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IEEFA Argentina: Setbacks in plan to use Vaca Muerta oil and gas reserves to kickstart economy

January 09, 2019
Tom Sanzillo and Kathy Hipple

Argentine officials are pinning much of the country’s economic comeback on attracting foreign investment to find, pump and sell oil and gas from the Vaca Muerta region in Neuquén Province to a new set of global customers.  The question for Argentina is whether its economic problems will undermine its ability to develop the Vaca Muerta oil and gas reserves.

Investment in Vaca Muerta not going well.

Argentina has joint ventures with a host of big name global oil companies to help it meet its ambitious oil and gas production schedule. Its national energy plan projects significant increases in both oil and gas development over the next five years, and even more in the out years.

Yet, two recent events may suggest things are not going so well.

First, U.S.-based Retamco promised a long-term commitment of $1 billion to support the development of the reserves it was awarded for development in November 2017.  According to published reports, after the company invested $1.1 million and then requested more time to raise capital, the deal is now dead. We don’t know whether Retamco jumped or was pushed. The Argentine government may have pulled the plug.

Steve Gose, Retamco’s owner, made his bones in Texas, but went bust in the early 1980s. Retamco, his operation in Montana, started in 1995 and has holdings in North Dakota, Wyoming and Colorado. It was the first U.S. independent oil company to ink a deal when it won its Vaca Muerta bid in 2017.  That was important because Argentina needs both large-scale major corporations and smaller independent companies that can bring rigs into Vaca Muerta and piggyback off the structure of the larger investments.

Last year, Reuters reported that the two small independents doing business in Argentina were experiencing problems raising capital. The faltering economic situation, skyrocketing interest rates and the devaluation of the Argentine peso during 2018 apparently chased away Retamco’s investor network. The problems apparently proved insurmountable. The loss of the company’s involvement in Vaca Muerta is a setback, although Argentine officials have said they will find other developers.


Second, after a recent roadshow to the United States to promote Vaca Muerta, the government received no bidders on a recent offering of new blocks in Vaca Muerta.

Argentine officials are taking steps to counter these problems. As the region’s weak oil and gas production in 2018 became apparent, officials from its leading state utility Yacimientos Petroliferos Fiscales Sociedad Anonima (YPF) predicted a more robust 2019. The country has recently revamped its subsidy program to support new natural gas drilling.

The government is looking for the Vaca Muerta reserves to kickstart an economic revival in Argentina. The rush to sign up large global oil and gas companies has been touted by the government. Whether Argentina’s policy initiatives can overcome basic market forces of the oil and gas sector remains to be seen.

Spanish language version: IEEFA Argentina: Los contratiempos en el plan de utilizar las reservas de petróleo y gas de Vaca Muerta para impulsar la economía

Tom Sanzillo ([email protected]) is IEEFA’s director of finance.

Kathy Hipple ([email protected]) is a financial analyst at IEEFA.


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Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures.

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Kathy Hipple

Former IEEFA Financial Analyst Kathy Hipple is a founding partner of Noosphere Marketing and the finance professor at Bard’s MBA for Sustainability.

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