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Schlumberger out in Vaca Muerta, Shell - Equinor in

Shell, Equinor buy Schlumberger's stake in Vaca Muerta bloc.

- Separate deal is for buying 11% of shale oil block from YPF
- Deals show how geology is winning over country's economic problems

By Platts

Petroleumworld 02 03 2020

Shell and Equinor said Friday they have agreed to buy Schlumberger's 49% stake in Bandurria Sur for $355 million, adding that they plan to increase their ownership of the shale oil block in Argentina's Vaca Muerta to 60% in a separate deal.

The companies will pay $177.5 million each for 24.5% stakes in the 56,000-acre block, according to separate statements.

The Netherlands-based Shell and Norway's Equinor added that they have entered into a preliminary deal with YPF, Argentina's state-backed company that owns the other 51% of Bandurria Sur, to buy 11% of the block from it, taking their ownership of the block to 60%. The ownership will be divided evenly between Shell and Equinor.

YPF will retain a 40% stake in Bandurria Sur and remain the operator, it said in a securities filing.

Schlumberger has said it is selling as part of a global strategy to refocus its business on oilfield services, not production.


Bandurria Sur is a prime asset for all three companies. Located in the oil window, it is part of a cluster of blocks in the central-east of the play that YPF, the biggest oil producer in Vaca Muerta, is targeting for production growth over the next few years.

Bandurria Sur is in the late pilot phase of development with production of around 10,000 boe/d, according to Equinor.

For Shell, the block is located adjacent to the Bajada de Añelo block that it operates, providing economies of scale in the location.

"Partnering with Equinor in accessing the Bandurria Sur block provides Shell with additional liquid-rich growth opportunities in what we see as a promising area," Sean Rooney, head of Shell Argentina, said in a statement.

Shell has been expanding its acreage in Vaca Muerta over the past decade, acquiring two blocks from Total in 2014 and putting into production a cluster of three blocks in the oil window since then.

For its part, Equinor's country manager for Argentina, Nidia Alvarez Crogh, said the acquisition is part of a broader strategy "to build international growth options."

Equinor has been increasing its reach in Vaca Muerta as well as offshore Argentina, as has Shell. Equinor has a 50% stake in YPF-operated Bajo del Toro in the north of Vaca Muerta and has a 90% operated interest in the neighboring blocks Bajo del Toro Este and Aguila Mora Noreste.


The deal comes even after investment in Vaca Muerta plunged last year after the implementation of price controls, first on gas and then on oil, that have cut wellhead prices to nearly breakeven levels.

President Alberto Fernandez, a left-leaning moderate who took office December 10, has extended the controls to try to contain inflation, which at 54% is among the highest in the world.

Despite this, companies have said that the geology of Vaca Muerta is so promising for production growth that they can put up with such short-term hurdles. Both Equinor and Shell last week told Omar Gutierrez, the governor of Neuquen, the province where most of Vaca Muerta is located, that they were looking for opportunities to increase their participation in the play as they develop their existing assets.

Chevron also told the governor that it is taking steps to boost oil production from Vaca Muerta, while France's Total has expressed optimism about its projects in the play.

Vaca Muerta, which came into production in 2012-13, is producing more than 100,000 b/d of oil and 37 million cu m/d of gas, but there are expectations that the overall oil output will jump to 1.1 million b/d and gas to 260 million cu m/d by 2030. The estimate, by the Energy Secretariat, suggests that with such production, Argentina will be able to export 500,000 b/d of crude and more than 60 million cu m/d of gas by then.

By S&P Global Platts 01 31


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