Argentina’s shale oil output from the vast but barely tapped Vaca Muerta formation has increased, but low world oil prices and high drilling costs threaten profitability, the chief executive of state-run YPF said.

YPF has said the slump in international oil prices over the last year has had no impact on the company’s exploration plans, defying the industry trend of multinational giants announcing multibillion-dollar spending cuts.

The South American country wants to ramp up its exploitation of Vaca Muerta, which lies beneath the windswept plains of Patagonia, to reverse an energy deficit.

Government controls on the economy and high costs, however, have deterred foreign investors.

As the fall in world oil prices has forced energy companies to recalculate their plans, uncertainty has been heightened in Vaca Muerta, where production is in its infancy and engineers are still deciding at what angles to drill in order to optimize output.

"It is still early to talk about the profitability of non- conventional energy. It depends on a lot of factors," YPF chief executive officer Miguel Galuccio told an industry conference in Uruguay.

"It is not profitable with an $11 million well and prices at $50 per barrel. We drilled our vertical wells with the expectation that they would be profitable at $84 per barrel and with wells that cost between $6.5 or $7 million," he added.

"The horizontal wells are demonstrating a much more positive range in terms of productivity, but we are talking about wells that have been producing for less than one year," Galuccio said.

YPF has said reversing the country’s energy deficit will require $200 billion in investment over the next decade to exploit Vaca Muerta.