BUENOS AIRES, March 10 (Reuters) - Argentina’s state-controlled energy company YPF plans to increase production this year while reducing the cost of drilling in its promising Vaca Muerta shale oil and gas field, CEO Miguel Galuccio said in a conference call on Monday.
The South American country is betting that Vaca Muerta, potentially one of the biggest shale formations in the world, will restore it as a net energy exporter in the years ahead.
Government accounts, already hit by loose fiscal policy fueling one of the world’s highest inflation rates, have been further drained in recent years by expensive fuel imports.
YPF expects to increase crude production by 3.0 percent and natural gas output by 6.0 percent this year, Galuccio told analysts during the call to discuss company’s earnings.
The production growth estimate does not include the bump expected from YPF’s recent purchase of the Argentine operations of U.S. energy company Apache, for which the Argentine company paid $800 million.
Crude output of YPF, which was nationalized by the Argentine government in 2012, grew 2.2 percent last year to 232,300 barrels per day. It’s natural gas production grew 1.5 percent to 34 million cubic meters per day.
“We are consistently drilling and completing vertical wells for $7.5 million,” the YPF chief executive said, adding that each well is taking about 18 days to complete.
The first well drilled at Vaca Muerta cost about $10 million. The increase in efficiency remains far from what will be necessary to make Vaca Muerta profitable. The drilling of similar wells in the United States costs $2 million to $3 million per perforation.
“Our ultimate objective is much more aggressive than $7.5 million per well,” Galuccio said.
A U.S. Department of Energy report shows that Argentina has more natural gas trapped in shale rock than all of Europe, a 774-trillion-cubic-feet bounty that could transform the outlook for Western Hemisphere supply.
The country’s shale gas reserves trail only China and the United States. (Reporting by Alejandro Lifschitz)