Argentina’s crude oil production in the Vaca Muerta shale formation is on track to reach 1 million barrels per day by the end of the decade, according to a recent forecast by Rystad Energy. The increase in production is expected to help Argentina surpass Colombia, making it the third-largest oil producer in South America. This marks a significant milestone in the region’s evolving energy landscape.
In the third quarter of 2023, production from the Vaca Muerta play hit a record high of 400,000 barrels per day. Rystad Energy predicts that daily output will rise to 1 million barrels by 2030, fueled by increased productivity, expanded pipeline infrastructure, and a higher number of drilled wells. In the third quarter alone, the number of wells drilled increased from 33 per month in the first quarter to 40, with 46 new wells drilled in September, 39 of them oil wells.
This production surge challenges global projections that oil demand may soon plateau, underscoring a fundamental reality of the resource sector: as long as there is demand, there will be supply. Argentina’s state-owned energy company, Yacimientos Petrolíferos Fiscales (YPF), is investing billions of dollars in expanding pipeline infrastructure to meet this growing demand.
The Vaca Muerta play, located in Neuquén province, is one of the largest shale oil and gas fields in the world, with an estimated 16 billion barrels of recoverable crude oil and 308 trillion cubic feet of natural gas. It is considered the second-largest shale gas deposit and the fourth-largest shale oil resource globally. Although it is often compared to the Permian Basin, geologically, it is closer to the Eagle Ford shale formation. Over the past five years, Vaca Muerta’s output has quadrupled, and it is now poised to outpace Colombia’s oil production.
In contrast to Argentina’s oil boom, Colombia’s energy policy has shifted toward prioritizing environmental concerns over energy security. Under President Gustavo Petro’s administration, the country is transitioning away from oil and gas toward wind and solar energy. However, this shift comes at a high cost, with the government estimating a $40 billion price tag for electrification and changes in agriculture and energy. In this context, oil and gas revenues are expected to play a lesser role, and Colombia is no longer issuing new oil and gas exploration permits.
While Colombia’s government has expressed intentions to increase oil production while advancing its energy transition, it faces significant contradictions in its policies, such as banning hydraulic fracturing (fracking) while simultaneously seeking to boost oil output. This has led to uncertainty regarding the country’s energy future.
Meanwhile, Argentina’s government has clearly embraced its ambition to become a major oil and gas producer. By offering incentives for investment in Vaca Muerta, the Argentine government has successfully stimulated a boom in production. According to data from the U.S. Energy Information Administration (EIA), Argentina’s oil exports have grown by an average of 33% annually from 2017 to 2023, while the country has reduced its natural gas imports by 47% in 2023 alone.
As Colombia faces the challenge of either ramping up natural gas production or increasing LNG imports to avoid power shortages, Argentina’s growth in oil and gas output places it on a path to replace Colombia as a leading regional oil producer. This shift could also position Argentina as a potential natural gas supplier to Colombia, should Colombia’s domestic gas production continue to decline due to its fracking ban.
Despite recent offshore gas discoveries in Colombia, which could attract over $4 billion in investment from Petrobras and Ecopetrol, Colombia’s energy policy continues to focus on a long-term energy transition. The discovery, while promising, may not be enough to shift the country’s trajectory unless the government adjusts its approach to local gas development.
In contrast, Argentina is pursuing a more balanced strategy that combines its oil and gas growth with plans to expand its critical minerals production and increase its share of low-carbon energy sources. Argentina’s comprehensive energy approach, which mirrors strategies seen in countries like China and India, is helping the nation achieve its dual goals of energy growth and a clean energy transition. With oil and gas export revenues helping to fund its plans, Argentina is set to surpass Colombia as a top-three oil producer in South America and potentially become a key energy supplier for the region.
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