Drill, baby, drill in Argentina's Vaca Muerta shale lands!

Argentina's new, market-friendly government, and concerns about oil supplies from the Middle East, and elsewhere, are driving a boom in drilling and production in the Patagonian South, which is home to the giant Vaca Muerta shale, Spanish for "Dead Cow".

In the flat, arid terrain, the production of shale oil and gas is surging. Fracking wells have been drilled in record numbers, and pipelines have been built to transport gas to the capital Buenos Aires – and beyond once LNG plants are operational.

A huge blue billboard, erected by the state energy giant YPF in front of Anelo's shale-town, proclaims "Our energy future will be built here." New homes are being constructed quickly. The population of the town grew by 10% over the past year.

Under the pro-industry libertarian president Javier Milei's leadership, Argentina's embattled Government is pushing for oil and gas exports in order to raise foreign currency and build reserves. It is also offering sweeteners to big investors.

Vaca Muerta is an area about the size of Belgium that holds the second-largest shale reserves in the world and the fourth largest for shale oils. It is a relative newcomer to the energy industry, but it holds great promise.

Investors welcome the prospect of a stable and new source of LNG and oil at a moment when conflict is escalating in the oil rich Middle East, while Russia's gas giant wages war on Ukraine and Venezuela remains a pariah.

Oil towns like Anelo have seen a rapid increase in activity. Only a few decades earlier, it was a sleepy village with only a handful houses. It has now become a hub of activity with hotels, restaurants, and even a gambling hall for the energy sector workers who flock there in large numbers.

Monica Paredes 70, one the first residents of Anelo, sat outside her house of nearly half a century, near the central plaza, and said, "The boom is here." "There was nothing before, nothing."

Anelo, according to the local governor, has gained 1,000 new residents over the past year. The local infrastructure has been strained by this. Growth is a bigger challenge.

The region is attracting thousands of oil executives for a major summit on energy, which starts on Wednesday. Infrastructure, LNG export plans, and energy deals are on the agenda. The hotels in Neuquen and the surrounding area are fully booked.

Former secretary of hydrocarbons of Argentina, Jose Luis Sureda said: "Growth has been so rapid that the infrastructure can't keep up."

A GLOBAL PLAYER OF ENERGY BY 2030

Vaca Muerta could be a crowning achievement for Argentina. The country has been battling economic crises with its depleted reserves of foreign currency, triple-digit inflation, and political swings from left to right for many years.

Milei, a libertarian, has changed investor's mood by introducing policies to boost the private sector, and austerity measures in order to correct the economy, even though poverty is on the rise.

Investment is encouraged by a scheme that offers tax breaks for large projects, such as those in energy and mining. It also gives them better access to foreign currency controlled markets.

Logistics are still the biggest challenge. Argentina lacks LNG export capability, and it will take many years for the capacity to be fully built out. In places like Anelo, local roads, schools and housing still need to catch-up.

Sureda stated that new oil development will outpace the gas industry in years to come because oil is more easily shipped to global markets despite bottlenecks on pipelines. Gas is facing a much more complex challenge, due to the lack of LNG export plants.

Sureda said that "Vaca Muerta could provide 2,000,000 barrels of oil per day with no problem." Argentina's current shale-oil production is approximately 400,000 barrels of oil per day.

The oil industry needs more workers and equipment.

The dream of Argentina becoming a major global player in energy is gaining more and more traction. This year, the number of fracking-wells used to extract shale gas and oil has risen. Investment has increased. Production has reached new records.

Daniel Dreizzen is the director of Aleph Energy, and former secretary for energy planning.

Energy firms are focusing on Argentina's ability build its gas export terminals and pipelines. Insiders in the industry said that a major LNG terminal agreement between YPF Malaysia and Petronas was shaky, highlighting the problem.

Even if the project proceeds, it will take years and cost billions.

Dreizzen said that while oil is profitable, gas infrastructure needs to be improved. He predicted that annual investments in the sector could double, reaching $23 billion within eight years.

You have to build the pipelines, liquefy, transport, and compete with America. This is a long term project."

(source: Reuters)