Salta Province Trying to Attract Investment in High-Potential Conventional Plays

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Part I

The Salta province is in northwestern Argentina. It covers an area of 155,488 square kilometers.

Salta province NW Argentina

Salta province NW Argentina

It borders Bolivia and Paraguay to the north and Chile to the west. It has a warm semi-arid climate and a dry winter season. There is a high diversity of landscapes including the Andes Mountains, enormous valleys, and the Puna, or Altiplano, in the northwest, which is a plateau at 3,000 to 4,000 meters above sea level. Before the Spanish conquest in the 16th century, Diaguita and Calchaquie indigenous groups lived in the valleys, the Atacama in the Puna and the Wichí in the Chaco province in the southeast. The first Spanish conquistador to venture into this area was Diego de Almagro in 1535, and the first autonomous government was created in 1814 by Gervasio Antonio de Posadas after the Battle of Salta in 1813. The provincial hero was the gaucho leader Martín Miguel de Güemes, who led the guerillas that liberated the territories from the Spanish kingdom. The new Salta province included parts of the neighboring Jujuy province, southern Bolivia, and northern Chile. Those territories were lost in the early 20th century, leaving the province as it is today.
Agriculture is an important activity in the province, with tobacco, sugar cane and wine as the most important products and leading exports from the area. The Salta province is home to a number of natural, social, and historic attractions including the city of Salta “La Linda” (“The beautiful”). Original Spanish colonial architecture is perfectly conserved. The Tren a las Nubes (Train to the Clouds) crosses canyons and cliffs before arriving at San Antonio de los Cobres at an elevation of over 12,500 feet. Three national parks receive many visitors from all over the world. The population of Salta is about 1.2 million.

The Train to the Clouds

The Train to the Clouds

Exploration History and Plays

The first exploration for hydrocarbons started in 1907 at Quebrada de Galarza in the northern part of the province. Oil shows were found in 1911 with the Aguaray 1 and Aguaray 2 near the northern border. Many wells were drilled by the Standard Oil Company in the 1920s in Aguas Blancas, Lomita and San Pedro. The early state-owned YPF development was the Vespucio field, which gave the first significant economic results in the province. Other fields were discovered and provincial production reached 1.3 million barrels in 1942. The oil discovery of the Campo Duran 6 and Madrejones wells in 1952 launched the development of one of the most important fields in the area. Three major geologic and geographic trends have been identified in the province as oil and gas productive.

Silurian-Devonian Play

– The Los Monos Formation is the source rock, and Huamampampa, Icla and Santa Rosa are the main reservoir rocks. The most important fields in this basin are Aguarague, Tranquitas, Arroyo Lomitas, San Pedrito, Chango Norte, Porcelana, San Pedrito, Ramos Norte, Limon, Rio Pescado, San Andres and Rio Colorado.

Silurian-Devonian play(Thickness)

Silurian-Devonian play(Thickness)

Carboniferous Play

– This basin produced the first volumes of hydrocarbon in the province, with shallow objectives between 320-1,200 meters at the Lomitas, Vespucio, San Pedro, Aguas Blancas, Tranquitas, Cerro Tartagal and Ramos fields. A second exploratory stage led to new discoveries in the 1950s and early 1960s at Campo Duran, Madrejones, Ipaguazu, Jollin, Tonono, Acambuco and Macueta. The main productive formations were Las Penas, Tarija and Tupambi. Some pelitic layers of Tupambi and Itacuami are considered potential source rocks.

Carboniferous play (thickness)

Carboniferous play (thickness)

Cretaceous Play

– The main producing horizon is the Yacoraite Formation with sandstones and oolitic and fractured limestones. Other oil and gas sources have been identified with the secondary porosity limestones of the Olmedo and Maiz Gordo formations. In 2000, important volumes of gas and condensate were found within the Mealla sandstone horizons. The main producing fields here are El Chorro, Balbuena Este, Puesto Climaco, Vinalar Norte, La Reina, Yacarecito, La Bolsa, Puesto Guardian, Puesto Climaco, Canada Grande, Pozo Escondido, Las Avispas, Divisadero Sur, Martinez del Tineo, Dos Puntitas and Valle Morado. This trend covers about 90,000 square kilometers.

Cretaceous play (thickness)

Cretaceous play (thickness)

Source Rocks

– With more than one source rock and various reservoirs, Salta has multiple petroleum systems. The highest-potential organic TOC Los Monos shales are capable of generating large volumes of hydrocarbons with approximately 1,000 meters of thickness and a wide extent. The Yacoraite Formation source rock is thought to be the Olmedo Formation with a hydrocarbon-generating window between 3,600 and 4,000 meters.

Unconventional Potential

– Various reports indicate the Los Monos fractured shales as a potential unconventional source in the area, with mainly gas prospects. They can be considered either a source or a seal. Future exploration is likely to be focused on areas with better petrophysical conditions where the formation exists in anticlines more than 2,000 meters thick.

A New Oil and Gas Era for Salta?

Currently UK’s President Petroleum, Techint Group subsidiary Tecpetrol, Pan American Energy and Argentina’s Pluspetrol are the biggest players in Salta province concessions. Phoenix Global Resources, Hong Kong’s New Times Energy subsidiary High Luck, John Henry Petroleum (JHP) and Scan Oil Energy also hold interests in the province.

Licensed acreage by operator

Licensed acreage by operator

Tecpetrol was the biggest oil producer in the province with 752 Mbo in 2016. Pan American Energy recorded production of 748 Mbo the same year. Pan American Energy was the leader in natural gas production in 2016 with 42.85 Bcfg and was followed by Tecpetrol with 27 Bcfg and Pluspetrol with 23 Bcfg. According to provincial authorities seven exploratory high risk potential plays have been identified in Salta, three in the Paleozoic and four in the Cretaceous. In 2016, an exploration permit was awarded to YPF on the 1,165-square-kilometer Desecho Chico exploration block for an initial three-year exploration period. The company presented an exploration plan for a 365-square-kilometer area of the block. The block is located in close proximity to and west of a Bolivian Tarija Basin block with active oil production.

Production and Reserves

The Salta province was for decades the second-highest producer in Argentina and its productive plays were among the most prolific in the country. However, it eventually lost its position due to natural reservoir declines from long-term production and also the lack of wellhead gas price policies to promote new investment.

Production decline 2006-2017

Production decline 2006-2017

Daily oil production in August 2017 reached 5,000 bo/d and 233 MMcg/d from 65 wells. Total proven reserves were calculated in 2016 as 28.21 MMbo and 714.51 Bcfg. The main producing prospects and horizons in Salta are the Silurian-Devonian Huamampampa, Icla and Santa Rosa formations as well as the possible shale prospects for the Los Monos Formation, seen previously as a source rock but where interesting results have been recorded on the Yacuy 1001 and Ramos 1004 wells. The San Telmo, Las Penas, Tarija, Tupambi and Cretaceous Yacoraite formations are among the recognized productive horizons and targets in the province and Paleozoic prospects are deep but hold high productive potential for both oil and natural gas. The oil and gas cumulative production from 1999 to 2016 is dominated by four contracts, historically the most important producers in Salta:

Ramos
Acambuco
Aguarague
San Antonio Sur

Salta Province Trying to Attract Investment in High-Potential Conventional Plays

Salta Province Trying to Attract Investment in High-Potential Conventional Plays

The Ramos field has the highest cumulative production, but over the last decade production declines now put it in third place for annual production.

Salta Province Trying to Attract Investment in High-Potential Conventional Plays
Salta Province Trying to Attract Investment in High-Potential Conventional Plays
These four main producing contracts are mainly focused on natural gas production. In the other areas, production is more oriented to oil because higher profitability that makes projects sustainable.

Salta Province Trying to Attract Investment in High-Potential Conventional Plays
When analyzing the last decade of production, the number of producing wells averages slightly below 90 per year. If investment is not increased to drill more development wells and maintain production levels, the progressive decline of the fields is inevitable. The main producers in the province seem to have recently recognized this and are pursuing drilling campaigns and ambitious workover programs, like the one recently performed in Puesto Guardian by President Energy.

Salta Province Trying to Attract Investment in High-Potential Conventional Plays
Considering reserves for the entire Salta province, a consistent decline is noted, especially for gas reserves. The oil reserves have slightly increased in the last three years. This is not related to increased exploration activity, but mainly to a reserves re-evaluation by operators. The lack of exploration investment is reflected in the number of exploration wells drilled in the last decade, which is only 13.

Salta Province Trying to Attract Investment in High-Potential Conventional Plays
Salta Province Trying to Attract Investment in High-Potential Conventional Plays

Future Bid Round

In order to reverse the declines, since 2015 the province has been preparing a bid round for 15 exploratory blocks. A contract was recently signed with private consultants to organize the provincial hydrocarbon data in order to accommodate bid round and exploration plans. The main objective is to promote future investments in the province. Final details of the offering are still being decided at this time. Salta officials in early 2017 participated in a preliminary trip to the U.S. organized by the AmCham (U.S. Chamber of Commerce in Argentina) to Washington, D.C., and the Houston area where they met with U.S. government officials and other energy and industry representatives.

Future bid blocks and licensed acreage

Future bid blocks and licensed acreage

The provincial government is preparing a hydrocarbon activity promotion law to declare oil and gas research, development and production as in the provincial interests of Salta. It will establish a special promotional regime to expand conventional and unconventional hydrocarbon exploration and production and also encourage private sector participation in those activities. Research, exploration and other related activities will be stimulated, with special emphasis in certain geographic zones. Salta technical information and resources to reduce costs and investment risk will be improved by the proposed law. This regime could include tax exemption on much equipment and a significant reduction in royalties for the province, especially for high-risk projects. Technical and financial assistance will be provided by the government for the applicants of this regime. Public services will be improved to facilitate oil and gas activity.

It will be interesting to see if Salta and its upcoming round can also challenge other parts of Argentina such as the Neuquén Basin Vaca Muerta trend for the attention of the hydrocarbon industry in a setting better known for scenic beauty than hydrocarbons.

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