Argentina to focus on infrastructure to ramp up oil, gas output: incoming minister

Argentina's incoming Infrastructure Minister Guillermo Ferraro will prioritize building roads and other infrastructure to support a ramp-up in oil and natural gas production in Vaca Muerta shale play, he said Nov. 21.

"We are going to seriously develop infrastructure for Vaca Muerta," Ferraro, who will oversee energy affairs, said in an interview on Radio Mitre.

Vaca Muerta, located in an arid and sparse region of northern Patagonia, is largely supplied by trucks, which bring in vast amounts of sand and water for fracking.

Ferraro called this inefficient, adding that the construction of an aqueduct, loading terminals and a railroad would be better.

The past two governments — on the political right and then the left — have been seeking financing for this more than $1 billion railroad project since 2018, most recently from China. The country, however, fell into a financial crisis that year that is still keeping away capital for building the proposed North Patagonia Train, or Norpatagonico.

The Norpatagonico has been designed to move sand, seamless steel tubes, building materials and other supplies to Vaca Muerta and take crude oil out of the play, as well as fruit, manufactured products, minerals, methanol and other goods. The train, a large portion of which will run on an existing but to-be-revamped line, will move the goods to Bahía Blanca, an Atlantic port in Buenos Aires province, for export or domestic delivery.

Private investment

Ferraro said that investment for this and other projects will be sought from the private sector, unlike the outgoing administration of President Alberto Fernández, which put a focus on state oversight and control over projects, often via concessions with private investors.

"The approach we have is that the state has to reduce its participation in the economy to make room for the private sector," Ferraro said. "There is an enormous opportunity for the private sector to invest in Argentina."

Ferraro said there is a more than 20-year deficit in infrastructure in the country, adding that to close this gap and build new projects will require annual investments equivalent to 15% of the country's gross domestic product. That is more than the 1%-1.5% of GDP that has been invested over the past few years, he added.

The key for attracting this investment, he said, is for there to be "a credible government."

Ferraro will take his post Dec. 10 with President-elect Javier Milei, who on the Nov. 19 runoff election against the ruling party's Economy Minister Sergio Massa as Argentinians overwhelmingly voted for change amid a worsening financial crisis.

New energy secretary

Ferraro said his energy secretary will be Eduardo Rodríguez Chirillo, a lawyer who advised Milei on energy affairs during the campaign.

The energy secretary will run a team of professionals, Ferraro added.

"In the rest of the departments there will be very proven, well-known and trustworthy people for the private sector, with experience in the sector," he said.

They will oversee a sector that is one of the fastest growing in Argentina, led by Vaca Muerta. The play is is expected to drive production growth in Neuquén to 400,000 b/d by early 2024, up from 330,000 b/d currently, before increasing to 1 million b/d by 2027 or 2028, according to a forecast by the provincial government, home to most of the acreage in the shale deposit.