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Argentina's Oldelval to expand oil pipeline capacity as shale output rises



By Charles Newbery / Platts

Petroleumworld 05 23 2019

Argentinian oil pipeline operator Oleoductos del Valle plans to invest $100 million to expand its transportation capacity by 38% over the next year or so to handle growing output from Vaca Muerta, the country's biggest shale play, and avert bottlenecks.

The project will take its transport capacity to a little more than 226,000 b/d, including by modernizing four pump stations and a storage tank facility, as well as installing new flow meters and other infrastructure, the company said in a statement late Thursday.

This will help Oldelval, as the company is known, to keep up with increasing demand for pipeline capacity as shale oil production surges in the Neuquen Basin, home to the Vaca Muerta play.

"Our main objective is to satisfy demand to avoid any bottlenecks," the company's general manager, Jorge Vugdelija, said in the statement.


On Wednesday, Omar Gutierrez, governor of Neuquen province, where the majority of the pilot and full-scale development projects in Vaca Muerta are located, said oil output from the province would double to 260,000 b/d by the end of 2020 from 130,000 b/d this month.

Production would continue to grow after that, he said, as more companies advance to full-scale development from pilot level in Vaca Muerta, taking the acreage in mass production to 4% or 5% in 2020 from 2% this year.

Shell, the latest company to go into full-scale production in the play, Chevron, ExxonMobil and other companies are stepping up their investments, with a focus on the oil window. One driver is the availability of immediate pipeline capacity and the export potential, given that production is starting to surpass average domestic demand of 500,000 b/d.

The country produced slightly more than 502,000 b/d in March, according to the latest data from the Energy Secretariat.


The growth has allowed Argentina to halt crude imports and step up exports, first of heavier varieties from southern Patagonia, which averaged nearly 50,000 b/d in March, official data show.

Despite the production growth, there have been warnings of potential bottlenecks. Gabriel Lopez, the deputy secretary of energy in Neuquen, told S&P Global Platts in March that midstream projects must soon start to sustain the production and export growth. Otherwise, he said, the province's production would peak at 350,000 b/d in 2022 or 2023.

Oldelval's project should bring some relief to those concerns.

The company, which transports 30% of the country's oil production, has said it wants to expand its capacity to 315,000 b/d in 2024, helping to keep up with the expected growth.

This is buoying expectations of export growth.

On Thursday, Argentina's deputy secretary of energy planning, Luciano Caratori, said he expects oil production to grow by between 5.2% and 7% per year through 2030, led by Vaca Muerta.

As there are no plans to expand the country's refining capacity, that means exports will climb as production increases.

The first shipments of light crude from Vaca Muerta were made in February, "and in the short term there will be more movement," Caratori told an energy seminar held by the Argentine Council of International Relations, a think-tank.

The government has said that if Vaca Muerta's development progresses as planned, Argentina could double its oil production to 1 million b/d in 2023, allowing exports to increase to 500,000 b/d by that year. The country has the capacity to refine 560,000 b/d, but its demand averages 500,000 b/d, and is currently less than that because an ongoing recession is dampening demand for petroleum products.



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Story by Charles Newbery from Platts / SPGlobal.

- 05 17 2019

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