Vaca Muerta shale formation propels Argentina closer to energy self-sufficiency, analysts say

June 17 (Reuters) - Soaring oil and gas production from Argentina's Vaca Muerta shale formation in the first quarter of 2025 is fueling the nation's push for energy self-sufficiency and ambitious plans to become an important liquefied natural gas exporter, Rystad Energy analysts said on Tuesday.

Vaca Muerta, a vast unconventional oil reserve, is pivotal for Argentina to cut costly imports and bolster its economy. Oil output there climbed 26% year-on-year to more than 447,000 barrels per day in March, Rystad estimates showed.

New drilling increased only marginally, Rystad said, partly as existing pipelines were unable to handle more volume - a constraint expected to ease with an April pipeline expansion.

Production of dry gas – natural gas primarily composed of methane after heavier liquids and water are removed – in the first quarter jumped to 2.1 billion cubic feet per day, up 16% from a year ago.

"Gas is stealing the spotlight," said Radhika Bansal of Rystad Energy, noting Argentina "could soon become a pivotal player in global gas supply."

The burgeoning output is key to Argentina's plan to meet LNG demand abroad, Rystad said.

Initiatives underway include the Southern Energy SOU.V LNG project, which plans two floating LNG vessels with a combined 6 million metric tons per annum capacity, with first output targeted for late 2027.

State-owned YPF YPFDm.BA is also making headway on larger projects with partners Shell SHEL.L and Eni ENI.MI, with Rystad projecting them to reach full capacity by the late 2030s.

Norwegian energy firm Equinor EQNR.OL also reversed an earlier decision to exit Vaca Muerta, citing improved infrastructure and export viability, which Rystad said signals renewed investor confidence in the zone.

Vaca Muerta is attracting sizeable investments, Rystad argued, adding that in the first quarter, merger and acquisition deals in the formation accounted for 43% of all upstream, or oil and gas exploration and production, transactions across Latin America.