter of 2015 to around $11.2 million, allowing Chevron and its associate, state-owned Argentine oil producer YPF, to move closer to their aim of drilling wells at less than $10 million.

“There are a lot of companies watching Chevron and YPF in Argentina,” Moshiri claimed. “The performance of those wells are coming very close, very competitive to the United States.”

In 2013, Chevron signed a US$1.6 billion deal to work with YPF as part of a pilot program to drill at the field located in the Neuquén Basin. Moshiri said the partnership has drilled some 400 wells and is worth ten times the initial investment to $16 billion.

The low prices of oil, declining output in the U.S., and favorable policies by the Argentine government have tempted foreign oil firms to invest in Argentina’s vast shale reserves. Exxon Mobil Chairman and CEO Rex Tillerson on 2 June claimed that his oil company plans to spend at least US$10 billion on drilling and exploration at Vaca Muerta, the world’s second-largest shale gas deposit. Moshiri, meanwhile, believes Chevron’s involvement at Vaca Muerta has given it a distinct advantage over other firms.

Related: Russia-German Pipeline May Break Europe’s Energy Union

“We are a long-term business; we don’t try to do anything for just a few years,” Moshiri said. “A few years ago no one knew about Chevron in Argentina. Now we are the largest investor in the oil industry.”

Not all producers are as keen as Chevron and Exxon Mobil over Vaca Muerta. Laurens Gaarenstroom of Royal Dutch Shell recently noted that the high costs of labor and importing equipment has stifled development at Vaca Muerta, especially compared to the investment at North American sites.

By Erwin Cifuentes for Oilprice.com

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