BUENOS AIRES (Bloomberg) — The cost to drill wells at Argentina’s Vaca Muerta, site of the world’s second-biggest shalereserves, has dropped 20% this year, putting Chevron Corp. and its partners closer to meeting spending goals.
Drilling costs at Loma Campana field in Vaca Muerta have declined to $11.2 million per well from $14 million in the last three months of 2015, Ali Moshiri, president for Latin America and Africa, said in an interview with Bloomberg News in Buenos Aires on Thursday. That’s putting the joint venture with YPF SA closer to its goal of drilling wells at less than $10 million, he said.
“There are a lot of companies watching Chevron and YPF in Argentina,” Moshiri said. “The performance of those wells are coming very close, very competitive to the United States.”
Oil companies including Exxon Mobil Corp. are rushing to tap Argentina’s shale reserves, the largest after the U.S., as low oil prices put pressure on producers in the U.S. Output in the U.S. has dropped this year as prices plunged, while producers in Argentina have maintained production levels because of government subsidies to stimulate extraction.
Chevron signed an agreement with state-owned YPF in 2013 to invest $1.6 billion in a pilot program to drill at Vaca Muerta in the Neuqen province. The joint venture, worth about $16 billion, has drilled about 400 wells, Moshiri said.
The government of former President Kristina Fernandez de Kirchner raised the price of oil produced domestically to $75/bbl from $45, gave drillers tax exemptions and capped royalties at 15% since 2012, creating a boom in the oil industry domestically as it struggled globally because of falling prices.
“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.”