In Patagonia, where the desert steppe clashes with lush riverbank riverside, Argentine drilling machines are extracting raw as light as that of the Permica basin – the largest energy reserve in the United States between Texas and New Mexico – and are doing it with a much lower cost. Welcome to the last bum of the shale. After a decade of failures, the Muerta Vaca site is finally taking off, promoted by President Javier Milei. The libertarian leader wants to make Argentina an important oil producer and transform an economy, now based largely on agriculture. It is an existential project for all involved: if Milei manages to generate new oil wealth, he could take the country out of his economic quagadment and persuade voters to continue to support their political project. His biggest obstacle to achieve this is timing. The awakening of Vaca Muerta arrives at a time when oil prices are far from their best days and that raises doubts about what the right production rhythm should be. If the project does not bear enough fruits before Milei is presented to re -election in 2027, voters, tired of their austerity measures, could become against him, endangering the foreign investment necessary to fully take advantage of the abundance of raw materials of Argentina. Dead Vaca – Yacimient Key to Milei, who urgently needs economic victories to assure voters that all the sacrifices of the last year and a half were worth it, ”acknowledges Benjamín Gedan, a member of the Latin American Studies initiative of the Johns Hopkins University. «And it can also be the axis of the next chapter of your program,» he adds. As the cover of a bottle that opens suddenly after someone loosen his closure, Vaca Muerta was already about to explode when Milei assumed the position. In addition to having the support of the previous three administrations, the rock three kilometers deep that houses this site, according to geology experts, it is so good, if not better, than that of the Permian, the larger and larger and prolific schist deposit in the world. This helps companies in charge of drilling to reduce costs and advance the operating equilibrium point – that is, when money begins to earn – in front of their US competitors, according to the Norwegian consultant Rystad Energy. To accelerate the inertia that the project was taking, Milei only had to suppress obstacles: he practically eliminated the oil pricing stops; He relaxed the capital controls that have been especially the nightmare of large oil companies such as Chevron; and granted the energy investors tax exemptions guaranteed for 30 years. A year after assuming the position, the daily production of crude oil in Vaca Muerta had grown by 28%. And last April he reached 442,000 barrels. It is expected that in the next five years the million barrels per day will exceed – a level of production similar to some members of the OPEC -, destined most of the export. However, the increase in production coincides with the volatility of the energy market. Before Israel launched air attacks against Iran on June 13, Brent type oil had come to touch the $ 60 per barrel, its lowest level in four years. After a brief rebound caused by the rise of geopolitical tensions – the price approached 80 dollars – the Brent has cooled again moving this week at levels close to 68 dollars. The prices of recent months have been bad enough for American shale perforators to begin to cut their investments whose consequence was an unusual fall in the pumping of the world's main oil producers.
A greater resistance
Argentine schist oil companies, on the other hand, have maintained their investments. The largest of all, the state YPF, insists that its operations can support a drop price drop at $ 45. Vista Energy, the second largest local group, has also called for calm by explaining that they would only review its annual goals if the price fell below 55 dollars. For its part, the third Argentine oil company for size, Pampa Ener, estimates that its shale oil division can reach the operating equilibrium point with less than $ 40 a barrel. This confidence may seem excessive, since Vaca Muerta lacks the economies of scale of those enjoyed by operators in the Permian, where competition between numerous services and suppliers reduces the total costs. But with the best area of the already exploited Permian, American shale wells are becoming more expensive. Meanwhile, Argentine perforators can still select the best places to work on. In addition, they have broad access to fresh water and the sand necessary to carry out the fracture of the rock, the process known as fracking under which the schist oil is obtained. “We can still improve,” says Alexis Martínez, drilling supervisor of one of the operators of the deposit. Martínez, 48, was destined for Vaca Muerta after years in conventional deposits, where there is little room for innovation. «Everything was so standardized that it was difficult to break with that,» he explains. «On the other hand, we are not left with crossed arms.» In Neuquén, a municipality located in the Argentine Patagonia whose name derives from an indigenous word that translates as «bold», the commitment to the shale seems to be paying off. The population grows dizzy together with oil production. Between 2010 and 2022 (last Argentine census), its inhabitants have grown by 32% and already add 727,000. This represents more than double the national rhythm, since thousands of people come to the region to try to take advantage of the potential wealth that houses its subsoil. Nicolás Almará, 37, is one of them. He arrived a decade ago as a photographer for a local newspaper and now directs a team for a drilling contractor. Working in two weeks shifts in the well of the well, he thinks he can earn enough money to retire at age 50. «The only reason you are not going to progress here is if you don't want,» he says. The architect Pablo Arpajou also tries to benefit from the arrival of a new population and with the real estate promoter Safiar Design Residential Torres in the capital of the province of Neuquén for that new generation of ambitious oil companies. But not everything is advantages. In Añelo, a dusty city that is just at the foot of the desert where the schist site is, are emerging some of the dangers of the oil boom, which highlights the challenges that Milei must manage in the long term even if the shale flourishes. In Añelo the population has been quintupled until reaching 11,000 inhabitants since the first shale well was drilled around 2011. New blocks of houses for workers occupy practically every centimeter of available land. Marcelo Venegas, a member of the municipal council, states that up to eight families a week arrive in Añelo in search of employment. Approximately half is installed in shacks in the new urban expansion of the city of Neuquén, while others wait in Añello, sleeping outdoors in the square, the cemetery or the YPF gas station. drill in search of natural gas. He knows better than anyone than the oil dream can come true: his father, waiter, opened his own coffee and, over time, he won enough as a oil company to accumulate savings he invested in properties. But also remember how oil communities such as Cutral and Catriel, a few kilometers from the state border, became ghostly villages when YPF was privatized in the early 90s and the business stagnated. «We do not want it to happen here. Especially if we take into account that the phenomenon of Vaca Muerta is much more explosive,» he acknowledges. 13 years, Venegas was a young YPF engineer when the Deputy Minister of Economy of Argentina, Axel Kicillof, broke into the glass tower of the company's offices in Buenos Aires and called the president on the phone to tell him that the government had recovered control of the company. The minister was criticized for having made mistakes in some aspects of nationalization, which led a New York Court to dictate a decade after Argentina, with liquidity problems, owes its former shareholders about 16,000 million dollars. Milei inherited the problem demanded and saw how the situation worsened at the end of June, when the court ordered the government to yield their participation in the company while litigants were looking for sovereign assets to collect the money. Argentina is appealing both the case as a whole and the order of a few weeks ago. At first, the small group felt marginalized: piled up in offices in an old gas deposit, and then in a couple of towing in an area called Loma Campana. It was not clear, at least, if the shale gas would work in Patagonia as it had done in Texas, the only place where hydraulic fracturing was viable then. But YPF's efforts with Chevron in Loma Campana to understand how to exploit this natural resource and take advantage of the American experience in shale gas demonstrated the productivity of the rock and raided the way for the arrival of more perforators.
Risks
The industry would later stumble under the presidency Mauricio Macri, whose efforts to liberalize the Argentine economy failed in 2018 and 2019. Weissel observed how investors, formerly euphoric with Macri, showed their suspicion to the huge budget deficits of their government and turned their backs. This caused the financing of a key gas gas pipeline evaporating, and the inflationary consequences of weight depreciation forced to return to the dreaded oil controls. While international investors regain confidence in the country and applaud Milei's approach in the creation of budgetary surpluses, many expect the result of the medium mandate elections next October to see a clearer signal that voters continue to trust the ultraliberal project of their president. At the moment, many of the oil barrels that leave Vaca Muerta will be transported from the desert to the sea through a new 560 -kilometer pipeline and an ad hoc built port, a project called Vaca Muerta Sur, financed with a loan from a group of international banks. «This is not any oil project,» says Manuel Castillo, a Venezuelan refugee in charge of supervising construction. «It is the one that will turn Argentina into an export power,» adventure.
