Vaca Muerta

From Global Energy Monitor

Reserves and CO2 Emissions

Argentina has the second-largest shale reserves in the world, consisting mostly of two formations (Vaca Muerta and Los Molles), which together stretch over 30,000 km².[1] The US EIA estimates total recoverable hydrocarbons from this Vaca Muerta Formation to be 16.2 billion barrels of oil and 308 trillion cubic feet of natural gas.[2] Burning the recoverable oil would release 7 billion metric tonnes of CO2, and burning the recoverable gas would release 16.9 billion metric tonnes of CO2, based on the US EPA estimate of 0.43 metric tonnes of CO2 per barrel of oil and 0.055 metric tonnes of CO2 per thousand cubic feet of gas, .[3] Exploiting all of Argentina’s shale gas reserves to their maximum potential would consume up to 15 percent of the entire global carbon budget for achieving the 1.5-degree Celsius Paris Agreement target, according to Greenpeace.[4]

Strategic Significance

Once one of the largest natural gas exporters in South America, Argentina was a net importer of natural gas by 2008. Imports, which accounted for 23% of Argentina’s natural gas consumption in 2015, came by pipeline from countries such as Bolivia and, to a lesser extent, as liquefied natural gas (LNG) from sources such as Trinidad and Tobago. The Argentinian government hopes to stop importing LNG by 2022. By reducing current imports first, the government’s long-term goal is to shift the region towards gas exportation through continental pipelines and projected LNG facilities in Uruguay, Chile, and Argentina.[5]

Companies Involved

The main actor is the oil and gas company YPF, which has been leading most of the projects alone or in joint ventures. With 51% of its stocks under state control, the rest is listed on the Buenos Aires and New York Stock Exchanges. Current shareholders are Lazard, Goldman Sachs, and Morgan Stanley, among other mutual funds and investors.[1] YPF controls roughly 40 percent of acreage in Vaca Muerta, with two sites in production. One is being developed for oil with Chevron Corp., and the second is being developed for natural gas with DowDuPont Inc. The company wants joint ventures with Malaysia’s Petroliam Nasional Bhd and Schlumberger Ltd. to progress from pilot projects to full production this year as it seeks to reverse declining output.[6]

In 2012 CNOOC signed a joint venture deal with YPF to invest up to $1.5 billion to drill 130 wells in the basin.[7]

Repsol, which previously operated YPF’s position in the Neuquén Basin, drilled some 20 vertical wells targeting the Vaca Muerta Shale that produced at encouraging initial rates of 180 to 600 bbl/day on restricted 4-mm choke. In 2012, Repsol estimated that its leases held a total of 92 Tcf and 7.0 billion barrels of contingent and prospective shale gas and oil resources.[7]

GyP has signed contracts with or sold blocks to Shell, Pan American Energy (PAE) (holding owned by BP (60%) and Bridas Corp (40%), Wintershall, and ExxonMobil. Another key player is Total, which is leading several projects on its own.[1]

Potential ESG Risks


Neuquén’s former Minister of Energy, Guillermo Coco, resigned in 2014, because, among other reasons, a lawsuit had been filed against over unaccounted monetary contributions to a Foundation owned by state-controlled GyP. These kinds of agreements were part of the clauses in contracts signed with ExxonMobil, Wintershall, and several other private companies.[1]

In August 2018 it was announced that companies named in an ongoing graft investigation would be allowed to bid on Vaca Muerta projects. Companies that were named in the probe include power generators Albanesi SA and MSU Energy SA, the construction companies IECSA SA and Grupo Roggio, and Grupo Techint, which owns the oil exploration company Tecpetrol SA.[8]

Labour Rights

Workers’ wages have been almost cut in half, as certain benefits were removed (e.g. transportation and on-site breaks are deducted from the day’s pay, and night shifts are permitted). A significant amount of decision-making power has also been taken away from workers’ unions and transferred to companies. New pressure is building up to also reform workers’ conditions in the logistics sector after five workers lost their lives, among other incidents.[1]

Indigenous Rights

Numerous indigenous communities have seen their territories being licensed for new developments, as in the case of Campo Maripe with YPF-Chevron. No international legal framework has been observed, such as the International Labour Organization Convention 169, which in Argentina has Constitutional status. Among other things, the Convention states that Indigenous people should be consulted before introducing policies that affect them. Moreover, in disruptive cases such as extractive industries, consent should also be informed. Neither of those mechanisms has been set in place.[1]

In 2017 the Chubut provincial government has escalated the use of violent tactics against Mapuche indigenous organisations, threatening two communities (Puel Pvjv and Fvta Xayen) with evictions, and bringing in national militarised gendarmerie against a community (Campo Maripe) that was protesting fracking on its land.[1]

NGO's Involved

The following groups are working against fracking in Argentina and are members of the Alianza Latinoamericana frente al Fracking (Latin American Alliance On Fracking): Environmental Assembly of Citizens of Río Gallegos; Argentine Association of Environmental Lawyers; Center for Human Rights and Environment (CEDHA); Environment and Natural Resources Foundation (FARN); Observatorio Petrolero Sur (OPSUR)[9][1]

Other groups working specifically on Vaca Muerta include Greenpeace, EJES, and AIDA.[4]

Local Opposition

Currently, the province of Entre Ríos (adjacent to Uruguay) and more than fifty local towns have enacted bans on fracking. Some of them are far away from Vaca Muerta, but others are in proved reservoirs in the Neuquén basin, and place limits on fracking expansion. One such case is the agricultural town of Vista Alegre, where YPF has high hopes for gas extraction. Campo Maripe has for months blocked the new YPF and Chevron wells. In Neuquén, residents and local organizations have also pushed for oil landfills to be banished from cities. That struggle succeeded in getting new regulations introduced, which set boundaries to protect cities and agricultural areas. In Río Negro, a new landfill spanning 300 hectares is being resisted by local population. Total stated that no further drilling would take place in the Auca Mahuida Protected Area.[1]

Status of Project

Argentina is well positioned to develop its shale gas and tight oil resources because it contains a large tight oil resource base, and it has a well-established oil and gas industry and midstream infrastructure. Argentina’s existing shale gas and tight oil sector is relatively small and currently there is a shortage of powerful drilling rigs, fracturing equipment, and proppant capacity needed to ramp up production. In the near term, production from tight oil formations in Argentina is expected to be limited, but it is projected to grow robustly in the long term, increasing from about 32,000 b/d in 2016 to more than 400,000 b/d by 2040. According to the International Energy Agency, oil production from fracking in the country will more than triple over the next five years to 110,000 barrels a day.[10]

Among Vaca Muerta fields, YPF estimates that Loma Campana should reach peak production of 100,000 boepd in 2024, while La Amarga Chica should peak at 75,000 boepd and Bandurria Sur at more than 50,000 boepd. Such performances would put them among the most productive blocks in Argentina.[11]

  • More than 588 vertical and horizontal shale wells have been drilled and completed in the Vaca Muerta shale play since 2010. From 2010 to 2013, more than 10,000 wells were drilled in the Eagle Ford, and average initial production per well nearly tripled over that period.[5]
  • Since there are very few exploitation projects, there is very little overall development (2 to 4%) with just over 1,500 fracking wells.[1]


Argentina also has international natural gas pipeline connections with Chile, Uruguay, Brazil, and Bolivia. Argentina is readying a tender for a $500 million train line that could help unlock the potential of Vaca Muerta. Drillers would be able to use the train to slash the cost of sand used in fracking. It would also cut the cost of transporting steel tubes for drilling.[6]

One of the main issues is sand transportation costs and little can be done until a train becomes operational. Aside from extraction, the project's value chain encompasses more than ten waste dumps and oil landfills, three sand extraction mines, plus its cleaning facilities and associated logistics; national and international pipelines, LNG plants on the Atlantic and Pacific oceans, a 700 km train line for goods transportation, expansion of petrochemicals and refineries as well as new roads and highways, among other assets involved. In a bid to ramp up drilling on these blocks, YPF will press ahead on midstream projects to handle the increased output. This will include the expansion of a treatment plant at Loma Campana and the construction of a new 88-km crude pipeline.[12]

Domestic Political Situation

Gasoline prices and energy bills rose by up to 1000% in some places between late 2017 and mid-2018,[1] and in July 2018 it was announced that prices would increase a further 25%-30% by the end of the year.[13]

Project Economics

Fossil fuel subsidy programs like Argentina’s “Gas Plan” – under which public money is used to pay a steep incentive of USD 7.50 per million British Thermal Units (mmbtu) of new shale gas to producers at the wellhead – are ill advised at best. Debt to fossil gas producers from this program amounted to USD 1,500 million for the year 2017 alone; budget limitations have forced the government to delay payment, which will now be made in installments “starting 2019.”[14]

  • The average drilling and completion cost of a horizontal well in Vaca Muerta was estimated to be $11.2 million as of 2015, compared to $6.5 million to $7.8 million in the Eagle Ford.[5]

Currently, Vaca Muerta’s gas price is higher (US$ 7.5 per million BTU) than its conventional counterpart (US$ 2.5 per million BTU), and it will remain so at least until 2021. prices and energy bills have risen by up to 1000%.[1]

Tax Revenues

Since 2013, a special economic regime has been set up to enable tax breaks and other incentives. Created in the midst of the YPFChevron deal as an executive decree, it was finally introduced in the reform of the hydrocarbon law in 2014. Te main advantages for companies are the extension of unconventional fossil licenses (from 25 to 35 years, allowing for indefinite 10-year extensions), the removal of license caps for each holder (previously restricted to five), fixed provincial royalties of 12%, and reduced capital and machinery import taxes, among others.[1]

The provincial royalties, set at 12%, are among the lowest on the continent.[15]

International Dynamics

The government's courtship of foreign oil companies is at odds with its nationalist rhetoric around Vaca Muerta, and this is exacerbating tensions with provincial elected officials.[16]


Actors involved include the U.S. government, through the Department of State’s Unconventional Gas Technical Engagement Program, and the U.S.-Argentina Binational Energy Working Group. Also involved are financial institutions like Citibank, ICBC, and Deutsche Bank, among others. The latter are holders of private and corporate debt (like that of YPF and the Argentine company Pampa Energía). Public debt is also being issued to fund infrastructure.[1]

Articles and resources


  1. 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 1.13 Vaca Muerta Megaproject, EJES, December 2017
  2. "Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States" (PDF). U.S. Energy Information Administration (EIA). June 2013. Retrieved June 11, 2013.
  3. "Greenhouse Gases Equivalencies Calculator - Calculations and References," U.S. EPA, accessed September 2018
  4. 4.0 4.1 "Debunked: Vaca Muerta," Greenpeace, June 2018
  5. 5.0 5.1 5.2 Argentina seeking increased natural gas production from shale resources to reduce imports, EIA, Feb. 10, 2017
  6. 6.0 6.1 Argentina Eyes $500 Million Rail Project to Boost Shale Play, Bloomberg News, Mar. 22, 2018
  7. 7.0 7.1 Technically Recoverable Shale Gas Reserves, EIA, September 2015
  8. Argentina to Let Companies Named in Graft Probe Bid on Projects, Bloomberg, Aug. 10, 2018
  9. Mexico y El Caribe, Heinrich Boll Stufting, Nov. 29, 2015
  10. Taking The Fracking Boom Global, Wall Street Journal, Jun. 19, 2018
  11. Argentina’s YPF To Ramp Up Shale Oil Production, Latin American Oil & Gas, Aug. 14, 2018
  12. Argentina's YPF sees return to oil production growth in 2019, S&P Global Platts, Aug. 8, 2018
  13. Argentina Continues Endless Energy Price Hikes, Telesur, Jul. 23, 2018
  15. Heading South, Friends of the Earth Europe, May 2014
  16. Violations of collective human rights and environmental rights by the Chevron, Total and Shell oil companies in Argentine Patagonia, CETIM, Oct. 17, 2016

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