Within Argentina’s battered economy, there is one sector that seems to be thriving amidst the crisis. And within this thriving sector, there is one specific asset that holds more promise than the rest: the large Vaca Muerta field. This accumulation of unconventional oil is producing some 386,000 barrels of crude oil per day, pushing Argentina to levels of crude oil production not seen in over 20 years. In an attempt to exploit this field even more, YPF and Pampa Energy are working to better utilize the resources and are looking for new ones within the same formation. Rystad Energy believes that, if all goes well, Vaca Muerta will experience a second revolution and compete with two historic oil fields. shale from the USA, with the cradle of hydraulic fracturing in America.
The engine of the oil boom that Argentina is enjoying is the formation of shale Vaca Muerta, located in the Neuquén Basin, Patagonia. Geologists estimate that the field could hold crude reserves equal to 16 billion barrels of shale oil. (shale oil), making it the largest unconventional crude oil reserve in Latin America and one of the largest unconventional hydrocarbon reserves in the world. Vaca Muerta is often compared to the prolific Eagle Ford shale field in Texas, a field that pumps about 1.2 million barrels of oil. The U.S. Energy Information Administration (EIA) confirmed in 2019 that Vaca Muerta and Eagle Ford share similar depths, thicknesses, pressures, and mineral compositions.
All this has led to the concentration of industrial investments in this “field”. The Argentine government explained in a note published in September that the production of unconventional hydrocarbons in Argentina continues to show sustained growth. In June, oil and gas Vaca Muerta training reached exceptional volumes in annual comparison with the same period in 2023. In the case of oil, in June 2024, 386,000 barrels per day were obtained in July (it is estimated that they continued to grow in August), which represents an increase of 28.2% compared to the same month of the previous year.
This increase is reflected in a sharp increase in production in Argentina. “Argentina’s supply increased by 10,000 barrels in August, to 820,000 barrels per day, driven by increased production from Vaca Muerta, the large shale field in the Neuquén Basin,” International Energy Agency experts said in a report published in September.
The second revolution
The Argentine state-controlled oil company YPF has received authorization to conduct a new exploration campaign in an area located north of the huge unconventional hydrocarbon formation of Vaca Muerta and under the jurisdiction of the Argentine province of Mendoza (west), according to an official. sources revealed. As the Mendoza government indicated in a statement, the provincial executive authorized YPF to begin the second exploratory period in the CN VII A area.
After announcing the positive results of its explorations in Paso Bardas Norte and CN-VII, in which it invested 17 million dollars, the oil company has requested authorization from Mendoza to proceed with a second period of exploration in the CN-VII reserve area of Argentina. the largest hydrocarbon producer plans to drill in this area, two deeper horizontal wells. Vaca Muerta is the world’s second largest unconventional gas reserve and the fourth largest oil reserve of this type. With 30,000 square kilometers, the formation has its epicenter in the province of Neuquén (southwest), but extends to other provinces, such as Mendoza.
“Mendoza has 30% of the Vaca Muerta formation in its subsoil. We must advance in the exploration of these resources to be able to certify them, because they represent a great potential for the production of hydrocarbons in Mendoza,” stressed the Minister of Energy a few days ago and Provincial Mining, Jimena Latorre.YPF’s progress in committing to more investments is an excellent sign on this path.which also encourages other companies to explore our resources,” the minister added. The new exploration period, which will last four years, will be crucial to more precisely assess the characteristics of the subsoil and determine the potential for the production of unconventional hydrocarbons in the region.
Not only YPF, but also the company Pampa Energía announced last Friday a debt issue of 410 million dollars, a key step to expand its operations in Vaca Muerta. Pampa is the third gas producer in the Neuquén basin. From Reuters, they point out that Argentina hopes that this increased investment in Vaca Muerta can increase national production, boost exports and help maintain the energy surplus obtained last month.
More than a million barrels
However, according to calculations by Rystad Energy’s booming Vaca Muerta crude oil production could increase to over 1 million barrels per day (bpd) in coming years by the end of the decade, but only if extraction capacity and platform availability do not limit growth. Rystad Energy’s modelling shows that if production is relatively free, oil production could realistically reach more than a million barrels per day in the second half of 2030.
“The expected growth could raise Vaca Muerta’s profile and position it as one of the leading sources of shale production, with the Bakken Fields or Eagle Fordtwo of the world-class shale basins in the United States. It would also help the Neuquén region become a net oil exporter, which could generate $20 billion in total revenue by 2030,” Rystad Energy estimates. To achieve these goals, Milei authorities and the government are digging the ground for a second revolution in the country. this field rich in crude oil and gas.
The recently approved omnibus bill promoted by the government of Javier Milei has precisely established significant changes in the oil and gas sector. Its objective is to eliminate state intervention in the market, allowing oil and gas companies to freely sell their products (without price limits or obstacles) both nationally and abroad, which encourages the production of hydrocarbons for export. With this reform, some price controls that distorted investment and growth of activity in the sector have been eliminated. Although, initially, these measures imply an increase in the price of some fuels, in the long term they will allow an increase in supply, thus balancing the market in a “natural” way.
The bill also introduces a promotion regime to improve tax and exchange conditions and ensure stability of investments exceeding 200 million dollarsThis should provide the private sector with predictability regarding operations and profits, and also generate more business opportunities, these experts note.
The measures also include the liberalization of fuel prices and the reduction of energy subsidies, which have contributed to inflation and directly affected citizens’ purchasing power, while improving private sector profit margins. Milei’s ideological position is unprecedented in Argentina’s political history and initially created challenges in the implementation of his program.
If legal stability is maintained and the price of oil does not fall (which would reduce the profitability of the investment), the Vaca Muerta projects could lead this Argentine crude oil field to bankruptcy. compete directly with some of the cradles of hydraulic fracturing in the United States. Furthermore, the revenues that would be generated in this scenario could be essential to stimulate the country’s economy.
