Argentina’s Vaca Muerta Fuels Oil Production Surge

(oilprice.com) Argentina’s controversial president Javier Milei, a self-described anarcho-capitalist, on taking office enacted strict austerity measures to rein in rampant triple-digit inflation, kick-start the economy and slash a massive fiscal deficit. While it is too early to tell if Milei has reversed decades of economic mismanagement there are promising signs of a miracle emerging. Inflation has plummeted while Argentina’s strife-torn economy is returning to growth boosting the country’s appeal to foreign investors. This, in turn, is fueling investment in the vast Vaca Muerta shale, causing oil and gas production to soar. Indeed, by the end of 2024, Argentina overtook Colombia to become South America’s third-largest oil producer, with signs of massive production growth ahead.

The 7.7-million-acre Vaca Muerta, Spanish for Dead Cow, shale situated in Argentina’s Neuquén province is touted to be the third largest hydrocarbon-rich geological body of its type globally. The geological formation has long been seen as an economic silver bullet by Argentina’s federal government in the capital Buenos Aires. While the unconventional hydrocarbon basin has often been compared to the Eagle Ford shale, lately, analysts are asserting that its quality is on par with the prolific Permian Basin, the largest U.S. oil-producing basin. Indeed, the Vaca Muerta is ranked as the world’s fourth largest shale oil resource, with the U.S. EIA estimating it contains 16 billion barrels of recoverable shale oil and second for natural gas with 308 trillion cubic feet of shale gas.

While the formation was discovered by Spanish global energy major Repsol in 2010, it wasn’t until President Cristina Fernández de Kirchner nationalized Argentina’s YPF, seizing 51% from Repsol in April 2012, that exploitation began in earnest. Since then, Argentina’s hydrocarbon reserves and production have grown prodigiously. Between 2014 and 2024, the Vaca Muerta’s oil production expanded tenfold, soaring from an estimated 45,000 barrels of oil per day to 453,000 barrels daily for December 2024. The shale formation is now the primary driver of Argentina’s growing hydrocarbon output, responsible for half of all petroleum and natural gas lifted during 2024 compared to a negligible share a decade earlier.

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