It is still too early to draw conclusions, but it seems clear that some things are changing in Argentina. If oil and gas production has increased sharply in recent months, it is no coincidence. Companies operating in the large unconventional oil formation of Vaca Muerta are accelerating their investments, driven by greater legal certainty and expectations of future incentivess product of these investments. All this has a notable impact on the country’s hydrocarbon production and, consequently, on the energy balance, which registers a more than notable surplus that could be vital for the Bank of Argentina to continue increasing its gross reserves in dollars. will give greater stability to the peso and support the fight against inflation of the government of Javier Milei.
Argentina’s energy balance has not only managed to reverse its negative balance, but which also accumulated its largest surplus in 17 years thanks to the growing activity of the gigantic unconventional hydrocarbon formation of Vaca Muerta. What does the Milei government have to do with all this? The International Energy Agency explains this in one of its latest reports: “Argentinian President Javier Milei has implemented energy sector reform with the publication of a broad general legal amendment in July. This law also created a new mechanism. for large-scale investments (Large Investment Incentive Regime or RIGI) which will provide 30 years of legal and regulatory stability for projects over $200 million.
The International Energy Agency itself highlighted these positive changes for the industry and pointed out that the tax changes that are already boosting gas and oil production in the country: “Additional tax exemptions, exemptions from export taxes and access to foreign exchange for projects worth more than $1 billion. These reforms are expected to enable increased production of Vaca Muerta as major international players analyze details and determine future plans investment.
The newspaper elEconomista.es had access to the CMF banking report in which these data are presented and the accumulated surplus is calculated. The experts of this entity assure that “in this sense, the main companies in the sector are progressing by leaps and bounds thanks to the implementation of RIGI. The most notable news in recent days has been the agreement reached by the main producers of unconventional oil. of Argentina to begin exporting the production which will be transported by the Vaca Muerta Sur pipeline to Punta Colorada. It is estimated that this consortium could generate annual exports of $30 billion from 2027.. The investment in this new operation would reach $2.6 billion. This, combined with other projects such as Oldelval and Vaca Muerta Norte, will significantly increase the export potential of the Neuquén Basin,” the report states.
The companies working on the Vaca Muerta training already sensed that the arrival of Milei was going to be synonymous with greater legal security, which is why their investments and operations are burning, generating great expectations in a training that can accommodate up to to 16 billion barrels of crude. oil reserves. Little by little, the Neuquén region is developing and consolidating itself as the largest hydrocarbon-producing province in Argentina, thanks to the permanent growth of the Vaca Muerta deposits, the centerpiece of the oil capital generated in this province. So, in October, Crude oil production hits new all-time high at 447,460 barrels per daywhich represents an increase of 0.13% compared to the previous month and a notable increase of 26.35% compared to the same month of 2023. Oil is increasingly important to the Argentine economy.
The $4.3 billion surplus
However, according to official data, during the first ten months of this year the energy trade balance accumulated a positive balance of 4.3 billion dollars and, according to official and private projections, it could close the year with a excess of between 5,000 and 6,000. million dollars. This result represents a reversal compared to the deficit that Argentina has recorded since 2011, with the exception of 2020, an abnormal year due to the effects of the pandemic.
“The dynamics of the energy balance continues to consolidate with a very good performance in hydrocarbon exports combined with a sharp contraction in its imports. During the first ten months of the year, the energy balance reached the largest surplus since 2007,” underlines the CMF bank in a report.
Exports of crude oil, gas and other energy rose in the first ten months of the year by 23.4 percent year-on-year to $7.995 million, while imports fell by $48.8 million. %, at $3.693 million. For Leonardo Piazza, director of the consulting firm LP Consulting, the key to this change in trend is Vaca Muerta, in southwest Argentina, the world’s second largest reserve of unconventional gas and the fourth largest reserve of oil of this type.
The colossal formation, which began exploration by Argentine state-controlled oil company YPF in 2013, has since received $50 billion in investment for its development. “The investments that were made at the time are bearing fruit today. There is an inertial flow: it is already generating production,” he assures. EFE Piazza.
A decade after Vaca Muerta began operations, production reached a record, allowing Argentina not only to significantly reduce its gas import needs during the southern winter, but also to have balances growing exportable hydrocarbons. “This has a very positive impact on Argentina’s trade balancewhich will no longer depend solely on its agricultural exports. And the flow of foreign currencies due to increased exports will allow the Central Bank’s monetary reserves to increase,” Piazza said.
Vaca Muerta, where oil companies such as Shell, ExxonMobil, Chevron, Total, Wintershall, Vista, Pan American Energy (PAE), Pluspetrol and Pampa Energía, among others, also operate, already accounts for more than half of the gas and oil that Argentina produces. Recent work to expand gas and oil pipelines has increased transportation and export capacity.
Argentina exports natural gas to Chile and will soon do so to Brazil through the network through which it previously imported gas from Bolivar, while its main buyers of crude oil are the United States, Chile and Brazil . The expansion of the Oldelval pipeline and the construction of the Vaca Muerta Sur pipeline – a project in which several oil companies are involved, with an investment of $2.6 billion – suggest a significant increase in crude oil exports.
According to a report from PwC published a few days ago that the massive development of Vaca Muerta and associated projects could bring Argentina’s energy surplus to more than $30 billion by 2030.supplanting the agricultural sector as the main foreign exchange generator in the South American country.
