The Vaca Muerta shale play in southern Argentina continues delivering strong production growth. In a mere decade, shale oil and gas production have regularly soared to all-time highs, boosting Argentina’s hydrocarbon output to new records. Even waning output from the Latin American country’s aging conventional oil fields has had little impact on overall production volumes, with growing unconventional hydrocarbon output filling the gap. October 2025’s numbers, like the month prior, reflect those trends and the rising outsized contribution the Vaca Muerta is making to Argentina’s hydrocarbon output.
Ministry of Economy data shows Argentina pumped yet another record of 849,646 barrels of crude oil per day for October 2025. This represents not only another all-time high but is nearly 2% higher month on month and 15.5% greater than the same period a year earlier. Shale oil surged by 1.8% month on month and a whopping 34% year on year to a new record of 571,478 barrels per day, which sees unconventional oil production now comprising 67.26% of all petroleum produced by Argentina. A notable expansion in drilling activity in the Vaca Muerta is responsible for such an impressive leap in production.
Despite record oil production, Argentina’s natural gas output fell for the third straight month. Production of the essential fossil fuel plummeted nearly 11% compared to a month prior and by almost 7% year on year to just under 4.4 billion cubic feet per day. A marked drop in shale gas production was responsible for this, with output plunging by a whopping 14% month on month and 5.8% year on year to 2.7 billion cubic feet for October 2025. As a result, shale gas comprised 61.6% of Argentina’s total natural gas production, the lowest ratio in months. This can be blamed on wells being shuttered for planned maintenance and a reduction in drilling activity.
The development of the 8.6-million-acre Vaca Muerta shale is a game changer for Argentina. Waning conventional oil and gas production from aging fields well past their prime was sharply impacting Argentina’s economy, the second largest in South America. Falling hydrocarbon production, especially for natural gas, which is an essential fuel in Argentina, forced Buenos Aires to substantially step up energy imports. This had an outsized impact on a fragile economy prone to calamitous financial collapses. Rising oil and natural gas imports were responsible for Argentina’s trade deficit ballooning out to dangerous levels, forcing Buenos Aires to implement fiscally costly energy price caps which can disincentivize investment.
The ongoing development of the Vaca Muerta, which began in 2012 with President Cristina Fernández de Kirchner seizing 51% of YPF, is driving an energy renaissance for Argentina. In just over a decade, the geological formation has become an energy powerhouse and the largest, most profitable shale play in Latin America. During 2014, a mere 5 horizontal wells entered production, but that number grew exponentially as drilling ratcheted up at a frantic pace, with 403 production wells operational by 2020, with 111 alone added during 2019. Over that period, the Vaca Muerta went from producing negligible volumes of hydrocarbons to pumping 27% and 59% respectively of Argentina’s oil and gas by 2020.
Indeed, the U.S. Energy Information Administration (EIA) estimated the Vaca Muerta contains 16 billion barrels of shale oil and 308 trillion cubic feet of shale gas. This makes the unconventional hydrocarbon formation one of the largest shale plays in the world, ranked fourth for oil and second for natural gas. With only around 10% of the Vaca Muerta currently under development, there is considerable scope for shale oil and gas producing operations to expand. Indeed, analysts predict the shale play will be pumping at least 1 million barrels of oil and 5.7 billion cubic feet of shale gas per day.
The Vaca Muerta is a key growth engine for Argentina’s oil patch because the country’s conventional oil and natural gas fields are caught in an inexorable decline. Leading industry body the Chamber of Exploration and Production of Hydrocarbons (CEPH) warned that conventional oil production is in a phase of “high operational fragility and accentuated decline”. This the industry body believes will lead to mature oilfields being shuttered in the near term with insufficient capital invested in maintaining operations. The CEPH, along with the provincial government of Chubut, blamed this on an 8% export levy applied to conventional oil exports.
Chubut has long been at the heart of Argentina’s conventional oil industry and, prior to the development of the Vaca Muerta, pumped most of the country’s crude oil and is the source for Escalante grade heavy oil. The province was recently exempted from the export tax and had its royalties lowered by President Javier Milei’s government. Eventually, the elimination of the levy will be extended to all 23 provinces. This forms part of the process of rationalizing export, capital, and price controls as the Milei administration implements a market-friendly regulatory environment, which will attract greater foreign energy investment.
The removal of that export levy will spur investment in Argentina’s conventional oil assets, ultimately boosting production from mature oilfields facing a series of headwinds. Among the most significant of these are high lifting and breakeven costs. According to the CEPH, Argentina’s conventional oilfields have high lifting costs of $35 to $45 per barrel, which is roughly double the $15 to $18 per barrel in the Vaca Muerta. This in turn leads to high breakeven costs of up to $75 per barrel lifted from Chubut’s conventional oilfields compared to $36 to $45 per barrel for the Vaca Muerta.
Those high costs arise because Argentina’s conventional oilfields are mature assets where production has peaked and is now in decline. As a result, costly secondary and tertiary recovery methods like water, gas of chemical injection are required to boost reservoir pressures and oil mobility so it can be lifted. Consequently, operations at conventional oilfields in Chubut have gone into a deep decline, with energy investment redirected to lower-cost and more profitable energy assets in the Vaca Muerta. This is particularly important in an operating environment impacted by the poor outlook for crude and softer prices with the international Brent benchmark trading at around $62 per barrel.
The parlous state of Argentina’s high-cost conventional oil industry underscores the importance of developing the Vaca Muerta for the country’s oil potential to be unlocked to boost economically viable hydrocarbon production. There are signs that the Vaca Muerta is Buenos Aires’ long-awaited economic silver bullet. The formation has the potential to change the energy landscape in Argentina and has already made the country a net oil exporter. Growing hydrocarbon production in the Vaca Muerta is not only reducing the volumes of imported natural gas, but it has now led to Argentina exporting the fossil fuel. This is improving the country’s balance of trade while substantially boosting fiscal revenues for a cash-trapped government.
By Matthew Smith for Oilprice.com
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