Argentina’s prized shale basin Vaca Muerta, once hailed as the key to transforming the country into a global energy exporter, is now facing a period of stagnation and uncertainty. Lower oil prices, rising costs, and policy constraints have slowed drilling and fracking, raising questions about whether the formation can deliver the government’s ambitious export goals.
According to Reuters, drilling and fracking activity in Vaca Muerta — the world’s fourth-largest unconventional oil reserve — has begun to plateau, with the number of wells in the Neuquén Basin falling for three straight months. Benchmark oil prices around $65 per barrel, down from $90 in April 2024, have eroded margins, while production costs in the basin are 35–40% higher than in the U.S. Permian. Analysts blame inflation, expensive financing, and soaring labor and service costs.
Vaca Muerta remains critical to President Javier Milei’s economic strategy, contributing 64% of Argentina’s oil output but with only 8% of the basin developed. Slower growth threatens Milei’s pledge to double energy exports to $30 billion by 2030. Major producers including Chevron, Tecpetrol, and TotalEnergies have urged the government to lift foreign currency controls and ensure export stability, while ExxonMobil is reportedly scaling back operations.
Despite headwinds, state oil company YPF is pushing ahead with an aggressive expansion plan. CEO Horacio Marín confirmed the company aims to operate 19 drilling rigs by 2026, nearly doubling production wells to 4,000 and supporting the Vaca Muerta Oil Sur (VMOS) pipeline, which will link the basin to an export terminal on Argentina’s Atlantic coast.
Yet the scale of investment needed remains staggering. A new study by the Argentine Institute of Oil and Gas (IAPG), cited by BNamericas, estimates that between 2025 and 2040, Argentina will require over 100,000 kilometers of new pipelines and dozens of new gas and oil processing plants to sustain growth. Access to financing and capital-market liberalization, the IAPG warns, will be “critical” for meeting medium and high-growth scenarios.
For now, the shale giant’s future hinges on whether Argentina can reduce costs, attract foreign capital, and build the infrastructure needed to turn geological promise into lasting prosperity.
By Tom Kool for Oilprice.com
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