Vaca Muerta Output Soars, But Argentina's Broader Economy Lags

Key facts

• Vaca Muerta shale region in Argentina has achieved record crude oil output of 887,227 bpd in May.
• Natural gas production in Vaca Muerta reached 5.5 billion cubic feet per day in May, close to a record.
• The energy sector's success has not broadly benefited Argentina, which faces sluggish growth and high inflation.
• Salaries in Neuquén's oil and gas sector are significantly higher than in Buenos Aires.
• President Javier Milei's government is prioritizing energy industry development.

Argentina's Vaca Muerta shale region is experiencing a significant boom, with record crude oil production and near-record natural gas output in recent months. This surge has boosted the energy industry, making it a key driver of GDP growth alongside agriculture. However, this success remains largely confined to the Neuquén province where Vaca Muerta is located.

Outside this energy hub, the broader Argentine economy continues to struggle with sluggish growth, high inflation, weak consumer spending, and increasing business and mortgage defaults. The country is also managing its substantial external debt obligations.

Crude oil output in Vaca Muerta hit an all-time high of 887,227 barrels per day in May, a 19% increase from the previous year. Natural gas production also rose to 5.5 billion cubic feet per day, just shy of the record. These figures have positioned Argentina as the fourth-largest oil producer in Latin America.

Workers in Neuquén's oil and gas sector are reportedly earning significantly higher salaries, around $5,600 per month, compared to the average $1,800 in Buenos Aires, creating a divide within the country. Economists describe this as "two Argentinas, one that grows and another that falls."

President Javier Milei's government is prioritizing the development of the local energy industry and hopes the Vaca Muerta boom will eventually trickle down to the rest of the economy. However, analysts express concern about whether the new export sectors can generate sufficient spillovers quickly enough, especially with upcoming elections next year.