Los Molles: Argentina’s ‘other’ shale formation – Natural Gas Daily – Interfax Global Energy

While the phenomenal Vaca Muerta has dominated headlines, Argentina’s Neuquén Basin also holds an older, thicker layer: Los Molles. Given the gas potential of the rock, experts have told Interfax the development of Los Molles is just a matter of time and money.

Los Molles rivals Vaca Muerta in terms of gas prospectivity. Technically recoverable resources from Los Molles are estimated at 275 trillion cubic feet (7.79 trillion cubic metres) of shale gas and 3.7 billion barrels of shale oil, according to the United States Energy Information Administration (EIA). Vaca Muerta’s gas resources are only slightly larger than its neighbour, although its oil resources are more than four times as big.

Experts are generally optimistic on prospects for the formation. “I am convinced that Los Molles will be developed, but after Vaca Muerta,” Luciano Codeseira, a Buenos Aires-based consultant at Argentina’s Energy Secretariat, told Interfax.

“Los Molles has greater gas potential than Vaca Muerta, according to a study carried out by Argentina’s Energy Secretariat, which is different to surveys performed by the EIA and Advanced Resources International,” he added.

“Once labour, transportation infrastructure and supply chain challenges for large-scale completions in the basin are tackled for Vaca Muerta, it would make sense from an efficiency standpoint to continue developing the Los Molles formation,” said Alex Fleming, a senior manager at EY.

Geological differences

“I’m not a geologist, so I cannot give a technical comparison of both plays,” said Codeseira. “But the main differences are: depth – Los Molles is deeper; mineralogy – Los Molles contains more quartz, which makes stimulation more difficult; and its location – the core of Vaca Muerta is beneath the bulk of [Neuquén] province’s infrastructure.

“The geochemistry is also different – there is a significant liquids window in Vaca Muerta, while Los Molles is more mature. It [Los Molles] seems similar to the D-129 well in the San Jorge Gulf Basin, with good levels of kerogen content in the rock, but lying very deep,” he added.

However, Vaca Muerta appears to be a much better source rock, according to the few well tests that have been shared with the EIA. Its rock holds a higher percentage of organic carbon than Los Molles, with rates as high as 14% in its northernmost section. Los Molles has some decent sweet spots, but it is patchier.

This results in Vaca Muerta’s superior resource concentration of up to 303 billion cubic feet per square mile (3.3 bcm per square km), compared with a maximum of 2.08 bcm per square km for Los Molles, according to the EIA. However, the organisation has reported positive early drilling results from both Vaca Muerta and Los Molles, with vertical shale wells producing up to 600 barrels of oil equivalent per day after a five-stage frack job.

Fleming said Los Molles should be seen as the next logical step for explorers after Vaca Muerta.

“As the Neuquén Basin is in an early stage of development, it is likely investors are initially targeting the Vaca Muerta formation, which is shallower in depth and less costly to develop at this time, as a way to control their investment costs until the long-term viability of the play is confirmed,” he said.

Shale-focused companies traditionally seek predictable and repeatable drilling and completion costs for wells, added Fleming, because unconventional exploration involves greater risks and uncertainty than conventional operations. “It has taken some operators several hundred wells in US formations to achieve the right well design and repeatable supply chain model to stabilise costs,” he said.

However, prospects for shale extraction improve dramatically once drillers become established in an area. The difficulty and cost of building the infrastructure to support large-scale shale extraction means there are strong incentives to “stay put”, said Fleming. “We have already seen this similar type of geographical focus happen in the Permian Basin and Bakken formations in North America,” he added.

“The uncertainty of the investment environment combined with inherent infrastructure challenges mean large-scale ‘manufacturing’ type extraction of the Vaca Muerta is still a few years away. Possible investors may wait for a few years to see what the actual cost and initial production rates are before making investment decisions for Los Molles,” said Fleming.

“However, the one thing that has been the constant in the US has been variability based on hydrocarbon pricing and changing resource estimates, meaning any shift could alter the decision paradigms for resource planners,” he added.

via Los Molles: Argentina’s ‘other’ shale formation – Natural Gas Daily – Interfax Global Energy.