France's oil major Total said on Thursday it approved the development of the first phase of the operated Aguada Pichana Este license in the giant Vaca Muerta shale play in Argentina, as it boosted interim dividends on back of a 56 per cent jump in first quarter earnings.
In a first quarter trading update, Total said its adjusted net income rose 56 per cent to $2.6 billion in the three months ending in March, up from $1.6 billion in the same quarter last year. It said the rise was due to good operational performance and a steadily decreasing breakeven price.
Oil prices in the first quarter averaged $54 per barrel, supported by an OPEC and non-OPEC agreement to cut production.
It lifted first quarter dividend by 1.6 per cent to 0.62 euro per share.
Total’s upstream business grew 4 per cent with the start-up of the giant Moho Nord field in Congo. It signed a deal with Petrobras, gaining access to the giant Lara and Lapa fields in Brazil and also agreed with Sonatrach for future development in Algeria.
In Argentina, the oil and gas major said it will also increase its interest in the Aguada Pichana Este license to 41 per cent from 27.27 per cent as it approved the first phase development.
Gas production from the project will be treated at the existing Aguada Pichana gas plant which will reach its full capacity of 16 million cubic meters per day or 100,000 barrels equivalent per day, Total said in a statement.
"Launching this project is a key milestone in the development of the giant Vaca Muerta shale play,” said Arnaud Breuillac, president of exploration and production at the energy firm.
Total is also increasing its interest in the East part of the Aguada Pichana concession where the results of pilot wells drilled to date have been “excellent,” he added.
The development will benefit from the use of existing facilities, to produce shale gas at a very competitive cost.
“This is one of the ten major projects that Exploration & Production plans to sanction in 2017-2018, taking advantage of the favorable low cost environment, which is now approved and will contribute to the Group’s production growth beyond 2020,” Breuillac said.
Total’s decision follows the announcement by the Argentine Ministry of Energy and Mines of the “Program for Stimulation of Unconventional Gas Developments” which guarantees gas prices until 2021.
As part of the project, the Aguada Pichana partners (Total Austral S.A. 27.27 per cent, YPF S.A. 27.27 per cent, Wintershall Energia S.A. 27.27 per cent and Panamerican Energy LLC 18.18 per cent) have entered into a memorandum of understanding that includes an increase of Total’s participation to 41 per cent in the Aguada Pichana Este project being developed. The agreement remains subject to the approval of Neuquen Province authorities.
TOTAL AND ARGENTINA
Total has been present in Argentina for nearly 40 years and operates around 30 per cent of the domestic gas production. In 2016, the group's share of production in Argentina was 78,000 barrels of oil equivalent per day.
On the CMA-1 concession in Tierra del Fuego, Total operates the onshore Ara and Cañadon Alfa fields and the offshore Hidra, Carina and Aries fields. In February 2016, Total has started up production at the offshore Vega Pleyade and condensate field situated on the concession. Total is also planning to sanction the Fenix development before end 2018.
In the onshore Neuquén basin, the company through subsidiaries holds equity interests in ten blocks, spanning more than 300,000 net acres, of which six are operated, including the Aguada Pichana and San Roque producing fields.
Total is currently conducting a pilot project on its operated Rincon la Ceniza license, which lies in the Vaca Muerta wet gas window, with very encouraging results so far. An appraisal well drilled in 2016 on the nearby operated La Escalonada block to test the oil window has also shown excellent productivity.