A view of two towers in Vaca Muerta, the field whose discovery gave Argentina huge potential in shale gas and oil. Since 2011, governments have dreamed of fully exploiting it, but have been unable to do so, so the country spends billions of dollars annually on imports of gas. CREDIT: Energy Secretariat

By Daniel Gutman
BUENOS AIRES, Aug 29 2022 (IPS)

Argentina, which has one of the largest unconventional hydrocarbon deposits in the world, has been forced to import gas for 6.6 billion dollars so far this year.

The main reason for this paradox -which aggravated the instability of the economy of this South American country- is the lack of transportation infrastructure.

In a public ceremony on Aug. 10, President Alberto Fernández signed the delayed contracts for the construction, for more than two billion dollars to be financed by the State, of a modern gas pipeline aimed at bridging that gap.

The objective is to bring a large part of the natural gas produced in Vaca Muerta to the capital, Buenos Aires, home to nearly a third of the 47 million inhabitants of this Southern Cone country.

Vaca Muerta is a geological formation with an abundance of shale gas and oil, located in the southern region of Patagonia, more than 1,000 kilometers from Buenos Aires.

The name Vaca Muerta has been on the lips of recent Argentine presidents as a symbol of the better future that awaits a country whose economy suffers from a chronic lack of foreign exchange and a weakened local currency, resulting in a poverty rate of around 40 percent of the population.

This has been the case since 2011, when the U.S. Energy Information Administration (EIA) reported that Vaca Muerta makes Argentina the country with the second largest shale gas reserves, behind China, and the fourth largest oil reserves.

Vaca Muerta has reserves of 308 trillion cubic feet of gas and 16.2 billion barrels of oil, according to EIA data, confirmed by Argentina’s state-owned oil company YPF.

“With Vaca Muerta, Argentina has the potential not only to achieve energy self-sufficiency but also to export. We are missing a huge opportunity,” said Salvador Gil, director of the Energy Engineering program at the public National University of San Martín, on the outskirts of Buenos Aires.

Gil told IPS that Argentina could play an important role, given the crisis of rising energy prices driven up by the war in Ukraine, which threatens to drag on.

But to do so, it must solve not only its transportation problems, but also the imbalances in the economy, which for years have hindered the influx of large investments in the country.

“Today, what the world needs is energy security and Argentina has gas, which has been identified as the main fuel needed for the transition period towards clean energies, in the context of the fight against climate change,” the expert said.

Argentine President Alberto Fernández, flanked by Economy Minister Sergio Massa (left), and the governor of the province of Buenos Aires, Axel Kicillof, signed a contract for the construction of the gas pipeline that will expand the capacity to transport natural gas produced in the Vaca Muerta field to the capital. It is considered a key project for the Argentine economy. CREDIT: Casa Rosada

More foreign dependence

However, since 2011, when the EIA made public its first data on Vaca Muerta’s potential, which led politicians and experts to start dreaming that Argentina would in a few years become a kind of Saudi Arabia of South America, the country is in fact more and more dependent from the energy point of view.

A study of the period 2011-2021 released this year by a private think tank states that “the decade was characterized by an increase in Argentina’s external dependence on hydrocarbons: gas imports increased by 33.6 percent over the decade while diesel imports grew by 46 percent and gasoline expanded 996 percent.”

The document, published by the General Mosconi Energy Institute, points out that Argentina, which until the end of the 20th century enjoyed self-sufficiency in gas and oil, began to experience a considerable decrease in production in 2004.

Two years later, gas began to be imported by pipeline from Bolivia and in 2008 liquefied natural gas (LNG), brought by ship mainly from the United States and Qatar, started to be imported.

“Since then, the proportion of imported gas out of the total consumed in the country has grown. In 2009 it represented only six percent, rising to 22 percent in 2014. In 2021 it represented 17 percent of the total,” the report states.

Still far below its real potential, Vaca Muerta’s production has been growing. In June it contributed 56 percent of the 139 million cubic meters per day of natural gas produced in Argentina, according to official data.

Gas is the main fuel in the country’s energy mix, accounting for about 55 percent of the total.

With regard to oil, Vaca Muerta contributed 239,000 of the 583,000 barrels per day of national production in June.

Today, gas from Patagonia in the south is transported to Buenos Aires and other large towns and cities through three gas pipelines built in the 1980s, which do not live up to demand.

For this reason, the gas pipeline whose contract was signed this month has been described by both the political leadership and the academic world as the most urgently needed piece of infrastructure in Argentina at the moment.

Its cost was set at 1.49 billion dollars at the end of 2021, but it will probably exceed two billion dollars, due to the devaluation and inflation that are crippling the Argentine economy.

According to the government, the pipeline will be operational by June next year, at the beginning of the next southern hemisphere winter.

View of the Costanera thermal power plant, which produces electricity in Buenos Aires with natural gas. Thermal generation predominates in Argentina’s electricity mix, making up almost 60 percent of the total in 2021. The gas shortage recorded this southern hemisphere winter made it necessary to use more liquid fuels to supply the power plants. CREDIt: Enel

In search of investment

“Of course the pipeline is important, but it will not solve all of Argentina’s energy problems,” said Daniel Bouille, a researcher with a PhD in energy economics.

The expert reminded IPS that an important factor is that shale oil and gas is extracted using the hydraulic fracturing technique or fracking, which “is more costly than conventional techniques.”

“To develop Vaca Muerta´s great potential, investments of between 60 and 70 billion dollars are needed,” he explained.

Bouille said that today the conditions do not exist for these investments to take place, in a country whose economy has not been growing since 2010 and where there are exchange controls and limits on the export of foreign exchange, none of which foments confidence among international capital.

In order to combat this situation, Economy Minister Sergio Massa announced that on Sept. 9 he will visit oil giants such as Chevron, Exxon, Shell and Total at their headquarters in the U.S. city of Houston, Texas to interest them in the possibility of investing in Vaca Muerta.

Argentina does not seem to be coming up with alternatives. “For 20 years the country’s conventional oil and gas production has been steadily decreasing, because all the basins have been depleted,” said Nicolás Gadano, an economist specializing in energy at the private Di Tella University.

“It is precisely the shale hydrocarbons from Vaca Muerta that in the last five years have offset the situation to slow the fall in total production,” he added in an interview with IPS.

Gadano believes that further development of Vaca Muerta’s potential will be positive for Argentina even from an environmental point of view.

“This year in Argentina a lot of oil was used for electricity production due to the lack of gas. But when the pipeline begins to operate, liquid fuels will be replaced by gas, which is a cleaner fuel,” he said.

There are also less visible but critical voices regarding the focus on Vaca Muerta as the path that Argentina should follow in terms of energy.

“Fracking, in addition to its negative environmental and social impacts, is very expensive,” said Martín Alvarez, a researcher at Observatorio Petrolero Sur, a non-governmental organization that focuses on the environmental and social aspects of energy issues.

He noted that “Vaca Muerta hydrocarbons had no possibilities of being exported until the current global energy crisis. It wasn’t until this year’s international price increase that a market for them emerged.”

“Argentina has forgotten about renewable energies and is committed to fossil fuels, which is a step backwards and goes against international climate agreements. Seeking the development of Vaca Muerta has been the only energy policy of this country in the last 10 years,” he complained.

Two drilling rigs in the Loma Campana deposit, in Vaca Muerta, in the Neuquén Basin, in south-west Argentina. Credit: Fabiana Frayssinet/IPS

By Daniel Gutman
BUENOS AIRES, May 9 2017 (IPS)

Since a US Energy Information Administration (EIA) report announced in 2011 that Argentina had some of the world’s biggest shale oil and gas reserves, the dream of prosperity has been on the minds of many people in this South American nation where nearly a third of the population lives in poverty.

The question that hangs in the air is whether it is really possible for Argentina to become South America’s Saudi Arabia, or if it is just a fantasy.

Six years after the release of the report, although Argentina is still, like then, a net importer of oil and natural gas, the hope would appear to remain intact for centre-right President Mauricio Macri.

When Macri visited the United States on Apr. 25-27 he stopped over in Houston, Texas, described as the “Oil Capital of the World”. There, he urged the executives of the world’s top energy companies to make the huge investments that Argentina needs to exploit its reserves.“Today in Argentina there are more than 1,500 boreholes that are being exploited by the fracking method, not just in Vaca Muerta, but also in other deposits in the area. In the next years, this number is expected to multiply.” --
Diego de Rissio

“Argentina is among the countries with the greatest potential in the world. We want the best companies to come and partner with us,” Macri told oil executives at lunch in Houston on Apr. 26, before flying to Washington, where he met with his US counterpart Donald Trump at the White House.

“The delays in exploiting non-conventional fossil fuels in Argentina are inherent to the process, from a technical standpoint. The oil and gas industry operates in the long term,” said Martín Kaindl, head of the Argentine Oil and Gas Institute (IAPG), a think tank supported by oil companies in the country.

“We have to do things well for this opportunity to become a source of wealth for Argentina,” he told IPS.

So far, however, what seems to have grown more than the investments are the social movements opposed to hydraulic fracturing or fracking, in which rock is fractured by the high-pressure injection of ‘fracking fluid’ (primarily water, as well as sand and chemicals,) to release natural gas and oil from shale deposits..

This process has environmental and socioeconomic effects, according to experts quoted by environmentalists.

The greatest achievement so far by the opponents of fracking in Argentina came on Apr. 25, when the legislature of the central-eastern province of Entre Ríos banned fracking and other non-conventional methods.

It became the first province in the country to reach this decision, which was preceded by local laws in dozens of municipalities. Entre Ríos has no oil industry tradition, but it is included in the long-run exploration plans of Argentina’s state-controlled company YPF.

“Entre Ríos is a province that lives mainly off of agriculture and tourism, where there is a tradition of environmental activism”, sociologist Juan Pablo Olsson, who is part of the Argentina Free of Fracking movement, told IPS.

“We must not forget that a few years ago, there were up to 100,000 people protesting against the pulp mills on the international bridge,” he added, referring to the 2005-2010 conflict with Uruguay over the construction of two paper factories, due to the environmental impact on the Uruguay River, which separates the province of Entre Ríos from the neighbouring country.

Pear trees in blossom in a farm in Allen, a city in the province of Río Negro, located next to a shale gas deposit. Fruit producers and other traditional sectors of that province are concerned about the negative impacts of the oil and gas industry in Vaca Muerta. Credit: Fabiana Frayssinet/IPS

According to the latest EIA data, Argentina has recoverable shale reserves that amount to 802 trillion cubic feet of gas and 27 billion barrels of oil. It is only second to China in shale gas reserves, and in fourth position after the US, Russia and China, in shale oil.

Of these reserves, 38 per cent of the gas and 60 per cent of the oil are concentrated in the geological formation of Vaca Muerta, where commercial exploitation began in 2013, in the Loma Campana deposit, by YPF and US company Chevron in the province of Neuquén.

This 30,000-sq- km deposit is located in the area known as the Neuquén Basin (a sedimentary basin which has traditionally been the main oil-producing area in Argentina), spreading over four provinces (Neuquén, Río Negro, Mendoza and La Pampa) in the country’s southwest.

The extraordinary potential of Vaca Muerta is one of the few things in which the current president and his centre-left predecessor, Cristina Fernández (2007-2015) have agreed on, with neither having made any reference whatsoever to the environmental risks posed by fracking.

The former president did not hide her enthusiasm when talking about the deposit, which in 2013 she suggested renaming as “Vaca Viva” (living cow) , instead of “Vaca Muerta” (dead cow), since “we are now extracting oil from it.”

Macri, meanwhile, said that Vaca Muerta “is changing the country’s energy future,” since it has “abundant, cheap and exportable” resources.

This was in January, when he announced the signing of an agreement with oil industry trade unions which allows a reduction of up to 40 per cent of labour costs, to attract investments.

Later, the president decreed a minimum price for shale gas, higher than the market price, reinforcing the strategy launched by his predecessor of maintaining domestic fossil fuel prices at levels making it possible to tap into non-conventional deposits.

In addition, during his stay in Washington he announced a 35 per cent reduction in the import tariffs on used oil industry machinery, which will favour the arrival of equipment that fell into disuse in the U.S-Mexican Eagle Ford Formation, due to the fall in international prices.

The minister of Energy and Mining, Juan José Aranguren, who went to Houston with Macri, said that currently between six and eight billion dollars a year are invested in Vaca Muerta, but that the government’s goal is to reach 20 billion in 2019.

“Today in Argentina there are more than 1,500 boreholes that are being exploited by the fracking method, not just in Vaca Muerta, but also in other deposits in the area. In the next years, this number is expected to multiply,” Diego di Risio, a researcher from the Oil Observatory of the South, an organisation of professionals from different disciplines interested in the energy issue, told IPS.

“But we believe that the environmental and social impacts should be debated, since it is a fruit-producing agricultural region,” said di Risio. One of the localities engaged in the production of fruit near Vaca Muerta, where shale oil is being extracted, is Allen, in the province of Río Negro.

Juan Ponce, a fruit jam manufacturer in Allen, told IPS: “Oil production overrode fruit-producing farms. There were 35 fruit warehouses, and now there are only five left.”

He also told IPS by phone that “most people buy bottled water, because our water is not drinkable anymore, despite the fact that we have the longest river in the Patagonia region, the Rio Negro.”

“The best evidence of the pollution that is being generated by the oil and gas extraction is that the owners of surrounding farms are receiving subsidies from the companies, since they can no longer produce good quality fruit,” he added.

Añelo, a Patagonian town in southwest Argentina that experienced explosive growth because it is next to the country’s biggest shale oil and gas field, is now starting to feel the impact on the development of these resources due to the plunge in international oil prices. Credit: Fabiana Frayssinet/IPS

By Fabiana Frayssinet
AÑELO, Argentina, Mar 19 2016 (IPS)

The dizzying growth of Añelo, a town in southwest Argentina, driven by the production of shale oil and gas in the Vaca Muerta geological reserve, has slowed down due to the plunge in global oil prices, which has put a curb on local development and is threatening investment and employment.

Vaca Muerta, a 30,000-sq-km geological reserve rich in unconventional fossil fuels in the province of Neuquén, began to be exploited in mid-2013 by the state-run oil company Yacimientos Petroliferos Fiscales (YPF) in a joint venture with U.S. oil giant Chevron.

“We had an interesting growth boom thanks to the strategic development plan that we were promoting, to get all of the oil services companies to set up shop in Añelo. That really boosted our growth, and helped our town to develop,” Añelo Mayor Darío Díaz told IPS.

The population of this town located 100 km from the provincial capital, Neuquén, in Argentina’s southern Patagonian region, rose twofold from 3,000 to 6,000.

And that is not counting the large number of machinists, technicians, engineers and executives of the oil companies who rotate in and out of the area, along with the truckers who haul supplies to the Loma Campana oilfield eight km from Añelo.

“There were around 10 services companies operating in Añelo; now we have about 50, and some 160 agreements signed for other companies to come here,” the mayor said.

The shale gas and oil in Vaca Muerta has made this country the second in the world after the United States in production of unconventional fossil fuels.

Loma Campana, where there are 300 active wells producing unconventional gas and oil after a total investment of three billion dollars, currently produces 50 billion barrels per day of oil, according to YPF figures.

The shale oil and gas industry has fuelled heavy public investment in Añelo and nearby towns. The population of this town is expected to reach 25,000 in the next 15 years.

“We’re building two schools and a hospital,” Díaz told IPS. “The primary and secondary schools have been expanded. We are making town squares and a new energy substation. We built a water treatment plant and have improved the sewage service. In terms of public works we have really done a great deal, keeping our eyes on our goal: growth.”

But the expansion of the town has also brought problems.

The mayor pointed out, for example, that rent for a two-bedroom housing unit has climbed from 33 dollars to 100 dollars a month, and that a plot of land that previously was worth 1,700 dollars cannot be purchased now for less than 130,000 dollars.

“Those are abrupt changes brought by the oil industry,” Díaz said. “What us old-time residents of Añelo have suffered the most is the social impact of all of this movement, of so much vehicle traffic, so many people, which brings insecurity and other things that are typical of development in general.”

New complications

People in Añelo are now worried that despite the costs they are paying for the development boom, the promised progress will not arrive.

On Mar. 4, the outgoing president of YPF, Miguel Galuccio, announced in a conference with international investors that the cutbacks in the industry in 2016 would be reflected in slower progress in Vaca Muerta.

Workers in Loma Campana, a field with 300 shale oil wells in Vaca Muerta. The decision to slow down the development of unconventional fossil fuels in Argentina has led to lay-offs in the area. Credit: Fabiana Frayssinet/IPS

In 2015, the company’s revenues shrank 49 percent, while investment grew less than four percent, below previous levels.

The costs of producing shale gas and oil, which requires an expensive technique known as hydraulic fracturing or “fracking”, are not competitive in a context where international oil prices are hovering between 30 and 40 dollars a barrel.

In Argentina, the cost of extraction in conventional wells stands at 25 to 30 dollars a barrel, and in unconventional wells at around 70 dollars a barrel, oil industry experts report.

But the internal price of a barrel in Vaca Muerta is regulated at 67.5 dollars and in the rest of the country’s oilfields at 54.9 percent – an artificial price established to shore up the oil industry’s expansion plans, especially in this part of the country, although at a slower pace now.

YPF announced that in Vaca Muerta, it would cut oil production costs by 15 percent, which has led to lay-offs.

“The situation is very complicated,” said Díaz, who estimated that there will be 1,000 more unemployed people in the province, added to those who have already lost their jobs. “A reduction in activity,” has already been seen, he said, and “people are working fewer hours” and wages have fallen, which has a social impact, he added.

Oil worker unions in Vaca Muerta say 1,000 people have been laid off so far in the industry, as well as 1,000 in other areas.

Eduardo Toledo, an agricultural technician who decided to move from Buenos Aires to Añelo and invest his savings in a restaurant, is worried about the slowdown in oil industry activity in Vaca Muerta.

“When we started, we had just one stove with three burners and an oven,” said Toledo, whose customers are truck drivers, factory workers and other oil industry employees who have been drawn to this area by the relatively high wages paid by the industry.

Like Toledo, many people invested in hotels, rental housing, shops and small-scale service businesses. “Everyone wanted to come to what was going to be the shale gas and oil capital,” he said.

But now his restaurant is working at a “mid to low level of activity.”

“If people know they’re going to lose their jobs, they don’t want to spend money,” he said.

Toledo is still confident that interest in shale gas and oil will keep things moving, despite the plummeting prices.

In Vaca Muerta, 77 percent of the proven shale reserves are gas.

Besides, “there are major gas resources that have not yet become reserves,” Ignacio Sabbatella, who holds a PhD in social sciences from the University of Buenos Aires and is the co-author of the book “History of a privatization; How and why the YPF was lost”, told IPS. (YPF was renationalised in 2012.)

But experts and local residents are taking a long-term view.

Sabbatella stressed that it is important to keep in mind that beyond the current international oil price swings, the investments in Vaca Muerta “will yield fruit in the long term” – in five to 10 years.

He pointed out that shale oil and gas production only got underway in the area in 2011, “and especially after the recovery of state control of YPF, in a joint venture with transnational corporations like Chevron.”

YPF, Argentina’s biggest company, was in private hands from 1992 to 2012, when the government of Cristina Fernández (2007-2015) decided to renationalise it.

Sabbatella said the announced cutbacks in YPF have coincided with an overall “shift in policy” since the arrival to the presidency on Dec. 10 of the centre-right Mauricio Macri, who ended a period of centre-left governments under Néstor Kirchner (2003-2007) and later his wife and successor, Fernández.

“The previous government did everything possible to sustain the levels of investment, exploration and production, even in an unfavourable international context, and what we are seeing is that this government is only halfway maintaining that policy and is even pushing YPF to cut its investments,” said Sabbatella.

“The current administration believes that the best thing is to adjust domestic oil industry policy to external conditions. In a context of low prices, they believe the best idea is to not sustain domestic investment, and they have even shown some illustrations of this, by importing cheaper crude and fuel from abroad, for example,” he said.

But Toledo prefers to be optimistic, because otherwise, he said, “I have to close my restaurant.”

“I can’t afford to go somewhere else and I’m not interested anyway because it’s hard to set down roots again in a place like this.”

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

The Loma Campana camp where YPF and Chevron produce shale oil in the southwest Argentine province of Neuquén. So far, the plunging of oil prices has not modified the costely development of this unconventional fuel. Credit: Fabiana Frayssinet/IPS

By Fabiana Frayssinet
BUENOS AIRES, Apr 10 2015 (IPS)

Despite the precipitous fall in global oil prices, Argentina has continued to follow its strategy of producing unconventional shale oil, although in the short term there could be problems attracting the foreign investment needed to exploit the Vaca Muerta shale deposit.

The uncertainty has come on the heels of the initial euphoria over the exploitation of shale oil and gas, of which Argentina has some of the world’s largest reserves.

Is the Vaca Muerta shale oil and gas field in intensive care, now that the price of a barrel of oil has plummeted from 110 dollars to under 50 in just seven months? That is the question repeated by financial and oil industry experts.

Argentina’s energy trade deficit climbed to almost seven billion dollars in 2014, partly due to the decline in the country’s conventional oil reserves.

Eliminating that deficit depends on the development of Vaca Muerta, a major shale oil and gas deposit in the Neuquén basin in southwest Argentina. At least 10 billion dollars a year in investment are needed over the next few years to tap into this source of energy.“Conventional oil production has peaked, so to meet the rise in demand it will be necessary to develop unconventional sources. And Argentina is one of the best-placed countries to do so.” -- Víctor Bronstein

“In the short term, it would be best to import, rather than exploit the shale resources,” Víctor Bronstein, the director of the Centre of Studies on Energy, Policy and Society, told IPS.

“But taking a more strategic view, investment in and development of these resources must be kept up, since oil prices are going to start climbing again in the near future and we have to have the capacity to produce our own resources when that happens,” he added.

That is how President Cristina Fernández saw things, he said, when she set a domestic price of 72 dollars a barrel – “40 percent above its international value” – among other production incentives that were adopted to shore up Vaca Muerta.

According to the state oil company Yacimientos Petrolíferos Fiscales (YPF), Vaca Muerta multiplied Argentina’s oil reserves by a factor of 10 and its gas reserves by a factor of 40, which will enable this country not only to be self-sufficient in energy but also to become a net exporter of oil and gas.

YPF has been assigned 12,000 of the 30,000 sq km of the shale oil and gas deposit in the province of Neuquén.

The company admits that to exploit the deposit, it will need to partner with transnational corporations capable of providing capital. It has already done so with the U.S.-based Chevron in the Loma Campana deposit, where it had projected a price of 80 dollars a barrel this year.

“Who is going to invest in unconventional oil and gas at the current prices?” the vice president of the Grupo Moreno, Gustavo Calleja, commented to IPS.

“We have to hold on to Vaca Muerta and continue studying its deposits in just a few pilot wells, to see how deep they are and what kind of drilling is necessary to keep down costs and curb the environmental impacts,” said Calleja, who was the government’s undersecretary of fuel in the 1980s.

YPF technicians working on one of the shale oil drilling rigs in the Loma Campana shale gas field in Vaca Muerta in southwest Argentina. Credit: Fabiana Frayssinet/IPS

Hydraulic fracturing or “fracking”, the technique used to extract shale oil and gas, involves the high-pressure injection of a mix of water, sand and chemical additives into the parent-rock formations at a depth of over 2,000 metres, in order to release the trapped oil and gas which flows up to the surface through pipes.

Besides being very costly, fracking poses environmental risks, as it requires huge volumes of water, pollutes aquifers, and can cause earthquakes.

The shale boom that began in the United States in 2008 was driven, among other factors, by high oil prices, which provided a profit margin.

“At the current prices only those who have cutting-edge technology can develop their shale reserves,” said Calleja.

The cost of producing a barrel of shale oil is based on variables such as extraction, exploration, investment amortization and the payment of taxes and royalties. In the United States, the cost is calculated at between 40 and 70 dollars.

That fact, explained Bronstein, led to an over 30 percent reduction in drilling activity since prices fell, “which will bring down production over the next few months.”

In Argentina, shale development is just starting, which means costs are high “due to a question of scale and problems of logistics and infrastructure,” said the expert.

In the United States, “developing a shale well, including fracking, costs around three million dollars,” while in Argentina “it costs more than twice that,” he said.

“The cost of extracting conventional oil in Argentina ranges between 20 and 30 dollars a barrel, while it costs around 90 dollars to extract a barrel of shale oil, although that will gradually go down as Vaca Muerta is developed,” he said.

Argentina does not yet produce shale gas on a commercial scale, as it still has large reserves of conventional gas. YPF’s shale oil production represents 10 percent of the company’s total output, and between three and four percent of the oil extracted by all operating companies in the country.

Canada and China produce unconventional oil on a commercial scale. But due to their geologic and operative characteristics, the United States and Argentina are seen as having the greatest potential in terms of future production of shale oil and gas.

YPF argues that with the gradual reduction in production costs, a rise in output, and higher domestic oil prices, Vaca Muerta is still profitable.

The industry is waiting for the collapse in prices to bring down the costs of international inputs and services, thus reducing the high domestic industrial costs.

YPF has also signed agreements for the joint exploitation of shale deposits with Malaysia’s Petronas and Dow Chemical of the United States, while other transnational corporations have announced their intention to invest in Vaca Muerta.

Bronstein believes the investments will continue to flow in because they were planned with an eye to “significant production in five years.”

“This means investors don’t take the current price of crude oil into account as much as the future price. And virtually all analysts agree that oil prices will rally within a few years,” he said.

“Conventional oil production has peaked, so to meet the rise in demand it will be necessary to develop unconventional sources. And Argentina is one of the best-placed countries to do so,” Bronstein added.

Cristian Folgar, who was undersecretary of fuels last decade, said “any snapshot of the market today would be distorted because the costs of different oil industry services have not yet settled.”

“YPF will continue to forge ahead and will not slow down investments that depend on its decision because the company currently channels its entire flow of investment into Argentina,” he told IPS.

In his view, international corporations will reduce their investments at a global level, which means “YPF is not at all likely to reach new joint venture agreements with other oil companies until the situation stabilises.”

But “those who have already started to invest are not going to back out,” he added.

“Argentina continues to pay for crude and gas at the same prices as before the start of this downward price trend,” Folgar said. “Since a change of government lies just ahead, new developments will probably wait for the next government to send signals indicating what its plans are in the energy sector.”

Calleja is worried that Saudi Arabia, the world’s leading oil exporter, and the country that according to experts is pulling the strings of the current price collapse in order to – among other goals – push shale out of the market, “may drive prices even further down.”

In the face of what he describes as a global “war of interests”, he believes it is a good time to start looking to energy sources other than fossil fuels.

Calleja argues in favour of hydroelectricity and nuclear energy, which currently represent just 14 percent of Argentina’s energy mix, but have “lower economic and environmental costs.”

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

Technicians discuss their work near two drill rigs at the Vaca Muerta oil field in Loma Campana, in southern Argentina. Credit: Fabiana Frayssinet/IPS

By Fabiana Frayssinet
NEUQUÉN, Argentina, Oct 27 2014 (IPS)

In Argentina they call it “yeil”, the hispanicised version of “shale”. But while these unconventional gas and oil reserves are seen by many as offering a means to development and a route towards energy self-sufficiency, others believe the term should fall into disuse because the global trend is towards clean, renewable sources of energy.

Wearing an oil-soaked uniform, the drilling supervisor in the state oil company YPF, Claudio Rueda, feels like he is playing a part in an important story that is unfolding in southern Argentina.

“Availability of energy is key in our country,” he told IPS. “It’s an essential element in Argentina’s development and future, and we are part of that process.”

The first chapter of the story is being written in the Vaca Muerta shale oil and gas field in Loma Campana in the province of Neuquén, which forms part of Argentina’s southern Patagonia region, where rich unconventional reserves of gas and oil are hidden in rocky structures 2,500 to 3,000 metres below the surface.

According to YPF, reserves of 802 trillion cubic feet of reserves put Argentina second in the world in shale gas deposits, after China, with 1,115 trillion cubic feet.

And in shale oil reserves, Argentina is now in fourth place, with 27 billion barrels, after Russia, the United States and China.“Staking our bets on fracking means reinforcing the current energy mix based on fossil fuels, and as a result, it spells out a major setback in terms of alternative scenarios or the transition to clean, renewable energy sources.” -- Maristella Svampa

According to projections, Argentina’s conventional oil and gas reserves will run out in eight or 10 years and production is declining, so the government considers the development of Vaca Muerta, a 30,000-sq-km geological formation, strategic.

“Nearly 30 percent of the country’s energy is imported, in different ways – a huge drain on the country’s hard currency reserves,” Rubén Etcheverry, coauthor of the book “Yeil, las nuevas reservas” (Yeil, the new reserves) and former Neuquén provincial energy secretary, said in an interview with IPS.

“We have been in intensive therapy for the last five years, with respect to the trade balance and the energy balance,” he said in Neuquén, the provincial capital.

“We went from exporting nearly five billion dollars a year in fuel, 10 years ago, to spending 15 billion dollars on imports; in other words, the balance has shifted by 20 billion dollars a year – an enormous change for any economy of this size,” Etcheverry said.

Imports include electricity and liquefied gas, natural gas and other fuels.

Diego Pérez Santiesteban, president of Argentina’s Chamber of Importers, said that at the start of the year, energy purchases represented 15 percent of all imports, compared to just five percent a year earlier.

Since 2009, accumulated imported energy has surpassed the Central Bank’s foreign reserves of 28.4 billion dollars.

Etcheverry sees Vaca Muerta as key to turning that tendency around, because the reserves found deep under the surface would be “enough to make us self-sufficient, and would even allow us to export.”

According to the expert, Argentina could follow in the footsteps of the United States, which thanks to its shale deposits “could become the world’s leading producer of gas and oil in less than 10 years.”

Shale gas and oil are extracted by means of a process known as hydraulic fracturing or fracking, which involves pumping water, chemicals and sand at high pressure into the well, and opening and extending fractures deep under the surface in the shale rock to release the fossil fuels.

But there is a growing outcry around the world against the pollution caused by fracking in the water table and other environmental impacts in wide areas around the deposits.

And in Argentina many voices have also been raised against the energy mix that has been chosen.

“This is an environmental point of view that goes beyond Vaca Muerta. The option that they are trying to impose in Argentina, as a solution to the energy crisis…has no future prospects,” said ecologist Silvia Leanza of the Ecosur Foundation.

“We’re basing all of our economic expansion on one asset here – but how many years will it last?” she asked.

Fossil fuels make up nearly 90 percent of Argentina’s energy mix. The rest is based on nuclear and hydroelectric sources, and just one percent renewable.

The Intergovernmental Panel on Climate Change (IPCC) has concluded that the burning of fossil fuels to generate energy is the main cause of climate change.

“This situation, along with the greater availability of renewable sources, indicates the end of the era of dirty energy sources,” Mauro Fernández, head of Greenpeace Argentina’s energy campaign, said in a report.

This country’s dependence on fossil fuels has made carbon dioxide emissions per capita among the highest in the region: 4.4 tons in 2009, according to the World Bank.

Fernández said unconventional fossil fuels are not only risky because of fracking, but are also “a bad alternative from a climate and energy point of view.”

“Unconventional deposits look like a new frontier for doing more of the same, fueling the motor of climate change,” he complained.

Argentina has set a target for at least eight percent of the country’s electricity to come from renewable sources by 2016.

“Staking our bets on fracking means reinforcing the current energy mix based on fossil fuels, and as a result, it spells out a major setback in terms of alternative scenarios or the transition to clean, renewable energy sources,” said sociologist Maristella Svampa, an independent researcher with the National Scientific and Technical Research Council.

“In the last decade, fracking has certainly transformed the energy outlook in the United States, making it less dependent on imports. But it has also made it the place where the real impacts can be seen: pollution of groundwater, damage to the health of people and animals, earthquakes, greater emissions of methane gas, among others,” she said.

Carolina García with the Multisectoral Group against Hydraulic Fracturing said that because of its rich natural resources, Argentina has other alternatives that should be tapped before exploiting fossil fuels “to the last drop.”

“We finish extracting everything in the Neuquén basin and what do we have left?” she commented to IPS.

Etcheverry mentioned the possibility of using solar energy in the north, wind energy in Patagonia and along the Atlantic shoreline, geothermic energy in the Andes, and tidal and wave energy along the coast.

But the author said that for now the costs were “much higher” than those of fossil fuels, because of technological reasons, transportation aspects and energy intensity.

He also said oil and gas are still necessary as energy sources and raw materials for everyday products.

For that reason, Etcheverry said, the transition from the fossil fuels era “is not simple.” First it is necessary to improve energy savings and efficiency, in order to later shift to less polluting fossil fuels, he added.

“In the first stage it would be a question of moving from the most polluting fossil fuels like coal and oil towards others that are less polluting, like natural gas. And from there, creating incentives for everything that has to do with clean or renewable energies,” he said.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

The main street of Añelo, a remote town in Argentina’s southern Patagonia region which is set to become the country’s shale oil capital. In 15 years the population will have climbed to 25,000, 10 times what it was just two years ago. Credit: Fabiana Frayssinet/IPS

By Fabiana Frayssinet
AÑELO, Argentina, Oct 23 2014 (IPS)

This small town in southern Argentina is nearly a century old, but the unconventional fossil fuel boom is forcing it to basically start over, from scratch. The wave of outsiders drawn by the shale fuel fever has pushed the town to its limits, while the plan to turn it into a “sustainable city of the future” is still only on paper.

The motto of this small town in the province of Neuquén is upbeat and premonitory: “The future found its place.”

But for now the town’s roads, most of which are unpaved and throw up clouds of dust from the heavy traffic of trucks and luxury cars driven by oil company executives, contradict that slogan.

“Many eyes around the world are on Añelo, but unfortunately we don’t have a good showcase, to put us on display,” the director of the town’s health centre, Rubén Bautista, told IPS.

“We are living on top of black gold, they take riches out of our soil, but they leave practically nothing to the local population,” added the doctor who, along with three other colleagues, covers the health needs of a population that doubled, from 2,500 to 5,000, in just two years.According to conservative projections, Añelo will have a population of 25,000 in 15 years, including people directly employed by the oil industry, indirect workers, and their families, who have begun to pour into the new mecca for Argentina’s energy self-sufficiency plans.

Añelo, a bleak town on the banks of the Neuquén river surrounded by fruit trees, goats and vineyards, is the town closest to the Loma Campana shale oil field, which is being worked by Argentina’s state oil company YPF and the U.S.-based Chevron.

It is only eight km from the oil field, which is part of new riches that hold out the biggest promise for revenue to fuel the country’s development: Vaca Muerta, a 30,000-sq km geological reserve that is rich in shale oil and gas and has made this country the second in the world after the United States in production of unconventional fossil fuels.

But the black gold is not shining yet in Añelo – which means forgotten place in the Mapuche indigenous language – located some 100 km north of Neuquén, the provincial capital.

The health centre, which refers serious cases to hospitals in the provincial capital, has just two ambulances, while 117 companies from across the planet are setting up shop in and around the town.

According to conservative projections, Añelo will have a population of 25,000 in 15 years, including people directly employed by the oil industry, indirect workers, and their families, who have begun to pour into the new mecca for Argentina’s energy self-sufficiency plans.

“They are people who come to Añelo with the idea of finding a better future…thinking about what unconventional fossil fuels could mean in their lives,” YPF Neuquén’s communications manager, Federico Calífano, told IPS.

YPF alone has 720 employees in the area. The workers come from nearby towns as well as other provinces, and from abroad, brought in by international companies in the construction, chemistry, hotel, transportation and services industries.

The town’s only hotel is full, and camps spring up on any flat area, with containers turned into comfortable temporary lodgings for the workers. Rent for a small apartment is five times what people pay in the most expensive neighbourhoods in Buenos Aires.

“We are building a city from scratch,” Añelo Mayor Darío Díaz told IPS, although he pointed out that even before the shale boom the town was “a strategic waypoint.”

YPF has been exploiting unconventional fossil fuels in the region since the 1980s, but “when their work was done they would leave,” Díaz explained. “This is much more intensive; there will be a lot of work over the next 30 years.”

“The town has infrastructure for around 2,500 inhabitants. It is too small now given the new demand for basic services like water, electricity, roads, and dust emission,” the province’s environment secretary, Ricardo Esquivel, told IPS.

The sound of hammering and pounding is constant. Two workers, who make the 120-km commute back and forth every day from Cipolletti, in the neighbouring province of Río Negro, are working on a new sidewalk. “It’s spectacular.There’s a lot of work here for everyone. More people are needed. The problem is housing,” construction worker Esteban Aries told IPS.

The YPF Foundation carried out an “urban footprint” study which gave rise to the Añelo Local Development Plan. The plan has the support of the Inter-American Development Bank (IDB) and its Emerging Sustainable Cities Initiative.

Carried out together with the local and provincial governments, the plan outlines different growth scenarios with the aim of assessing the risks and vulnerabilities of the area.

It addresses, among other aspects, “what surface area the city should have, how the urban planning process should start, what the diagram should look like, what services are needed – what Añelo is going to need today and in two, three, or five years,” Calífano said.

YPF reported that the work had already begun, including an expansion of the sanitation system, construction of homes for doctors, and a vocational training centre, linked to the needs of the oil industry. Primary healthcare clinics were set up in two trailer trucks – although Dr. Bautista said that’s not enough.

The economic growth has brought heavy traffic. The government is planning a two-lane highway to Vaca Muerta, on the so-called “oil route”, to keep the trucks out of the town.

“The steadily growing number of accidents is overwhelming,” Bautista said. The average has increased from 10 traffic and work-related accidents a month two years ago to 17 today.

“You have to keep in mind that most of the activity has been going on for a year,” said Pablo Bizzotto, YPF’s regional manager of unconventional fuels in Loma Campana, where some 20 wells are drilled every month, which has driven production up from 3,000 to 21,000 barrels per day of oil.

“There are things that we will obviously work out together with the authorities, as we go. This is all very new,” he said.

Agricultural engineer Eduardo Tomada left everything behind in Buenos Aires and invested his savings to open up a restaurant in Añelo, which is now packed with workers.

His cook, local resident Norma Olate, said she was happy because she’s earning more. But she nostalgically remembers when her town was “practically a sand dune.”

Development has brought work, “but also bad things,” the 60-year-old Olate told IPS. “There have been armed robberies, which we didn’t see here before.”

Olate, who has young, single daughters, said she is also worried about “the invasion of men.”

“So many men!” she said, laughing. “I’m not interested anymore, but the girls…there are guys who come and deceive them, a lot of them end up pregnant….that’s bad for the town too.”

Provincial lawmaker Raúl Dobrusín of the opposition Popular Unity party denounced the rise in prostitution, drug trafficking and use, alcoholism and corruption.

“We say the only things modernised in Añelo were the casino and the brothel,” he said ironically.

Dobrusín complained about the government’s lack of “planning” and “control” over these and other problems, such as real estate speculation and prices that are now unaffordable for many people in the town.

Nevertheless, for Mayor Díaz the balance is positive. “We have to take advantage of this opportunity for Añelo to develop as a town and improve the living standards of our people. What worries me is whether we will make the necessary investments quickly enough,” he said.

The province is preparing a “strategic development plan” for Añelo, along with nearby “oil micro-cities”, which will include the construction of an industrial park, schools, hospitals, roads and housing, and increased security.

“We’re not going to build an oil camp in Añelo without a city,” the mayor summed up.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

Pear trees in bloom on a farm in Allen, in the Argentine province of Río Negro, across from a “tight gas” deposit. Pear growers are worried about their future, now that the production of unconventional fossil fuels is expanding in the area. Credit: Fabiana Frayssinet/IPS

By Fabiana Frayssinet
AÑELO, Argentina, Oct 8 2014 (IPS)

Unconventional oil and gas reserves in Vaca Muerta in southwest Argentina hold out the promise of energy self-sufficiency and development for the country. But the fracking technique used to extract this treasure from underground rocks could be used at a huge cost.

The landscape begins to change when you get about 100 km from Neuquén, the capital of the province of the same name, in southwest Argentina. In this area, dubbed “the Saudi Arabia of Patagonia”, fruit trees are in bloom and vineyards stretch out green towards the horizon, in the early southern hemisphere springtime.

But along the roads, where there is intense traffic of trucks hauling water, sand, chemicals and metallic structures, oil derricks and pump stations have begun to replace the neat rows of poplars which form windbreaks protecting crops in the southern region of Patagonia.

“Now there’s money, there’s work – we’re better off,” truck driver Jorge Maldonado told Tierramérica. On a daily basis he transports drill pipes to Loma Campana, the shale oil and gas field that has become the second-largest producer in Argentina in just three years.“That water is not left in the same condition as it was when it was removed from the rivers; the hydrologic cycle is changed. They are minimising a problem that requires a more in-depth analysis.” -- Carolina García

It is located in Vaca Muerta, a geological formation in the Neuquén basin which is spread out over the provinces of Neuquén, Río Negro and Mendoza. Of the 30,000 sq km area, the state-run YPF oil company has been assigned 12,000 sq km in concession, including some 300 sq km operated together with U.S. oil giant Chevron.

Vaca Muerta has some of the world’s biggest reserves of shale oil and gas, found at depths of up to 3,000 metres.

A new well is drilled here every three days, and the demand for labour power, equipment, inputs, transportation and services is growing fast, changing life in the surrounding towns, the closest of which is Añelo, eight km away.

“Now I can provide better for my children, and pay for my wife’s studies,” said forklift operator Walter Troncoso.

According to YPF, Vaca Muerta increased Argentina’s oil reserves ten-fold and its gas reserves forty-fold, which means this country will become a net exporter of fossil fuels.

But tapping into unconventional shale oil and gas deposits requires the use of a technique known as hydraulic fracturing or “fracking” – which YPF prefers to refer to as “hydraulic stimulation”.

According to the company, the technique involves the high-pressure injection of a mix of water, sand and “a small quantity of additives” into the parent-rock formations at a depth of over 2,000 metres, in order to release the trapped oil and gas which flows up to the surface through pipes.

The extraction of unconventional fossil fuels at the YPF deposit in Loma Campana has already begun to irrevocably affect life in the surrounding areas. Credit: Fabiana Frayssinet/IPS

Víctor Bravo, an engineer, says in a study published by the Third Millennium Patagonia Foundation, that some 15 fractures are made in each well, with 20,000 cubic metres of water and some 400 tons of diluted chemicals.

The formula is a trade secret, but the estimate is that it involves “some 500 chemical substances, 17 of which are toxic to aquatic organisms, 38 of which have acute toxic effects, and eight of which are proven to be carcinogenic,” he writes. He adds that fracking fluids and the gas itself can contaminate aquifers.

Neuquén province lawmaker Raúl Dobrusin of the opposition Popular Union bloc told Tierrámerica: “The effect of this contamination won’t be seen now, but in 15 or 20 years.”

During Tierramérica’s visit to Loma Campana, Pablo Bizzotto, YPF’s regional manager of unconventional resources, played down these fears, saying the parent-rock formations are 3,000 metres below the surface while the groundwater is 200 to 300 metres down.

“The water would have to leak thousands of metres up. It can’t do that,” he said.

Besides, the “flowback water”, which is separated from the oil or gas, is reused in further “hydraulic stimulation” operations, while the rest is dumped into “perfectly isolated sink wells,” he argued. “The aquifers do not run any risk at all,” he said.

But Dobrusin asked “What will they do with the water once the well is full? No one mentions that.”

According to Bizzotto, the seismic intensity of the hydraulic stimulation does not compromise the aquifers either, because the fissures are produced deep down in the earth. Furthermore, he said, the wells are layered with several coatings of cement and steel.

“We want to draw investment, generate work, but while safeguarding nature at the same time,” Neuquén’s secretary of the environment, Ricardo Esquivel, told Tierramérica.

In his view, “there are many myths” surrounding fracking, such as the claim that so much water is needed that water levels in the rivers would go down.

Neuquén, he said, uses five percent of the water in its rivers for irrigation, human consumption and industry, while the rest flows to the sea. Even if 500 wells a year were drilled, only one percent more of the water would be used, he maintained.

But activist Carolina García with the Multisectorial contra el Fracking group told Tierrámerica: “That water is not left in the same condition as it was when it was removed from the rivers; the hydrologic cycle is changed. They are minimising a problem that requires a more in-depth analysis.”

She pointed out that fracking is questioned in the European Union and that in August Germany adopted an eight-year moratorium on fracking for shale gas while it studies the risks posed by the technique.

YPF argues that these concerns do not apply to Vaca Muerta because it is a relatively uninhabited area.

“The theory that this is a desert and can be sacrificed because no one’s here is false,” said Silvia Leanza with the Ecosur Foundation.

“There are people, the water runs, and there is air flowing here,” she commented to Tierramérica. “The emissions of gases and suspended dust particles can reach up to 200 km away.”

Nor does the “desert theory” ring true for Allen, a town of 25,000 people in the neighbouring province of Río Negro, which is suffering the effects of the extraction of another form of unconventional gas, tight gas sands, which refers to low permeability sandstone reservoirs that produce primarily dry natural gas.

In that fruit-growing area, 20 km from the provincial capital, the fruit harvest is shrinking as the number of gas wells grows, drilled by the U.S.-based oil company Apache, whose local operations in Argentina were acquired by YPF in March.

Apache leases farms to drill on, the Permanent Comahue Assembly for Water (APCA) complained.

“Going around the farms it’s easy to see how the wells are occupying what was fruit-growing land until just a few years ago. Allen is known as the ‘pear capital’, but now it is losing that status,” lamented Gabriela Sepúlveda, of APCA Allen-Neuquén.

A well exploded in March, shaking the nearby houses. It wasn’t the first time, and it’s not the only problem the locals have had, Rubén Ibáñez, who takes care of a greenhouse next to the well, told Tierramérica. “Since the wells were drilled, people started feeling dizzy and having sore throats, stomach aches, breathing problems, and nausea,” he said.

“They periodically drill wells, a process that lasts around a month, and then they do open-air flaring. I’m no expert, but I feel sick,” he said. “I wouldn’t drink this water even if I was dying of thirst….when I used it to water the plants in the greenhouse they would die.”

The provincial government says there are constant inspections of the gas and oil deposits.

“In 300 wells we did not find any environmental impact that had created a reason for sanctions,” environment secretary Esquivel said.

“We have a clear objective: for Loma Campana, as the first place that unconventional fossil fuels are being developed in Argentina, to be the model to imitate, not only in terms of cost, production and technique, but in environmental questions as well,” Bizzotto said.

“All technology has uncertain consequences,” Leanza said. “Why deny it? Let’s put it up for debate.”

This story was originally published by Latin American newspapers that are part of the Tierramérica network.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

A traffic jam in Jaciara, Brazil, caused by repairs to the BR-364 road. Credit: Mario Osava/IPS

By Diana Cariboni
MONTEVIDEO, Oct 2 2014 (IPS)

“We could be the last Latin American and Caribbean generation living together with hunger.”

The assertion, made by Raúl Benítez, a regional officer for the Food and Agriculture Organisation of the United Nations (FAO), shows one side of the coin: only 4.6 percent of the region’s population is undernourished, according to the latest figures.

By 2030, however, most of the countries in the region will face a serious risk situation due to climate change.

With almost 600 million inhabitants, Latin America and the Caribbean has a third of the world’s fresh water and more than a quarter of its medium to high potential farmland, points out a book published this year by the Inter-American Development Bank in partnership with Global Harvest Initiative, a private-sector think-tank.

It is the largest net food-exporting region, while it uses just a fraction of its agricultural potential for both consuming and exporting.

But almost a quarter of the region’s rural people still live on less than two dollars a day, and the region is prone to disasters (earthquakes, hurricanes, floods and droughts), some of them exacerbated by climate change.

Global warming poses serious challenges to the international community’s goal of eradicating poverty and hunger. Changes in rainfall patterns, soils and temperatures are already stressing agricultural systems.

Currently, more than 800 million people worldwide are at risk of hunger. Through its devastating impact on crops and livelihoods, climate change is predicted to increase that number by as much as 20 percent by 2050, according to a recent United Nations report.

Changes in temperature and rainfall patterns could lead to food price rises of between three percent and 84 percent by 2050, thereby feeding a vicious cycle of poverty and inequality.

Oxfam reports that in the more extreme scenarios, heat and water stress could reduce crop yields by 25 percent between 2030 and 2049.

Climate change is likely to impact mostly small and family farmers, who produce more than half the food in the region and have inadequate resources with which to deal with unpredictable weather.

Despite this looming threat, strategies for sustainability are far from clear. Regional drivers of growth are export-oriented commodities, and while some sectors have advanced in added value, technology and innovation, natural resources exploitation is still the key of the whole regional boom.

By 2011, raw materials and commodities accounted for 60 percent of regional exports, compared to 40 percent in 2000. At the same time, this growth of commodities exports led to a replacement of domestic manufactures by imported goods, affecting manufacturing industries in the region.

In rural areas, conflicting models of small farming and extensive monocultures based on genetically modified seeds compete for the land in a David versus Goliath fight.

In Paraguay, the fourth largest exporter of soybeans in the world, 1.6 percent of owners hold 80 percent of the agricultural land. In Guatemala, eight percent of producers own 82 percent of farmlands, while 80 percent of productive land in Colombia is in the hands of 14 percent of landowners, according to Oxfam.

Agriculture and related deforestation are major sources of greenhouse gasses (GHG) in Latin America, though other sources are growing rapidly. Brazil, for example, is joining the club of big polluters, with the burning of fossil fuels accounting for the majority of its GHG emissions in the last five years.

As the extractive industries grow, they demand more highways, railroads and ports, putting pressure on governments to avoid the so-called logistics blackout.

Energy demand is increasing too, not only from industries, but also from millions of people lifted out of poverty, and thus with larger consumption needs. The region’s energy demand for the period 2010-2017 increases at an annual rate of five percent.

The region is poised to cross a new fossil fuel frontier, when Argentina, Brazil and Mexico overcome their own political, financial and technical challenges to exploit substantial reserves of unconventional hydrocarbons, like the Argentinian Vaca Muerta geological formation or the pre-salt layer located in the Brazilian continental shelf.

It is difficult to argue that a region so rich in natural resources has no right to thrive on the demand and supply of commodities, particularly when the resulting fiscal revenues have allowed impoverished countries like Bolivia to drastically reduce extreme poverty numbers (from 38 percent in 2005 to 20 percent in 2013).

However, experts warn this path is unsustainable and climate change impacts, felt across the region, can undermine any social gain.

In Guatemala, the worst drought in 40 years is putting 1.2 million people at risk of suffering hunger in the next months. Those who suffer the worst impacts of unsustainable development models will ironically be those who contribute the least to global warming.

A recent U.N. document summarising actions for the follow-up to the programme of action adopted at the 1994 International Conference on Population and Development (ICPD) found that only about a “third of the world’s population could be considered as having consumption profiles that contribute to emissions.”

Fewer than one billion of them have a significant impact, while “a smaller minority is responsible for an overwhelming share of the damage,” the report added.

Still, it will be the poorest people who will bear the brunt, and Latin America, dubbed ‘the next global breadbasket’, is in desperate need of strong local and global action towards the goal of achieving sustainable development in the next decade.

Edited by Kanya D’Almeida

A YPF driling derrick at the Vaca Muerta shale oil and gas field in Loma Campana in the Neuquén basin in southwest Argentina. Credit: Fabiana Frayssinet/IPS

By Fabiana Frayssinet
LOMA CAMPANA, Argentina , Oct 1 2014 (IPS)

Production here has skyrocketed so fast that for now the installations of the YPF oil company at the Loma Campana deposit in southwest Argentina are a jumble of interconnected shipping containers.

Argentina is staking its bets on unconventional oil and gas resources, and the race to achieve energy self-sufficiency and surplus fuel for export can’t wait for the comfort of a real office.

“The camp here is our temporary offices,” Pablo Bizzotto, regional manager of unconventional resources of the state-run YPF, told a group of foreign correspondents during a visit to this oilfield in the southwestern province of Neuquén. “I apologise. But this is what we were able to set up quickly when we began the operations.”

Since last year, Loma Campana, some 100 km from the city of Neuquén, has been the Argentine oil company’s operating base, where 15 to 20 wells are drilled every month in the Vaca Muerta shale oil and gas field in the Neuquén basin.

There are currently more than 300 wells producing unconventional gas and oil here and in other oil camps in this part of Argentina’s southern Patagonia region. Some 250 are operated by YPF and the rest by foreign oil companies.

The final installations, with offices and a control and remote operation room, will be ready by mid-2015. But work at the wells is moving ahead at a different pace.

From January 2013 to mid-2014, daily oil output climbed from 3,000 to 12,000 barrels per day, before jumping to 21,000 in September.

“Loma Campana is the only large-scale commercial development [of shale oil and gas] outside of the United States. The rest are just trials,” said Bizzotto, explaining the magnitude of the operations in Vaca Muerta, which contains shale oil and gas reserves at depths of up to 3,000 metres.

Unlike conventional oil and gas extracted from deposits where they have been trapped for millions of years, shale oil and gas are removed from deep parent-rock formations.

According to YPF, which has been assigned 12,000 sq km of the 30,000 sq km in Vaca Muerta, the recoverable potential is 802 trillion cubic feet of gas and 27 billion barrels of oil.

A worker walking near pipes used to extract shale oil and gas at YPF’s Loma Campana oilfield in the southwest Argentine province of Neuquén. The shipping containers used as temporary offices can be seen in the background. Credit: Fabiana Frayssinet/IPS

With that potential, the country now has 30 times more unconventional gas and nine times more unconventional oil than traditional reserves. Thanks to recoverable shale resources, Argentina now has the world’s second largest gas reserves, after China, and the fourth largest of oil, after Russia, the United States and China, according to YPF figures.

Bizzotto said that in terms of both quantity and quality, as measured by variables of organic matter, thickness and reservoir pressure, the reserves are comparable to the best wells in the Eagle Ford Shale in the U.S. state of Texas.

Rubén Etcheverry, former president of the Gas y Petróleo de Neuquén, a public company, said the reserves open up “a new possibility for development and self-sufficiency from here to five or ten years from now.”

This is encouraging for a country like Argentina, whose reserves and production had declined to the point where over 15 billion dollars in fuel had to be imported.

“The possibility of converting these resources into reserves means that Argentina could have gas and oil for more than 100 years,” Etcheverry, who is also a former Neuquén energy secretary, told IPS.

But the challenge is just that: turning the shale resources into actual reserves.

Since 2013, YPF has invested some two billion dollars in Vaca Muerta.
But because of the magnitude of the resources and the country’s difficulties in obtaining financing from abroad, Etcheverry said “new actors are needed” in order to achieve the required volumes of investment, which he estimates at 100 billion dollars over the next five or six years.

YPF, which was renationalised in 2012, when it was expropriated from Spain’s Repsol oil company that controlled it since 1999, is now looking for foreign partners – a strategy that some political and social sectors see as undermining national sovereignty.

In Loma Campana, YPF operates one portion with the U.S. oil giant Chevron and is developing another shale gas field with the U.S. Dow Chemical.

Other companies involved in the area are Petronas from Malaysia, France’s Total, the U.S.-based ExxonMobil, the British-Dutch Shell, and Germany’s Wintershall, while negotiations are underway with companies from other countries, including China and Russia.

According to provincial lawmaker Raúl Dobrusín of the opposition Unión Popular party of Neuquén, the oil companies are waiting for the Senate to approve a controversial new law on hydrocarbons.

The legislation would grant 35-year concessions, reduce the tariffs the companies pay for imports, and allow them to transfer 20 percent of the profits abroad, and if they do not do so they would be paid locally at international values and without tax withholding, Dobrusín said.

The development of unconventional fossil fuels has also run into criticism from environmentalists.

Hydraulic fracturing or “fracking” is the technique used for large-scale extraction of unonventional fossil fuels trapped in rocks, like shale gas. To release the natural gas and oil, huge volumes of water containing toxic chemicals are pumped underground at high pressure, fracturing the shale. The process generates large amounts of waste liquids containing dissolved chemicals and other pollutants that require treatment before disposal.

Environmentalists say fracking pollutes aquifers and releases more toxic gases than the extraction of conventional fossil fuels.

“There is no doubt that it causes pollution. Wells are abandoned without being cleaned up. Here in Plottier the water contains heavy metals and isn’t potable in most places, and we blame that on conventional production that has polluted the groundwater,” Darío Torchio, who has a business in Plottier, a city of 32,000 located 15 km from Neuquén, told IPS.

“Oil is a heavy inheritance for our descendants, which ruins everything, while the wealth goes to the companies,” said Torchio, a member of the Permanent Comahue Assembly for Water.

Silvia Leanza, with the environmental Ecosur Foundation, said Argentina is opting for a development model based on “neoextractivism”.

These plans, she told IPS, are “designed in the central countries as part of the neoliberal economic development and globalisation package, where we are suppliers of raw materials.”

“The focus is on the exploitation of a non-renewable resource, fossil fuels, which also has an economic impact, because that money could go towards clean energy sources that could also be developed in Patagonia,” Carolina García, an activist with the Multisectorial contra el Fracking group, told IPS.

“This is an alarm signal,” Etcheverry said. “The timeframe is very short. We had reserves for the next eight or 10 years.”

But the government of Cristina Fernández has no doubts about the model of development being followed.

“When unconventional gas and oil production in Vaca Muerta reaches 1,000 wells, the gross geographical product will tend to grow between 75 and 100 percent in the province of Neuquén. That will have a three to four percent impact on the country’s gross domestic product,” argued the head of the cabinet, Jorge Capitanich.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes