The largest shale oil field (shale oil) of South America and the fourth largest in the world has awakened. However, this large oil reserve still has to overcome major obstacles, a typical problem in the crude oil market: this field is located very far from the large consumption points, both in America and in the entire world. To solve this problem, large investments are needed to transport oil from its extraction point to where it can be exported on a large scale, usually ports. Well, the largest oil companies that operate In Argentina they have joined forces by signing a historic alliance to build as soon as possible and in the best possible way the oil pipeline that unblocks the production of Vaca Muerta. Time is against us, since advanced countries are immersed in a process of decarbonization and transition towards renewable energies that promises to leave oil ‘punished’ in a corner within the global energy mix. For this reason, Vaca Muerta operators want to unleash the potential of this deposit as soon as possible.
The main oil companies operating in Argentina announced this Monday an alliance for the construction of the Vaca Muerta Sur pipeline, which will increase crude oil exports from the South American country. This vital project for Vaca Muerta, the world’s second largest unconventional gas reserve and the fourth largest oil reserve of this type, It will require an investment of 3,000 million dollars and is led by YPF -controlled by the Argentine State-, with the participation of Pan American Energy, Vista, Pampa Energía, Chevron, Pluspetrol and Shell.
The deregulation measures and incentive plans to increase legal security that the Government of Javier Milei is carrying out in Argentina are unleashing a wave of investments, among which those in oil stand out. In recent months, Argentina has achieved several surpluses in the energy balance thanks to the production of crude oil and gas from Vaca Muerta, all despite the fact that this field is competing ‘on one leg and with a bag of stones on its back’ against the absence of the necessary infrastructure to develop its full potential. All this is changing, which also coincides with the improvement of the economic climate in Argentina itself. The economy has emerged from recession at the same time that inflation has begun to moderate. Now, companies are willing to spend hundreds of millions to unclog Vaca Muerta.
The pipeline will have an extension of 437 kilometers and will carry crude oil extracted from the Vaca Muerta unconventional hydrocarbon formation, in the southwest of the country, towards the southern province of Río Negro, to a port terminal on the Atlantic. The project includes the construction of a loading and unloading terminal with interconnected monobuoys and a tank and storage yard in the Punta Colorada area, in Río Negro.
The pipeline is expected to be operational in the fourth quarter of 2026, YPF reported this Monday in a statement. Vaca Muerta Sur will allow the transport of up to 550,000 barrels of oil per day, with the possibility of increasing this capacity to 700,000 barrels per day. The shareholders of the new company (YPF, Pan American Energy, Vista Energy, Pampa Energía) committed to providing approximately 275,000 barrels per day of capacity. The new company, Vaca Muerta Oleoducto Sur (VMOS), has also granted options to Chevron Argentina, Pluspetrol and Shell Argentina to add up to 230,000 additional barrels per day.
The million-dollar project will be financed in part by shareholders “and, in another part, by local and/or international financing to be granted to VMOS in 2025,” YPF indicated. “The completion of this transportation work is strategic for the development of Vaca Muerta and, together with other initiatives, will open the door for export with the objective of achieving 15,000 million dollars in income for the country in the coming years, which with its expansions could reach more than 20 billion dollars,” the statement states.
The awakening of Vaca Muerta oil
The colossal formation of Vaca Muertawhich began to be explored by the oil company YPF, controlled by the Argentine State, in 2013, has since received investments of 50,000 million dollars for its development. Although its potential was well known, the companies that had been working in Vaca Muerta had not managed to squeeze their resources intensively due to a series of obstacles related to the different governments of Argentina and their legislation. NowVaca Muerta is more alive than ever and already produces more than 400,000 barrels of crude oil per day, raising Argentina’s total production to 738,000 barrels per day.
In 2021, something began to change little by little. This field has gone from being practically ‘dead’ to producing oil in large and increasing quantities. This is the very short-term story of the Vaca Muerta field, the field with the most unconventional crude oil (shale oil) and the largest in all of South America. This field could turn Argentina into a new engine of oil supply in South America that helps offset the production cuts of the OPEC cartel, as published by the US Energy Agency (EIA) in an interesting analysis a few days ago, a hypothesis that had already been launched by other market agents such as the experts at Energy Intelligence (EI), an energy data center based in New York.
The Energy Agency itself in its monthly report published this Thursday announced that the bypass is imminent in oil production in Colombia, another sign of the awakening of Argentine crude oil. The crude oil production forecast for Argentina in 2025 stands at 830,000 barrels on average, compared to 790,000 for Colombia, so they assume that the advance will probably occur in the first part of 2025 given the stagnation of the Colombian production and the boom in Vaca Muerta.
“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. natural. 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 close to the records set in the early 2000s,” according to the report published by the EIA.
With all of the above, in September 2024 (the latest official data), production averaged 738,000 barrels per day (b/d) of crude oil in Argentina, 15% more than in September 2023 and the largest amount in any month since 2003. In September, oil produced in the Vaca Muerta formation represented 58% of the country’s total production, according to SESCO.
However, it is expected that Vaca Muerta long live a revolution in both oil and gas matters. Exports will allow the energy and current account balance to be more positive each year for Argentina, due to a considerable increase in gas and oil exports and a decrease in imports of these hydrocarbons. The country stopped importing gas from Bolivia and LNG purchases will be sharply reduced in 2025. By 2030, and already considering LNG production, Argentine exports could reach 30 billion dollars annually.
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