Crude oil will flow in abundance
Fracking doesn’t go away, it just changes geography. While it’s true that the fracking (hydraulic fracturing) and shale oil (shale oil, sometimes known as shale) industries could have peaked in the US, with a slight decline starting in 2025, there’s another country, thousands of kilometres away, but on the same continent, that’s experiencing its own fracking fever at the moment. Argentina’s plan to extract every last drop of its most important shale oil formation is gathering pace. Although the results are already visible, Argentina’s great oil boom is expected to continue in the coming years.
Argentina’s oil industry is experiencing a new golden age, marked by increased production from the geological formation known as Vaca Muerta. The current daily production of this huge accumulation of unconventional oil is about 390,000 barrels of oil and about 90 million cubic meters of gas. Intense activity in this field has caused total crude oil production in Argentina to reach its highest level since 2008, however, the best is yet to come. The plans of YPF and other companies in Vaca Muerta promise to increase the crude oil production of this formation and the entire country several times overWhich would lead Argentina to overtake Venezuela as an oil power.
The plans that make up this formation are ambitious and require a large sum of money, which always generates uncertainty. Not only is it necessary to invest to extract the oil, but it is also necessary to build the infrastructure needed to transport that crude profitably and efficiently. All of this must be done in an environment of high uncertainty, including volatile oil prices (a drop in the price of crude can ruin the profitability of almost any project) and the regulatory uncertainty that has dominated this condemned industry for years. Despite everything, Vaca Muerta is thriving.
The Story of the Vaca Muerta
This structure has a strange history. Although today it is one of the largest structures in the world due to its unconventional oil content (shale oil),Actually, its capability was known ‘four days ago’. Dead cow It extends over approximately 36,000 km2 and, although it was originally discovered in the Sierra in the 1930s under the same name, it was not until 2011 when its great potential as a producer of unconventional hydrocarbons was confirmed, explains Jorge Navarro, vice president of AGGEP (Association of Spanish Petroleum Geologists and Geophysicists), in statements made to elEconomista.es
“We call a dead cow a source rock in petroleum geology. that is, a geological formation that contains rocks with a high content of organic matter, from which hydrocarbons are generated when sufficient temperature levels are reached. Part of the oil and gas generated by the Vaca Muerta migrated to other porous and permeable rocks, which produced gas and oil. Traditionally in Neuquén until the 2010s. Since then, following the shale oil and shale gas boom in the US, it has been assumed that oil and gas could be produced from the same parent rock, that is, from hydrocarbons that were not expelled and that are still present in the pores of the rocks of the Vaca Muerta Formation itself,” says Jorge Navarro.
In Vaca Muerta, the extraction of these natural resources is carried out using horizontal wells and through hydraulic fracturing or fracking, a technique that allows extracting gas and oil from the formation A depth that ranges between 600 and 3,400 meters after adding sand and some chemical additives by high-pressure water to break up the rocks. According to Argentina’s state-owned YPF, Vaca Muerta hosts the second unconventional gas reserve in the world after China and the fourth unconventional oil reserve after Russia, the US and China.
“The Vaca Muerta rocks have very low permeability, which means that their pores (where some hydrocarbons still remain) are not well connected to each other. So in order to connect them to each other and increase their productivity, they must be fractured, for which in addition, wells are drilled with a horizontal trajectory along this source rock in order to later fracture it, to further increase its productivity,” Navarro explained in statements to El Economista.
More oil production than the whole of Venezuela
According to Argentine sources in the region collected by S&P Global, thanks to fracking, Vaca Muerta’s production could reach 1.5 million barrels per day in the next 6 to 7 years. This amount of crude oil would matter if the rest of the factors remain constant Surprise in oil case from Argentina to Venezuela!something that does not seem unreasonable given the stagnation of production in the Caribbean country. It could also compete with Guyana, whose production could reach 1.2 million barrels per day.
Overall, Argentina has the potential to triple its current oil output, Palolo Rocca, CEO of Argentine energy engineering and construction provider Grupo Techint, said a few months ago. “We have in mind a target of 1.5 million barrels per day in six or seven years,” Rocca said. Vaca Muerta “has the potential to produce much more,” he said.
The piece that makes it all fit together
What is needed to increase production? Increasing crude oil production in the region is relatively simple, but it requires the necessary infrastructure and regulation Transport it profitably and on a large scale. means something is needed Let the crude oil flow in abundance. To this end, the oil company YPF has begun the construction of a new pipeline to transport oil extracted from the giant unconventional hydrocarbon formation of Vaca Muerta in southwestern Argentina. The company said in a statement that the construction of the first 130 kilometers of the Vaca Muerta Sur pipeline has begun. The work will increase crude oil production at Vaca Muerta, the world’s second largest unconventional gas reserve and the fourth largest oil reserve of its kind.
This first section will extend between the cities of Anelo, in the province of Neuquén (southwest), and Allen, in the province of Río Negro (south), where it will connect with the pipeline system of the Oldelval company. As YPF explained, this will allow it to start transporting oil while waiting for the completion of the second section and the export terminal in the Punta Colorada area, near Sierra Grande (Río Negro).
In turn, this first phase will “strengthen the entire oil evacuation system in the basin, making the most of its transportation potential.” towards the refineries and the Buenos Aires port of Bahía BlancaOil company highlights.
At its maximum operating capacity, this pipeline will allow the transport of 390,000 barrels per day, increasing the potential for extracting oil from the Neuquén Basin by 70% and doubling the current capacity of the Vaca Muerta core field. The second phase and export terminal, which will complete the project, is in the development phase and will involve an investment of approximately $2,000 million, which YPF will make jointly with other companies that have already shown interest in the project.
On the other hand, Rocca pointed out that another major obstacle to greater production is the regulatory environment, specifically what he called “government intervention in the price and market.” However, Argentina’s new president, Javier Miley, an ultra-liberal economist, has already begun to correct these problems by liberalizing the prices of crude oil and hydrocarbons in Argentina so that they can be sold at market prices, providing adequate incentives for investment. The main part of the proposed framework for this new hydrocarbon law is to guarantee that national fuel prices are equal to the real market price.”
With pipeline work underway and regulatory changes taking place in Argentina, the ground is set for abundant flows of Vaca Muerta oil in the coming years. If production capacity can be increased to 1.5 million barrels per day by the end of the decade, Argentina can produce a total of about 2 million barrels of crude oil per dayProduction surpassed historical figures in the oil world such as Libya, Venezuela or Nigeria.
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