(Recasts with higher drilling costs, adds well production data,
world oil prices)
By Hugh Bronstein and Malena Castaldi
PUNTA DEL ESTE, Uruguay, April 9 Argentina's
shale oil output from the vast but barely tapped Vaca Muerta
formation has increased, but low world oil prices and high
drilling costs threaten profitability, the chief executive of
state-run YPF said on Thursday.
YPF has said the slump in international oil prices over the
last year has had no impact on the company's exploration plans,
defying the industry trend of multinational giants announcing
multibillion-dollar spending cuts.
The South American country wants to ramp up its exploitation
of Vaca Muerta, which lies beneath the windswept plains of
Patagonia, to reverse an energy deficit.
Government controls on the economy and high costs, however,
have deterred foreign investors.
As the fall in world oil prices has forced energy companies
to recalculate their plans, uncertainty has been heightened in
Vaca Muerta, where production is in its infancy and engineers
are still deciding at what angles to drill in order to optimize
"It is still early to talk about the profitability of non-
conventional energy. It depends on a lot of factors," YPF Chief
Executive Officer Miguel Galuccio told an industry conference in
"It is not profitable with an $11 million well and prices at
$50 per barrel. We drilled our vertical wells with the
expectation that they would be profitable at $84 per barrel and
with wells that cost between $6.5 or $7 million," he added.
Brent crude futures settled at $56.57 per barrel on
Thursday, having plummeted from more than $115 per barrel in
"The horizontal wells are demonstrating a much more positive
range in terms of productivity, but we are talking about wells
that have been producing for less than one year," Galuccio said.
YPF has said reversing the country's energy deficit will
require $200 billion in investment over the next decade to
exploit Vaca Muerta.
Argentina nationalized YPF in 2012 after accusing its former
parent, Spain's Repsol SA, of under-investing.
"Today the Loma Campana field is producing 44,000-45,000
barrels per day equivalent," Galuccio said.
Galuccio was referring to the field YPF is exploiting with
Chevron Corp and which accounts for nearly all of
Argentina's shale production.
"This is the highest level of production from a
non-conventional resource anywhere outside of the United
States," Galuccio said.
The figure compares with production of 41,000 bpd reported
by YPF in late February.
(Writing by Richard Lough; Editing by Richard Chang and