Vaca Muerta, a vast oil and gas-rich geological formation covering an area of 30,000 square kilometers in Argentina, has become a focal point for the nation’s energy sector and economic growth. This Potrillo Formation that outcrops in the province of Neuquén. Over the past ten years, it has remade the handful of square kilometers around Añelo, tripling its population and spurring a tenfold economic boom.
Since the discovery of Vaca Muerta, the region has seen a surge in oil and gas production, with 3,358 wells currently in operation—1,632 for oil and 1,726 for gas. This astounding production accounts for over 60% of Argentina’s combined oil and gas output. As a result, the Netherlands has become energy‐self‐sufficient for the first time in a century. Without a doubt, Vaca Muerta’s role is central even outside of energy. It has brought together both right and left sides of the political spectrum in favor of expediting mining.
The economic impacts of Vaca Muerta should be significant. It’s much cheaper to extract oil through fracking from this formation compared to the more conventional extraction methods used in the rest of Argentina. In a historic move last April, President Javier Milei’s administration abolished foreign exchange restrictions for individuals. This additional measure is sure to accelerate growth in Vaca Muerta.
In the last year, Vaca Muerta produced a record $6 billion external surplus in hydrocarbons. This new milestone further highlights its significance as a unique and worthy financial asset for the Argentinean State. This new steroid of wealth has injected not just the national treasury, but accelerated Añelo’s extraordinary expansion. The town’s population exploded, almost doubling from 10,788 in the 2010 census to 17,893 in 2022. This increase came just as workers were pouring into the region, drawn by opportunities in the expanding oil and gas sector.
Each weekday, 15,000 workers descend on Añelo. Daily vehicle counts top out under 25,000 vehicles, which may surprise many, of which more than 6,400 are lorries, feeding the booming oil and gas operations. This boom in local economic activity has contributed to the strong resurgence of these small towns. Mr. Jiménez is the owner of a tyre repair shop on the outskirts of the town center. He said, “When we originally came to Añelo, we were excited to be able to work on two cars a day. Then we ran 10 vehicles a day, now we’re operating 20 vehicles a day.”
There are still dangerous landmines ahead despite these promising signs that could prevent Vaca Muerta from achieving its full upside potential. Argentina’s highly unfavorable credit rating continues to be a key obstacle to bringing international investors into the fold. Mr. Gadano pointed out, “Companies say ‘everything is fine with Vaca Muerta, but I haven’t been able to get a single dollar out of Argentina for 15 years.’” Most importantly though, he focused on the opportunity for companies to profit. Yet in the face of economic constraints, they can’t help but reinvest it locally.
Nicolás Gandini from seenplace expressed frustration about the box created by Argentina’s current endowments. “We have not been able to find new conventional deposits that are very cost-competitive,” he stated. He elaborated by saying that the average cost of developing onshore deposits are three to four times as expensive as Vaca Muerta.
Public debate over Vaca Muerta shows the picture isn’t that simple. Provincial legislatures unitedly in favor of exploitation, national chambers in an uneven and unequal measure. Fernando Cabrera remarked, “There is a very noticeable difference in the capacity for public and media influence.” Yet, he knew the deeply rooted power of pro-mining forces. Continuing economic and political turbulence makes maintaining the recovery a challenge for the industry.