Argentina's Mendoza aims to widen Vaca Muerta exploration with licensing round

Mendoza's government is seeking to expand exploration within the Vaca Muerta shale play in the western province of Argentina, Governor Alfredo Cornejo said, as his government prepares a licensing round for 15 blocks.

"We are optimistic that investment in Vaca Muerta is moving northwards," he said at the Offshore Technology Conference in Houston, according to a statement on May 5.

The development of Vaca Muerta over the past 15 years has been focused on Neuquén, a province located due south of Mendoza. Yet more companies are starting to test the play to the north in Mendoza and to the east in Río Negro.

YPF, the country's biggest oil producer, aims in October to start drilling a pad of wells targeting Vaca Muerta in a block in Mendoza, while Argentina-based Aconcagua Energía and the local consortium Quintana Energy and TSB are preparing exploration campaigns in the play.

"The more it runs [to the north], the more opportunities will open up for the province," Cornejo said.

Vaca Muerta, one of the world's biggest shale plays, is driving Argentina's oil and gas production growth. Most estimates forecast that it will more than double in output to 1 million b/d of oil and 250 million cu m/d of gas in 2030. That would be up from 446,000 b/d of oil and 66.6 million cu m/d of gas in March, according to data from the Argentine Energy Secretariat.

Licensing rounds

Cornejo made the comments after announcing plans May 2 to award 15 blocks at auction, of which a dozen are for exploration and several have access to Vaca Muerta shale play.

The goal will be to increase output from the many maturing conventional fields in the western province and widen exploration for shale resources, Cornejo said in a statement.

He said the call for bids will be made in early June.

The exploration blocks are Puesto Pozo Cercado Occidental and Zampal in Cuyo, a conventional hydrocarbon basin in the north of Mendoza. The rest of the exploration blocks -- Atuel Norte Exploración, Atuel Sur Exploración, Boleadero, Calmuco, Chachahuen Norte, CN III Norte, Los Parlamentos, Ranquil Norte, Río Atuel and Sierra Azul Sur -- are in the Neuquén basin to the south of the province, where there is potential for shale resources.

The three blocks already in production are El Manzano, Puesto Molina Norte and Puntilla del Huincán, all of which are in the Neuquén basin.

Tax incentives

To encourage bidding, Mendoza is offering tax breaks, including lower production royalties when international prices decline or for blocks with low productivity. Indeed, the government recently cut these taxes to 6.5% to 7% from the national average of 12% following a plunge in Brent, the international reference price, followed in Argentina, to around $60/b from $74/b on April 2.

These incentives helped boost conventional oil production by 1% to an average of 56,440 b/d in 2024 from the previous year, according to the province.

Mendoza also recently awarded five blocks -- three for exploration, two for development -- with investment commitments for more than $30 million, while YPF has sold blocks in the province where the new developers plan to invest more than $700 million.