(oilprice) For years, the vast shale province of Argentina has been heralded as a potential energy powerhouse, often likened to the prominent Permian Basin, with aspirations of transforming the South American nation into a net energy exporter, thus alleviating its long-standing dependence on imports.
The Vaca Muerta shale basin is recognized as holding one of the world’s largest deposits of shale gas, estimated to be the second-largest globally, and it ranks fourth in terms of shale oil resources. Despite its immense potential, Argentina has faced entrenched economic challenges, including strict capital and currency controls over the past decade, which have hampered significant investment in this key shale region.
The recent election of Javier Milei, a libertarian and pro-business president, has begun to shift the dynamics in Vaca Muerta as his administration implements market-oriented reforms designed to attract substantial foreign investments into the energy sector. With the goal of reviving Argentina’s dwindling foreign currency reserves, he hopes that an increase in oil and gas exports will generate billions of U.S. dollars for the country.
In a notable uptick, oil and gas production in Vaca Muerta has surged recently, positioning Argentina on the brink of exporting its extensive hydrocarbon reserves, marking a significant turning point in the resource boom.
Vaca Muerta—translated as ‘dead cow’ in Spanish—has earned a reputation as the Argentinian Permian, although geological comparisons suggest its characteristics align more closely with the Eagle Ford formation. This shale play, located in the province of Neuquen, is projected to boast recoverable resources that include an extraordinary 16 billion barrels of oil and a staggering 308 trillion cubic feet of natural gas, firmly establishing it as a crucial player in the global energy market.
Argentina has experienced a remarkable surge in the number of fracking wells in Vaca Muerta, with the total number exceeding 1,500 for the first time this year. This increase is attributed to the expansion of drilling activities amid the friendlier and free-market reforms introduced by the current government. Natural gas production has witnessed impressive growth so far this year, reflecting the uptick in activity within the region.
Oil production from Vaca Muerta has also seen a dramatic increase, quadrupling over the past five years, escalating from under 90,000 barrels per day (bpd) to nearly 400,000 bpd at present.
Free Market Reforms
Enhancing their footprint in the region, companies are capitalizing on the new, business-centered investment landscape. The administration of President Milei has actively promoted new legislation, known as the Large Investment Incentive Regime (RIGI), which provides enticing tax breaks and various incentives to attract major investors to Argentina.
Argentina’s moves towards market deregulation are anticipated to elevate energy investments within the country to about $2.5 billion, aiming for a target of approximately $15 billion by next year, according to officials’ projections. With the additional support from the RIGI investment framework, expectations rise to a combined $30 billion in energy investments for 2025 and 2026.
Exports Powerhouse
Vaca Muerta plays an essential role in Argentina’s strategy to emerge as a formidable exporter of oil and gas at a time when global supply apprehensions regarding exports from other regions, notably the Middle East and Russia, are causing disruption in trade flows. Vaca Muerta’s operators are ramping up production significantly.
CEPH, Argentina’s oil and gas industry association, predicts that oil output will soar beyond 1 million bpd by 2030, up from the current figure of approximately 400,000 bpd. Independent producer Vista Energy, now the second-largest shale producer in Argentina, is poised to invest around $1.1 billion into Vaca Muerta, contributing to the burgeoning growth of the region.
“In 2012, Vaca Muerta was for believers. Today, Vaca Muerta is for engineers,” expressed Miguel Galuccio, founder and CEO of Vista Energy, to Reuters last month, highlighting the tangible production advancements being realized within the shale play.
Moreover, supertankers may soon be berthing in Argentina to load oil from the prolific shale region, as infrastructure including a pipeline is set to connect Vaca Muerta with a terminal at Punta Colorada port, designed to accommodate very large crude carriers (VLCCs).
Additionally, Argentina is inching closer to exporting liquefied natural gas (LNG) from Vaca Muerta, following a groundbreaking 20-year agreement between maritime LNG infrastructure firm Golar LNG and Pan American Energy (PAE) for the use of a Floating Liquefied Natural Gas (FLNG) vessel in the country.
Despite these advancements, the pace of infrastructure development, particularly for gas pipelines, is trailing behind and requires a significant boost to fully unlock the potential of Argentina’s vast shale resources. Given the challenging financial position of the Argentinian government, public investment in infrastructure projects is limited. However, the newly adopted business-friendly policies could effectively incentivize private sector investments in crucial oil and gas pipelines and export terminals.
The vast potential of Vaca Muerta is undeniable, said Miguel Galuccio, founder of Vista Energy, a firm focused on optimizing the shale resources. “We’ve proven the quality of Vaca Muerta’s formation is second to none, [even greater] than the US’s Permian Basin,” Galuccio stated in a conversation with the Financial Times.
By Tsvetana Paraskova
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Interview with Miguel Galuccio, Founder and CEO of Vista Energy
Editor: Miguel, thank you for joining us today. Vaca Muerta has been a focal point for Argentina’s energy potential for years. Can you explain how the recent political changes have impacted the shale industry in the region?
Miguel Galuccio: Thank you for having me. The election of President Javier Milei has indeed ushered in significant changes. His administration’s pro-business stance and market-oriented reforms are crucial. By implementing the Large Investment Incentive Regime, we’ve seen a newfound optimism and an influx of investments that were previously stymied by strict capital and currency controls. This shift is paving the way for Argentina to harness its abundant resources more effectively.
Editor: It sounds like these reforms are making a tangible difference. Can you share some specific improvements in production rates since these changes have been implemented?
Miguel Galuccio: Absolutely. In just a short period, production numbers have been remarkable. We’ve seen oil output quadruple over the last five years, rising from under 90,000 barrels per day to nearly 400,000. Additionally, the number of fracking wells has surpassed 1,500 for the first time this year, which shows we’re really ramping up our activities in Vaca Muerta.
Editor: That’s impressive growth. With Argentina’s energy sector now approaching historic production levels, do you believe the country is on the path to becoming a net energy exporter?
Miguel Galuccio: We are optimistic about that prospect. As production continues to rise, particularly in light of global supply concerns from other regions, Argentina is strategically positioned to meet international demands. If we successfully attract the projected $30 billion in energy investments by 2025 and 2026, we could indeed establish ourselves as a formidable exporter of oil and gas.
Editor: You’ve mentioned investment projections, but what does this mean in terms of job growth and economic stability for Argentina?
Miguel Galuccio: Investment in Vaca Muerta directly translates into job creation and economic revitalization. More jobs in the oil and gas sector will contribute to reducing unemployment and stimulating local communities. Moreover, the subsidies from increased exports could help stabilize our economy and soften the impact of historical economic challenges.
Editor: Lastly, Miguel, how do you see the future of Vaca Muerta unfolding over the next decade?
Miguel Galuccio: I see a bright future. With continued investments and innovations, we could see oil production exceed 1 million barrels per day by 2030. Vaca Muerta truly has transformed from a concept for believers into a reality driven by engineers and industry professionals focused on maximizing our resources. The potential is immense, and I am confident we will see significant advancements in both production and export capabilities.
Editor: Thank you, Miguel, for your insights. It’s clear that Vaca Muerta is at a pivotal moment, and we’ll be watching closely to see how these developments unfold.
Miguel Galuccio: Thank you for the opportunity to discuss this crucial topic. The future is indeed promising for Argentina’s energy sector.
Development for Argentina?
Interview with Miguel Galuccio, Founder and CEO of Vista Energy
Editor: Miguel, thank you for joining us today. Vaca Muerta has been a focal point for Argentina’s energy potential for years. Can you explain how the recent political changes have impacted the shale industry in the region?
Miguel Galuccio: Thank you for having me. The election of President Javier Milei has indeed ushered in significant changes. His administration’s pro-business stance and market-oriented reforms are crucial. By implementing the Large Investment Incentive Regime, we’ve seen newfound optimism and an influx of investments that were previously stymied by strict capital and currency controls. This shift is paving the way for Argentina to harness its abundant resources more effectively.
Editor: It sounds like these reforms are making a tangible difference. Can you share some specific improvements in production rates since these changes have been implemented?
Miguel Galuccio: Absolutely. In just a short period, production numbers have been remarkable. We’ve seen oil output quadruple over the last five years, rising from under 90,000 barrels per day to nearly 400,000. Additionally, the number of fracking wells has surpassed 1,500 for the first time this year, which shows we’re really ramping up our activities in Vaca Muerta.
Editor: That’s impressive growth. With Argentina’s energy sector now approaching historic production levels, do you believe the country is on the path to becoming a net energy exporter?
Miguel Galuccio: We are optimistic about that prospect. As production continues to rise, particularly in light of global supply concerns from other regions, Argentina is strategically positioned to meet international demands. If we successfully attract the projected $30 billion in energy investments by 2025 and 2026, we could indeed establish ourselves as a formidable exporter of oil and gas.
Editor: You’ve mentioned investment projections, but what does this mean in terms of job growth and economic development for Argentina?
Miguel Galuccio: Increased investment in the energy sector translates directly to job creation. We anticipate thousands of new jobs in both the short and long term as companies expand drilling activities and infrastructure development. This growth not only boosts employment but also stimulates local economies—positively influencing everything from services to construction. Ultimately, a robust energy sector will play a significant role in addressing Argentina’s economic challenges and reducing our dependence on imports.
Editor: Thank you, Miguel, for sharing these insights. It seems that Vaca Muerta’s potential is finally being realized under the current administration.
Miguel Galuccio: Thank you for having me. Yes, we are on a promising path, and it’s crucial for us to maintain this momentum to fully capitalize on Vaca Muerta’s resources.
