Argentina’s president Javier Milei has enacted austerity measures leading to improved inflation and investment in the Vaca Muerta shale, propelling oil production. The shale, one of the largest globally, is set to elevate Argentina as South America’s third-largest oil producer by 2024 with significant foreign investment and infrastructure improvements contributing to this growth.
Argentina’s newly elected president, Javier Milei, an ardent supporter of anarcho-capitalism, has implemented strict austerity measures to combat severe triple-digit inflation and restore economic stability. Despite the challenges posed by past economic mismanagement, indicators suggest a positive turnaround is underway. As inflation decreases and economic growth resumes, Argentina’s appeal to foreign investors has strengthened, aiding the rapid development of the Vaca Muerta shale and propelling a surge in oil and gas production.
Covering approximately 7.7 million acres, Vaca Muerta, meaning “Dead Cow,” is located in Neuquén province and is recognized as the third-largest hydrocarbon-rich geological formation worldwide. Argentina’s government has long regarded it as an economic boon, likening its potential to the Eagle Ford shale but now arguing its quality rivals that of the Permian Basin. The U.S. Energy Information Administration estimates that Vaca Muerta holds about 16 billion barrels of recoverable shale oil and 308 trillion cubic feet of shale gas.
Discovered by Repsol in 2010, significant exploitation only began following the nationalization of YPF in 2012 under President Cristina Fernández de Kirchner. Since then, oil production from Vaca Muerta has grown extensively, from approximately 45,000 barrels per day in 2014 to an expected 453,000 by December 2024. As this formation contributes to half of Argentina’s hydrocarbon output, the country has recently surpassed Colombia, now ranking as South America’s third-largest oil producer.
Argentina’s total oil production for 2024 is projected to average 702,000 barrels per day, marking a noteworthy 10.5% increase from the previous year. Notably, December 2024 production figures indicate a daily output of 757,122 barrels, largely derived from Vaca Muerta. This production boom signifies the beginning of a major unconventional oil and gas boom, enhancing Argentina’s position in the global energy landscape.
Investments in Vaca Muerta are advancing, with projections estimating over $9 billion will be allocated towards its development in 2024 alone. This capital will target essential infrastructure enhancements, including pipelines and storage facilities. YPF leads the initiative as the largest producer and investor in the shale formation, and plans to expand its investments significantly in the coming years.
YPF reported an investment of $3 billion on its unconventional acreage in 2024, contributing to 55% of the country’s shale oil output. Foreign companies are also pivotal players in the region, with Vista Energy, Shell, and Pan American Energy among the leading producers in Vaca Muerta. Such foreign investments are essential for further infrastructure development to support the booming shale sector.
Looking forward, YPF anticipates capital expenditures of $5.5 billion in 2025, primarily aimed at increasing production from Vaca Muerta. This uptick is projected to enhance shale oil production significantly by 30% to 40%. Additionally, key infrastructure projects like the $3 billion Vaca Muerta Sur pipeline, which will greatly enhance transport capacity for crude oil and facilitate additional production growth, are already underway.
The geological formation is expected to reach one million barrels per day in production by the decade’s end, positioning Argentina to become South America’s second-largest oil producer, behind Brazil. Such advancements are projected to contribute an estimated $10 billion to the nation’s gross domestic product by 2030, making oil and gas exports a crucial driver for the economy and reinforcing President Milei’s economic reforms.
In summary, Argentina’s Vaca Muerta shale formation is demonstrating remarkable growth in oil and gas production under the leadership of President Javier Milei. With significant investment and infrastructure development, Argentina has positioned itself as a key player in the South American oil market, potentially overtaking Colombia and Venezuela in production levels. This is expected to contribute significantly to the national economy, bolstering Milei’s initiatives to stabilize and grow Argentina’s economy.
Original Source: oilprice.com
