Chevron and Shell will be part of a mega investment in Vaca Muerta

Chevron and Shell finalized their incorporation as shareholders in the company Vaca Muerta Oil Sur (Vmos) last week, which is in charge of the construction of a 267-mile (430-kilometer) pipeline between Neuquén and Río Negro, along with complementary works.

This project will allow a significant increase in Argentina's oil exports, according to the specialized portal Econojournal. The partnership is led by YPF, along with Vista Oil & Gas, Pan American Energy (PAE), Pluspetrol, and Pampa Energía, who had confirmed their participation at the end of last year.

The incorporation of the multinationals could facilitate obtaining the financing required for an investment estimated at at least USD 2.5 billion.

Vmos has already obtained an initial syndicated loan of USD 1.7 billion from five international banks, while the remaining amount should be contributed by the involved companies. Additionally, approval is expected from the Government of Javier Milei for the project to benefit from the Incentive Regime for Large Investments (RIGI).

The construction of the project began in January, according to YPF last week to its shareholders and investors. Currently, progress is being made in the mobilization of contractors, earthworks, and pipe delivery.

"The construction of VMOS facilities began last January and is now progressing with the mobilization of contractors, earthworks, and pipe delivery," explained Maximiliano Westen, a member of YPF's Executive Committee, during a conference with investors.

"Meanwhile, Vemos is advancing on two key fronts: the request for government approval and the process to secure project financing, with a target financing structure of 70% in debt and 30% in equity. In this regard, Vemos has already mandated five international banks for an initial syndicated loan of 1.7 billion dollars," he added.

A historic project

This pipeline, which will allow the transport of up to 550,000 barrels of oil daily starting from the second half of 2027, is projected as one of the most significant infrastructure works in Argentina, standing out for its expansion potential.

The design contemplates the possibility of increasing capacity to 700,000 barrels daily if necessary, consolidating the project as key for the sustained growth of production and exports from Vaca Muerta, the fourth-largest shale oil reserve in the world.

The capacity of the new pipeline will be key for YPF to advance its goal of consolidating itself as the main shale producer in the region. It is estimated that exports could exceed USD 20 billion annually by 2027.

Additionally, the project's expansion seeks to strengthen the competitiveness of Argentine crude in the global market, especially in Asia, through the connection with VLCC (Very Large Crude Carriers) ships, which will allow optimizing logistics costs.

Vmos's financing scheme, based on 70% debt and 30% equity, aims to guarantee the construction and development of the different stages of the infrastructure.

A essential aspect of the project is the export through the maritime terminal in Punta Colorada, Río Negro, which will be connected via a submarine pipeline to the dispatch buoys, thus facilitating the loading of the VLCCs.

The impact of this investment will be significant, not only because of the infrastructure that will facilitate large-scale oil transportation but also for its potential to generate employment and foster economic growth in the producing provinces, such as Neuquén and Río Negro.

It is expected that, once the work is completed, Vmos will contribute to increasing production in Vaca Muerta and consolidate crude oil exports as one of the essential pillars of the Argentine economy.

According to a report by the consulting firm PwC, directed at international investors, Argentina could achieve an energy surplus of USD 30 billion by 2030, driven by the development of Vaca Muerta. This advancement would position the sector as one of the country's main foreign exchange generators.