Sept. 16 (oilprice.com) Argentina’s controversial right-wing president, Javier Milei, slashed inflation with a brutal dose of economic austerity, but this came at a steep social cost. The cost of living is spiraling higher, fueling household debt, loan delinquencies, and economic hardship. Industrial output, since Milei took office, has declined sharply, with local companies closing at an alarming rate. While parts of the economy are falling into chaos, Argentina’s oil and gas sector is experiencing a generational boom driven by the Vaca Muerta shale.
Argentina’s vital hydrocarbon sector continues to surge, with oil production hitting yet another record in July 2026. Output reached 902,920 barrels per day, almost 1% above June and 12% higher than a year earlier, marking the country’s highest oil production on record. Natural gas production has also expanded strongly, although output slipped 0.5% month over month and 1.6% year over year in July to average 5.6 billion cubic feet per day. That modest setback barely dents the bigger picture: economically crucial gas production has surged 21% over the past five years.
It is the ongoing and growing exploitation of the Vaca Muerta shale, situated in northern Patagonia in Neuquén Province which is responsible for Argentina’s booming oil and natural gas complex. For July 2026, shale oil production rose by 1.2% month over month and a whopping 26% year over year to an all-time high of 648,347 barrels per day. As a result, shale oil now comprises a record 72% of Argentina’s total petroleum output. This is also responsible for bolstering energy security in the Americas.
Shale gas production is also expanding at a healthy clip. For July 2026, Argentina lifted an average of 3.9 billion cubic feet per day of the fossil, which, despite being nearly 1% less than a month prior, was almost 4% higher year over year. That is the second-highest monthly shale gas production ever recorded. It was only eclipsed by June 2026 output, which hit 3.94 billion cubic feet per day. Shale gas now makes up 70% of Argentina’s natural gas output, which is the highest level ever recorded.
Shale oil and gas production will keep growing at a solid pace, with Argentina on track to become a pure unconventional producer. You see, conventional oil output is in decline and has been for over a decade. Argentina’s conventional fields are well past their prime, in many cases having hit peak production a decade ago with output now truly in decline. Government data shows July 2026 conventional oil production of 254,574 barrels per day, which is 2% lower than a month prior and 13% less year over year, indicating conventional oil output is 50% lower than a decade ago.
Despite the Vaca Muerta already being the world’s second-most productive shale play after the Permian its vast potential remains largely untapped. The formation boasts geological advantages that rival, and in some respects surpass, many of the United States’ major shale plays. Thicker shale, richer organic content and higher reservoir pressure give Vaca Muerta wells a productivity edge, enabling them to sustain output longer before reaching peak production. In many cases, wells are outperforming those in North American shales, including the Permian, Bakken, and Eagle Ford.
Those geological advantages, coupled with low breakeven costs of $36 to $45 per barrel, make the Vaca Muerta a compelling investment proposition for foreign drillers. As mature U.S. shale plays peak and decline, drillers are looking overseas for their next growth engine. Continental Resources, the pioneering shale driller founded by billionaire Harold Hamm, joined Phoenix Global Resources in bidding for acreage in the Vaca Muerta’s August 2026 licensing round held by Neuquén province.
Continental agreed to acquire a 50% stake in Phoenix Global Resources, creating an equal joint venture with Mercuria Energy Group, one of the world’s largest independent commodities traders. Billionaire venture capitalist Peter Thiel recently acquired a 1% interest in Vista Energy, worth around $76 million, the second-largest oil producer, after national oil company YPF, in the Vaca Muerta. Global energy supermajors, including Chevron, Shell, and BP, are active in South America’s top shale play.
Chevron, the second-largest U.S. oil company, is making a major push into the Vaca Muerta and announced plans to invest $13.8 billion to develop its wholly owned and operated El Trapial acreage in the formation’s north. This plan was filed under Milei’s Incentive Regime for Large Investments (RIGI) framework. The RIGI structure targets significant investment in Argentina exceeding $200 million for major projects. The framework provides a 30-year guarantee of regulatory, tax and foreign exchange stability, which can’t be eroded by the introduction of more burdensome regulations.
Chevron controls two blocks there: El Trapial-Curamched, a conventional oil operation, and El Trapial-Este, an unconventional concession. While the supermajor has disclosed few details about the acreage, early results are encouraging. Chevron plans to drill ultra-long horizontal wells exceeding 3 kilometres to tap the Vaca Muerta’s premium light crude. If Chevron’s plan is approved by Buenos Aires, it will represent one of the largest new foreign investments in the Vaca Muerta, making it a powerful driver of production growth in the formation.
In August 2026, state-controlled YPF applied for RIGI incentives to develop a $51 billion integrated liquefied natural gas (LNG) project, with Italy’s Eni and XRG, a subsidiary of Abu Dhabi National Oil Company, also participating. That came on the back of YPF’s earlier $25 billion RIGI investment plan announced in May 2026. Here, Argentina’s national oil company intends to develop the LLL oil project, targeting production of 240,000 barrels of crude oil per day by 2032, with all the petroleum lifted destined for export.
This tremendous investment will drive higher oil and natural gas production from the Vaca Muerta in the coming years. It is estimated that the shale formation will be pumping at least one million barrels of crude oil by the end of the decade, with optimistic projections estimating output could be as much as 1.5 million barrels. This will give Argentina’s economy a badly needed boost at a critical juncture, as Milei’s sweeping reforms continue to squeeze household finances and impact key sectors, particularly construction and retail.
Thanks to the Vaca Muerta, oil is now Argentina’s second-largest export after soybeans, generating nearly 11% of export earnings. That, along with the surge in natural gas production, which led to sharply lower energy imports, is giving the economically crisis-prone country’s balance of trade a solid boost. Indeed, after decades of costly fossil-fuel imports that helped drive a damaging trade deficit, Argentina has transformed into a net energy exporter, with hydrocarbons emerging as a powerful engine of economic growth.
By Matthew Smith
Brazil Energy Insight 
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