Javier Milei’s shock therapy is bearing fruit in Argentina even sooner than expected. It is true that his policies have helped moderate inflation, reduce country risk and attract new investment. But it is also true that there is another component that is helping the Argentine economy and that is not directly related (indirectly) to the management of the Argentine president. The awakening of Vaca Muerta, the largest unconventional oil field in South America, had already begun before Milei’s arrival at the Casa Rosada. It is true that the basic law and the incentives generated within its framework are currently helping to increase investment, but Vaca Muerta production had already been increasing since mid-2023. This greater crude oil production is allowing the country to increase reserves gross dollars and export earnings, somewhat vital so that Argentina can ‘enjoy’ a safe economic renaissance. But what is better, this deposit has not reached its peak by any means, its boom in activity is only underway.
Vaca Muerta, Argentina’s gigantic unconventional hydrocarbon formation, reached last year record levels of activityas reported this week by sources in the sector. The number of fracture stages (a technical way to measure activity in unconventional reservoirs) In all of 2024 it was 17,796 in Vaca Muertaaccording to a report from the Energy Contacts Foundation. The data exceeds the previous historical mark by 20.6%recorded in 2023, with 14,747 fracture stages. Last year, activity was once again led by YPF, the largest hydrocarbon producer in Argentina.
All in all, the latest production data reveals that Vaca Muerta could be pumping about 433,000 barrels per day, more than half of all the oil Argentina produces. All of this is allowing Argentina to export gas and oil to achieve a surplus in the energy balance that in some months has translated into a current account surplus (more exports than imports). which allows a greater accumulation of dollars and brings Argentina closer to the end of exchange controls. This is why the success of Vaca Muerta has become a key piece for Javier Milei to carry out his future plans by incurring as few risks as possible.
Last November, Argentina consolidated the surplus in its energy balance, thanks to a strong increase in hydrocarbon exports and a drop in fuel imports, according to official sources. According to data from the Ministry of Energy, Argentina achieved a surplus in the energy trade balance of 514 million dollars. In November, exports totaled 641 million dollars, of which 285 million corresponded to sales of petroleum oils.
The key to the change in trend in Argentina’s energy balance is the growing activity. As noted above, Vaca Muerta is the world’s second largest reserve of unconventional gas and the fourth largest oil reserve of this type. This colossal formation, which began to be explored by the YPF oil company, controlled by the Argentine State, in 2013, It has since received investments of 50,000 million dollars for its development.
A decade after the start of exploitation in Vaca Muerta, production is a record, which has allowed Argentina not only to substantially reduce its need for gas imports in the southern winter, but also to have growing exportable balances of hydrocarbons. Vaca Muerta, where oil companies such as Shell, ExxonMobil, Chevron, Total, Wintershall, Vista, Pan American Energy (PAE), Pluspetrol and Pampa Energía, among others, also operate, already represents more than half of the gas and oil that Argentina produces. . Recent works to expand gas and oil pipelines have increased transport and export capacity.
The Energy Agency itself in its monthly report announced that the crude oil production forecast for Argentina in 2025 stands at 830,000 barrels on average, levels that have not been seen for more than 20 years in Argentina. “Argentina’s crude oil and natural gas production is approaching all-time highs, driven by increased production from the Vaca Muerta shale formation, which is offsetting declining production from conventional oil and gas fields. From January 2021 to September 2024, crude oil production in Argentina increased by 50% and natural gas production increased by 27%, raising production of both fuels near records. established in the early 2000s,” according to the report published by the EIA.
Argentina’s export dream
After the awakening of domestic production, Argentina’s export ‘dream’ now arrives, which would allow the country to increase its gross dollar reserves to continue closing the exchange gap (something it is almost achieving) and thus be able to lift the stocks. so that the peso exchange rate fluctuates completely freely. Vaca Muerta’s oil and gas revenues are going to be fundamental to this. This part will depend, in part, on expanding the infrastructure surrounding Vaca Muerta, something that is expensive and time-consuming. However, the first steps have already begun to resolve this bottleneck.
The measures adopted by the Government of Javier Milei in terms of legal security and investment incentives are bearing fruit. For example, Tecpetrol announced this Thursday that it will invest close to 2,000 million dollars in Vaca Muerta in 2025 and they are analyzing entering the Large Investment Incentive Regime (RIGI) announced by the Milei Government. The Techint Group oil company plans to increase its production to reach 70,000 barrels per day by mid-2027. The Spanish company Técnicas Reunidas has also obtained an important contract for engineering services in the area.
Within the framework of Techint’s ProPymes 2024 Seminar, Ricardo Markous, CEO of Tecpetrol, said that “now we are concentrating more on oil. Today we have a production of 20,000 barrels, our project is to reach 100,000 barrels.” In the best case scenario, it is estimated that Vaca Muerta could reach almost 2 million barrels per day by 2030.
Argentina could achieve in 2030 an energy surplus of 30 billion dollars thanks to the development of the Vaca Muerta unconventional hydrocarbon formation, according to a report released this Thursday by the firm PwC. Those 30,000 million dollars would be a more than enough injection for the country to achieve reserves in dollars that guarantee the changes that Javier Milei seeks in the economy without causing an exchange crisis or some other type of shock. For all of the above, Vaca Muerta could be key when it comes to part of Javier Milei’s policies achieving their objectives and giving rise to a new renaissance of Argentina’s economy.
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