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Can the shale boom that has transformed the North American hydrocarbon land-

scape be replicated in other markets? Countries that hope to meet ris-ing consumer demand and reduce imports by increasing oil and gas production may look to the shale boom for solutions.

Unconventional shale devel-opment has generated significant

interest globally, with a number of markets taking the plunge to explore the possibilities. Argentina has made the most headway in achieving com-mercial success. Nearly 300 uncon-ventional wells are producing an esti-mated 25,000 to 30,000 barrels (boe) per day from the prolific Neuquén Basin in the country. For the foresee-able future, the play will be the busi-est outside North America.

Daunting challenges face coun-tries that are attempting to imple-ment viable unconventional in-dustries in their markets. Just as operators in North America had to overcome early obstacles and a steep learning curve, Argentina is experi-encing its own growing pains. The nation is transitioning from conven-tional to unconventional production, currently focused on shale oil for

Argentine Operations Shift to Unconventional Plays By Richard Brown & John Cadenhead, Schlumberger

Customized systems and increased access can spur production in these remote areas.

Field personnel execute an integrated project in the Vaca Muerta. Article images courtesy of Schlumberger

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GLOBAL UNCONVENTIONAL FIELDS

internal consumption from the Vaca Muerta, a Jurassic to Cretaceous aged formation in the Neuquen Basin. Rather than simply extracting tech-nology and expertise from the U.S., the challenges are best met by adapt-ing what has been done in North America to work in a new market.

Argentina’s oil sector is mature, and because of several years of declin-ing production investment in equip-ment by the service sector, the infra-structure and personnel have been limited. In North America, the shift occurred in a gradual sequence from conventional oil and gas, to tight gas, then coalbed methane, shale gas production and finally shale oil pro-duction. In Argentina, however, the industry is jumping directly from rela-tively easy conventional production to shale oil development. During the last three years, an industry that has a 100-year-old history of producing oil and gas has been upended.

In these early days of data-gathering and understanding in Argentina, operat-ing companies are also learning that the

geology of Argentina’s shale basins fea-tures characteristics and structural issues that may require further technological in-novation. Methods not typically seen in unconventional development, such as underbalanced drilling (UBD), are al-ready being applied.

The U.S. Energy Information Agency ranks Argentina fourth glob-ally in technically recoverable uncon-ventional oil reserves and second in shale gas reserves. The country’s push to develop the resources is motivated by the high cost of importing energy. Unconventional activity is centered in the Neuquén Basin, adjacent to the Andes mountain range, where volca-nic and tectonic activity has created a complex subsurface environment.

The basin, which is 30,000 square kilometers (18,641 square miles), en-compasses a prolific reservoir that is up to 500 meters thick and over-pres-sured. However, the rock is not ho-mogenous and poses geomechanical challenges. The formation is highly laminated with layers of volcanic ash beds and mineralized calcite veins.

Understanding the SubsurfaceCurrently, 27 rigs are in the develop-ment area, the majority of them op-erated by Argentine exploration and production company Yacimientos Petroliferos Fiscales (YPF). As the most active operator in the basin, YPF is drilling mostly vertical wells and quickly ramping up production. This practice is commonly used in early shale development to gain an understanding of the subsurface and the production mechanism. Major operating compa-nies and a number of smaller operators are betting on increased production rates by drilling horizontal wells.

Pad drilling, usually two rigs drilling four to six wells, is common. However, a lot of work is necessary to determine optimum well spac-ing. Wells are typically drilled down to 3,000 to 3,400 meters (9,843 to 11,155 feet), but only a handful of rigs are capable of drilling a 1,000-meter lateral on top of that. The very narrow mud weight window in the Quintuco formation requires UBD, a method of drilling with the hydrostatic head of the drilling fluid intentionally lower than the pore pressure of the formation, which adds operational complexity. If the mud weight is too high, it will fracture the formation, and the resulting mud loss can cause a kick. Operators address this challenge by using a lighter mud and producing the wells while drilling.

The practice of drilling on a live well that is producing hydrocarbons is risky and relatively new to the local industry. It also adds to the already significant equipment mobilization and needs.

Only a small number of the drilling units in the country have the capacity

A field engineer runs wireline openhole and hydraulic fracture mapping services to analyze fracture patterns from hydraulic stimulation.

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to drill horizontal wells at 10,000 feet. If the play will be developed using a horizontal factory drilling approach, a significant number of new rigs will need to be mobilized. YPF is report-edly bringing in 15 rigs that have the necessary drilling capacity and can be moved between locations in hours rather than days.

Market ConstraintsThe town of Neuquén, which has long been the center of Argentina’s gas production, has little unemployment, meaning much of the workforce must be brought in from other areas of the country. Operators also compete with other industries to recruit workers.

The field operations are too far from Neuquén for daily commuting. Operators and service companies are building camps in the field to accom-modate employees. Critical services infrastructure will also need to ex-pand as the population grows.

Equipment is still being brought in from North America, a process that can be expensive and time consum-ing. Service companies have entered into commercial agreements with lo-cal large machinery manufacturers to start producing some equipment, such as hydraulic fracturing pumps and cementing units.

Expansion of local infrastructure will be required to accommodate the vast logistical demands of a shale development project. Water sources can be as far as 100 miles from well sites, meaning holding ponds and pip-ing networks should be constructed. Roads also need to be expanded and reinforced to stand up to the rigors of intensive trucking activity.

While these market constraints suggest unconventional develop-ment in Argentina will ramp up more

slowly than in North America, the industry has made significant strides. Operations have grown five-fold in the last three years. A significant amount of equipment has been mo-bilized, which serves as a testament to the high expectations that the in-dustry has for the Vaca Muerta Shale. As progress continues during the next decade, Argentina is expected to emerge as a key player in the impor-tant unconventional resource arena.

With more than 24 years of indus-try experience, John Cadenhead is strategy manager of Unconventional Resources for Schlumberger. Based in Houston, he is responsible for corporate operational and marketing strategy in shale gas and liquids. Cadenhead has held technical and managerial positions in North America, France, Indonesia, Kuwait and Saudi Arabia. His career includes experience in op-erations, engineering, marketing, sales

and management. Cadenhead has a BSc in electrical engineering from the University of Oklahoma.

With 22 years of experience with Schlumberger, Richard Brown is vice president of unconventional resources for Schlumberger in South America. Based in Buenos Aires, Brown is responsible for the deployment of the global unconven-tional strategy, leading a team of techni-cal experts focusing on Latin American shale plays and providing operational and marketing support to the business units. Brown joined Schlumberger as a wireline field engineer in 1992 and has since held many technical and manage-rial positions. In 2009 Brown moved to Buenos Aires to manage Schlumberger’s operations in Argentina, Bolivia and Chile. He has been involved in the evolution of the Vaca Muerta operations from the beginning.

© Copyright 2014 Cahaba Media Group, Inc. All rights reserved. Permission granted by publisher to Schlumberger to reproduce and distribute this excerpt in any medium and on multiple occasions, provided that this copyright statement appears on the reproduced materials.

Mud loggers examine cuttings to determine the composition, physical attributes, hydrocarbon content and matrix porosity.