Crude oil production in the Vaca Muerta play reached an all-time high of 400,000 barrels daily in the third quarter of this year, Rystad Energy wrote at the end of November, predicting that the play will reach a daily output of 1 million barrels daily by 2030. The consultancy cited productivity improvements and a buildout in takeaway capacity as reasons for the production boost. The third reason for the output growth was the higher number of wells drilled, from 33 per month in the first quarter to 40 in the third quarter. In September alone, 46 new wells were drilled in the Dead Cow play, of them 39 oil wells.
This development raises certain questions about some outlooks for global oil demand that see a looming end to its growth, and it highlights the most fundamental principle in the resource industries: for as long as there is demand, there will be supply. And there is clearly demand because Argentina’s state energy major Yacimientos Petrolíferos Fiscales, or YPF for short, is spending billions on pipeline infrastructure in the Vaca Muerta.
The shale play in the Neuquen province is estimated to hold recoverable resources consisting of 16 billion barrels of crude oil and 308 trillion cubic feet of natural gas. Those numbers make the Vaca Muerta the world’s second-largest shale gas deposit and the fourth-biggest shale oil resource. It has been dubbed the Argentinian Permian, although geologically, it is closer to the Eagle Ford play. Its output has quadrupled over the past five years, set to exceed the output of fellow regional oil producer Colombia in illustration of the importance of political support—or lack thereof—for the abovementioned resource industries.
In Colombia, the government of Gustavo Petro sees carbon dioxide emissions as a bigger priority than energy security and oil revenues. There, a shift is in progress from oil and gas to wind and solar that the government has estimated would cost some $40 billion—and this money is apparently not coming from oil and gas revenues because Colombia wants to be original. It would be spent on electrification, changes in agricultural practices, and the abovementioned wind and solar.
Interestingly, earlier this year, the country’s energy minister said there were plans to boost oil production as well, while advancing an energy transition—and despite banning hydraulic fracturing. A month later, President Petro ended the issuance of new oil and gas permits. Colombia’s energy policy has been, in a way, conflicting.
Now compare this to Argentina’s clear intention to become an oil and gas major, and the respective government policies that have encouraged more investment in the Vaca Muerta play through incentives—and it has worked exactly as planned. Per government data cited by the EIA, Argentina has boosted its oil exports by an average annual 33% between 2017 and 2023 and cut its natural gas imports by 47% since the start of this year alone, thanks to the boom in domestic production in the Vaca Muerta.
Colombia, meanwhile, is facing a choice of either boosting its own natural gas production or stepping up LNG imports if it wants to avoid blackouts. The reason is that natural depletion has reduced the availability of local natural gas, but the fracking ban is preventing the development of new shale resources. Unless the ban is reversed, Colombia would have to increase its reliance on energy imports—possibly some from Argentina, which is going in the opposite direction.
Colombia looks determined to stay the transition course, so it would be sooner rather than later that Argentina replaces it as a top three oil producer in South America and possibly even turn into its gas supplier—despite a recent offshore gas discovery offshore Colombia, which could attract investments of over $4 billion from the developers, a consortium between Petrobras and local Ecopetrol—unless the Petro government decides to do away with local gas altogether.
Yet the news of the discovery and the investment plan suggests that there is still an ounce of reason left in Colombia’s political circles. Planning energy transitions worth $40 billion is one thing, but finding that kind of money and maintaining a secure supply of energy simultaneously is quite another thing.
Compared to Argentina, which also has transition plans—everyone has them, transition plans are all the rage these days. Yet these plans are being pursued alongside the country’s oil and gas growth plans in an all-of-the-above sort of approach we have notably seen from China and India when it comes to energy. Argentina wants to boost its oil and gas production, but it also plans to boost its critical minerals production and the share of non-hydro low-carbon energy sources in its mix to 20%. And oil and gas export revenues will help it do it—and overtake Colombia as a top three regional oil producer.
