Argentina's Vaca Muerta Anchors Record Production - Energy Analytics Institute (EAI)

(Camilo Ciruzzi, Energy Analytics Institute, 6.Dec.2024) — Argentina’s crude oil and natural gas sectors are experiencing a historic surge. That, as production nears record highs, driven by the prolific Vaca Muerta shale formation. Continued development of Vaca Muerta is reshaping the South American country’s energy landscape, reducing reliance on costly energy imports, and opening the valve for new export opportunities.

Since 2021, Argentina’s oil production has soared 50%, averaging 738,000 barrels per day (b/d) in Sep. 2024, its highest level since 2003.

Similarly, gas output has soared 27%, averaging 5 billion cubic feet per day (Bcf/d) in the first nine months of 2024, according to data from the country’s Energy Secretariat. Of note, gas production peaked at 5.4 Bcf/d in Aug. 2024, the most significant monthly production figure achieved in 21 years. Importantly, the Vaca Muerta now accounts for 58% of oil and 74% of gas production, according to the data.

Key Drivers of Growth

The surge in oil and gas production is attributed to several factors from technological advances and infrastructure build outs to political incentives as summarized:

Technological advances: Innovations in hydraulic fracturing and horizontal drilling have enhanced efficiency.

Infrastructure development: New pipelines, such as the Vaca Muerta Norte Oil Pipeline, have expanded export capacities.

Policy incentives: Initiatives like the Plan Gas.Ar and the Promotional Regime for Large Investment, also known as RIGI by its Spanish acronym, have attracted significant investments.

Export expansion and reduced imports: With rising oil and gas production, Argentina has become a net exporter of both commodities. Of note, oil exports rose by an annual average 33% from 2017-2023, with the US, Brazil, and Chile as key destinations.

Piped-gas exports to Chile and Uruguay have also increased significantly. This export boom is bolstered by projects like the Perito Francisco Pascasio Moreno gas pipeline and the reversal of flows along the Gasoducto Norte, which facilitate distribution to northern Argentina and neighboring countries. All this, as Argentina’s reliance on liquefied natural gas (LNG) imports is down 43% to-date in 2024 compared to the previous year.

Future prospects: Argentina’s export ambitions, particularly as they relate to gas, extend to the global LNG market. This, as projects—both on the floating LNG and modular fronts—garner development momentum. Companies like Argentina’s state-owned energy company YPF SA and Golar LNG are leading initiatives—Argentina LNG and Southern Energy SA respectively—to enhance LNG export capacity, targeting markets beyond South America.

Headwinds and outlook

Despite progress, challenges such as high infrastructure costs and geopolitical uncertainties remain as headwinds for energy sector investors.

However, the combination of vast reserves—estimated at 308 trillion cubic feet (Tcf) of shale gas and 16 Bn Bbls of shale oil—and supportive policies position Argentina as a rising energy powerhouse.

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