Prospects for Non-Conventional Oil and Gas Outside of North America
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At the 2013 Oil & Money Conference, YPF's President & Chief Executive Officer, Miguel Galuccio discussed Argentina's unconventional resources and the evolution of cost and productivity.

At the 2013 Oil & Money Conference, YPF's President & Chief Executive Officer, Miguel Galuccio discussed Argentina's unconventional resources and the evolution of cost and productivity.

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Prospects for Non-Conventional Oil and Gas Outside of North America Presentation Transcript

  • 1. Argentina’s Unconventional Resources A great prospect Oil & Money Conference – London - October. 2013
  • 2. Disclaimer Safe harbor statement under the US Private Securities Litigation Reform Act of 1995. This document contains statements that YPF believes constitute forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995. These forward-looking statements may include statements regarding the intent, belief, plans, current expectations or objectives of YPF and its management, including statements with respect to YPF’s future financial condition, financial, operating, reserve replacement and other ratios, results of operations, business strategy, geographic concentration, business concentration, production and marketed volumes and reserves, as well as YPF’s plans, expectations or objectives with respect to future capital expenditures, investments, expansion and other projects, exploration activities, ownership interests, divestments, cost savings and dividend payout policies. These forward-looking statements may also include assumptions regarding future economic and other conditions, such as future crude oil and other prices, refining and marketing margins and exchange rates. These statements are not guarantees of future performance, prices, margins, exchange rates or other events and are subject to material risks, uncertainties, changes and other factors which may be beyond YPF’s control or may be difficult to predict. YPF’s actual future financial condition, financial, operating, reserve replacement and other ratios, results of operations, business strategy, geographic concentration, business concentration, production and marketed volumes, reserves, capital expenditures, investments, expansion and other projects, exploration activities, ownership interests, divestments, cost savings and dividend payout policies, as well as actual future economic and other conditions, such as future crude oil and other prices, refining margins and exchange rates, could differ materially from those expressed or implied in any such forward-looking statements. Important factors that could cause such differences include, but are not limited to, oil, gas and other price fluctuations, supply and demand levels, currency fluctuations, exploration, drilling and production results, changes in reserves estimates, success in partnering with third parties, loss of market share, industry competition, environmental risks, physical risks, the risks of doing business in developing countries, legislative, tax, legal and regulatory developments, economic and financial market conditions in various countries and regions, political risks, wars and acts of terrorism, natural disasters, project delays or advancements and lack of approvals, as well as those factors described in the filings made by YPF and its affiliates with the Securities and Exchange Commission, in particular, those described in ―Item 3. Key Information—Risk Factors‖ and ―Item 5. Operating and Financial Review and Prospects‖ in YPF’s Annual Report on Form 20-F for the fiscal year ended December 31, 2012 filed with the US Securities and Exchange Commission. In light of the foregoing, the forward-looking statements included in this document may not occur. Except as required by law, YPF does not undertake to publicly update or revise these forward-looking statements even if experience or future changes make it clear that the projected performance, conditions or events expressed or implied therein will not be realized. These materials do not constitute an offer for sale of YPF S.A. bonds, shares or ADRs in the United States or otherwise.
  • 3. Contents 1 YPF results 2 Unconventional potential in Argentina 3 Evolution of cost and productivity
  • 4. Increased investments and activity • Significant increase in investment during 2013 • Significant increase in activity Rigs Millions Dollars (*) 152% +63% 63 46 2010 25 1230 Others Downstream Upstream 2011 2012 Sep-13 Workover (1) 73% 85 70 49 6M 2012 6M 2013 Investments as in Note 2.g. of the financial statements at Q2 2013. Converted to USD at period – end exchange rate 2011 2012 Sep-13
  • 5. Increased Production Downward trend in production seen in recent years reversed; crude oil and natural gas production for July above previous two quarters. Natural gas production (Mm3/d) Crude oil production (kbbl/d) 234.4 34.2 227.4 33.4 31.4 33 34.8 228.2 226.3 222.6 2011 2012 1Q'2013 2Q'2013 Jul'2013 2011 2012 1Q'2013 2Q'2013 Jul'2013
  • 6. Contents 1 YPF results 2 Unconventional potential in Argentina 3 Evolution of cost and productivity
  • 7. Argentina has the natural resources to increase production Oil Potential Gas Potential (Bbbls) (Tcf) NOROESTE CHACO PARANAENSE 29 4,4 CUYANA NEUQUINA 802 27 GOLFO SAN JORGE Conventional (Gas 3P + Resources) Unconventional Unconventional (resources) Source: Secretaria de Energia / U.S. Energy Information Administration (DOE) / Advanced Resources International (ARI), 2013 Conventional (Oil 3P + Resources) AUSTRAL (resources 4th in Unc. oil resources 2nd in Unc. gas resources
  • 8. Vaca Muerta – World Class asset that can be massively developed Comparable to US plays Net YPF Area 12,075 km2 77% 5% 18% Area EUR 20 - 40 Bbbl 100 - 200 TCF Approximately 100 years of current production gas gas TOC (%) Thickness (m) Oil Wet US Best Composite 30,000 km2 EUR Dry Vaca Muerta Total Windows(1) Oil Wet gas Dry gas Shale Oil and Gas Key unconventional acreage holders in America Chesapeake ExxonMobil YPF Chevron Apache Reservoir Pressure (psi) 3 - 10 Marcellus 2 - 12 30 - 450 Eagle Ford 30 - 100 4,500 – 9,500 Haynesville 2,500 – 8,500
  • 9. Oil: First pilot initial investment First 20 km2 - pilot 1 cluster Investment 1,240 20 km2 Massive development 290 Km2 million dollars Wells +100 Drilling rigs 19 (as of December 2013) Direct employees +1,500 Neuquina basin Vaca Muerta 700 drilling 300 transport 350 well services 160 stimulation
  • 10. Contents 1 YPF results 2 Unconventional potential in Argentina 3 Evolution of cost and productivity
  • 11. Unconventional Development Trends Shale wells Qi evolution 45 Progress towards turning Vaca Muerta into a highly profitable shale development Qi oil average, M3/d 40 35 30 25 First Vaca Muerta reservoir simulation model (lead by YPF team together with top North America shale experts) 20 15 10 Increased initial productions due to improved fracture methodology and management of the draw down imposed on the hydraulic fractures 5 Oct-10 Ene-11 Abr-11 Ago-11 Nov-11 Feb-12 May-12 Sep-12 Dic-12 Completion costs per vertical well M USD 12 11.1 Renegotiated completion contracts generating savings as efficiency and economies of scale increase 10.4 10 7.8 8 7 Decreased well cost by 10% during 2012 and completion by more than 20% 6 Initiated multi-pad drilling 4 2 0 2011 2012 1H 2013 2H 2013 Started pilot development targeting 130 wells in 2013, now 19 drilling rigs active in North Loma La Lata
  • 12. Production Evolution Gas (km3/d) 10.000 Gas km³/d Oil bbl/d Oil (bbls/d) 9.000 8.000 7.000 6.000 700 600 500 400 5.000 4.000 300 3.000 200 2.000 100 1.000 0 0 Current production +13,000 boe/day
  • 13. The partner of choice Key advantages in Argentina YPF Expertise • Long term contracts • Main hydrocarbon producer in Argentina 25/35 years, 12% royalties • Excellent connectivity and infrastructure • 1,167 km crude oil transmission system 1 crude oil export pipeline to Chile • 14,800 km gas transmission system 5.5 BCF/d capacity - 12 international pipelines 2.5 BCF/d • 10 refineries 639,000 bbl/d total capacity • Promotion of Investment Decree 929/13 • Investment over 1B US$ on Hydrocarbons Production gives right to export up to 20% of the hydrocarbons produced and free disposition of exports' proceeds. • Improved Gas Prices 7,5 US$/Mbtu on new gas (36% of Argentina total production) • 93 concessions and 50 exploration blocks • Excellent Economy of scale in its operations • Leader in unconventional wells in Argentina 3 times all companies combined • 3rd largest unconventional acreage holder in America • Fully integrated company (Uptream & Downstream) • Leader in Vaca Muerta
  • 14. Conclusions Summary A definite potential exists for Unconventionals outside of North America Approach to developing Unconventionals outside of North America is different Argentina has various sizeable Unconventional Oil & Gas plays that can be developed Vaca Muerta is a world class shale resource that has been proven MATERIAL and can be massively developed. Opportunity exists to reduce development costs through fit for purpose technology, estate of the art reservoir modeling, and logistics improvements. Both Argentina and YPF are completely open to investment and partnerships in developing Unconventionals YPF is the leader and partner of choice
  • 15. Project size - 35 years Total investments Total operating costs Drilling activity +16.0 +9.0 +1,500 Billion USD Billion USD Cumulative production +750 Million BOE New wells Plateau production +50,000 Oil Bbls per day +3 million m3 per day of gas
  • 16. Unconventional opportunities “Unconventional” Resources Tested & Producing NOROESTE CHACO PARANAENSE 4,4 Vaca Muerta (shale oil / gas) Area 30,000 km2 OOIP 661 Bbbl (40 Bbbl)* OGIP 1,181 TCF (117 TCF)* CUYANA Other Opportunities Noroeste - Cretaceous Yacoraite (shale / tight oil & gas) Noroeste - Tarija Los Monos (shale gas) GOLFO SAN JORGE Neuquina Los Molles (shale / tight gas) Agrio (shale oil) D-129 (shale oil / tight oil) NEUQUINA Lajas (tight gas) Mulichinco (tight oil / gas) Golfo San Jorge Neocomiano (shale oil / gas) Chaco Paranaense Devonian – Permian (shale oil) AUSTRAL Cuyana Cacheuta (shale oil) Potrerillos (tight oil) Notes: K: thousand; M: million; B: billion (109) Austral Inoceramus
  • 17. Focus on value creation and new opportunities • +29% prod. rate Oil • 251 Mbbl Others 8% Secondary Prod 14% Shale oil 46% • 5,380 wells Exploitation Primary Prod 32% • +23% prod. rate Gas • 1.27 TCF • 1,160 wells Exploration • 250 wells Refining & Marketing * • +44% diesel oil • +24% gasoline Notes: * R&M includes Petrochemicals and Logistics / K: thousands; M: million; Bn: billion (109) Others 8% Infil 33% Shale gas 32% TightlGas 27%
  • 18. Logistics optimization Sand Transportation • Sand Train transportation will allow for • Substantial reduction of sand transportation cost and time • Bulk transportation instead of big bags • Central Storage Optimization in silos • Optimized distribution with bulks Water Sourcing & Distribution • Water pipe network to minimize water truck transport • River Water being pumped to the field • Central fresh Water Pit storage • Water pipe network for water pumping to well location
  • 19. Performance of vertical wells for hydraulic fracturing Vertical wells, hydraulic fracture in Vaca Muerta Cumulative Oil, avg bbls/well 40,000 D vs 2012: + 4,500 bbl 2010-2011: 15 wells 35,000 YPF 2012: 10 wells YPF 2013: 36wells Forecastt Back up 30,000 25,000 20,000 15,000 10,000 5,000 0 0 1 2 3 4 5 6 7 8 9 10 11 12 Production months