YPF Projects U$S 4.5 Billion Investment in Mendoza's Vaca Muerta Under RIGI Regime
Horacio Marín, chairman of YPF's board of directors, confirmed during an official visit to Mendoza that the state-owned company is planning a megaproject investment of U$S 4.5 billion under the Large Investment Incentive Regime (RIGI) for massive exploitation of the unconventional segment of Vaca Muerta in southern Mendoza. The announcement was made during a meeting attended by Governor Alfredo Cornejo and Energy and Environment Minister Jimena Latorre, who reviewed progress from the first drilling phase in Malargüe and defined the operational timeline that will guide the province's oil strategy in the coming years.
Positive Exploration Results in Shale Formation
Marín explained that metrics obtained from initial drilling in the shale formation have been encouraging for the company's board. The executive detailed that YPF has launched three exploratory wells whose performance supports advancing the project to the next stage.
We have been analyzing the results of the exploratory wells we drilled at Vaca Muerta and we believe they are good results
The board chairman ratified that the company will maintain drilling rigs active throughout the year and projects beginning the development phase. Its central purpose is to unify both concession areas and submit a joint application for RIGI access.
We have included in the budget the idea of YPF continuing with the rig throughout the year and starting development. What we want to do is unite both areas, apply for RIGI for the two Mendoza areas and begin development. I think this is good news for YPF and for the province
Unification of Concessions and Expansion of Drilling Program
According to Minister Latorre, YPF's plan contemplates the unification of the Paso de las Bardas Norte and CN-VII areas into a single unconventional concession. This integrated scheme will allow optimization of operational management and maximize utilization of the geological potential of both blocks.
The province is also advancing a Joint Venture arrangement combining YPF with the UTE Quintana-TSB to complete a total of 5 wells in back-to-back mode, that is, continuously and sequentially. From previous drilling operations, characterized by lateral sections of up to 1,200 meters, the plan moves to extend horizontal laterals up to 2,500 meters to significantly increase geological precision and reservoir drainage capacity.
This unified block is projected to achieve estimated production of 90,000 barrels per day, a figure representing 25% of total potential identified in Mendoza's unconventional oil according to studies by the provincial Ministry of Oil, Environment and Energy.
Reconversion of Provincial Oil Matrix and Andes Plan Strategy
Governor Cornejo highlighted the impact YPF's massive entry into Malargüe will have and ratified the official strategy of ceding mature conventional blocks through the so-called Andes Plan. This reconversion has involved the transfer of lower-yield areas to mid-sized operators with the goal of stemming conventional production decline while boosting unconventional segment development.
If YPF is in Mendoza's Vaca Muerta, the rest of the major unconventional operators already operating in Neuquén will be here too. It develops our potential and gives certainty to what our Oil, Environment and Energy team had been telling us: there is potential in southern Malargüe with unconventional resources
In assessing the conventional area transfers, Cornejo stressed that the reconversion has not been an easy process and has entailed considerable political risk, including contract renegotiations with YPF. However, he assured that it represents the best long-term strategy for Mendoza.
That reconversion has not been easy. We have taken considerable risk, even political risk, with the renegotiation of Andes Plan contracts with YPF, but we believe it is the best path for Mendoza. We are already beginning to slow the decline of oil production with new operators and aspire to continue in that same direction
Regarding the commitment assumed by the state company, Cornejo emphasized that YPF is currently the largest investor in the country, describing the announcement as a concrete signal of medium and long-term development. The provincial leader committed to working in the coming quarters with his team to present even more ambitious initiatives that capitalize on opportunities offered by RIGI at the national level.
Infrastructure and Logistics as Project Pillars
The unconventional Vaca Muerta project requires substantially greater operational deployment than traditional oil activity. For this reason, the provincial administration stressed the need to support YPF's undertaking with compatible infrastructure works, with special emphasis on developing rail transport to southern Mendoza, connecting with key logistics nodes such as Palmira.
Minister Latorre clarified that the U$S 4.5 billion figure constitutes an initial estimate based on projected barrel production, and called for exercising caution regarding initial positive results to avoid overextending expectations.
The U$S 4.5 billion is an initial estimate based on barrels estimated to be producible. That is the calculated project; but we must be cautious because good news can lead us to overextend our expectations. It is very good news, but we must take firm steps so that what today means having a drilling rig can multiply as we successively unblock further stages
The provincial administration underscores that development of rail infrastructure is essential to guarantee supply of key inputs, such as hydraulic fracturing sands, and to ensure efficient evacuation of future large-scale crude production in southern Mendoza. Investment in logistics infrastructure is shaping up as a sine qua non condition for the megaproject's overall viability.