81 Fracking in Vaca Muerta The current fracking process is described as follows. After initial exploratory research, site preparation to include the well pad and development of access roads for materials transportation drilling itself can begin. The well is drilled downward through overlying soil and rock layers to the shale reserve level, at which point the drill is turned horizontally and the hole is advanced, often for a mile or more. Once the shale reserve itself is reached, a casing of steel and concrete is used to prevent leakage of oil, gas, and fracking compounds into adjacent water aquifers. A perforating gun is utilized to initially open up the rock layers, creating cracks; subsequently, a fluid consisting largely of water, but also various chemicals and sands, is injected under pressure along the end of the horizontal portion of the well. This pressure further develops and expands cracks within the shale source that releases the oil and gas. The sand helps keep the fissures open so that the flow of gas and oil can be maintained. Pressure carries the oil, natural gas, and significant portions of the fracking fluid to the surface, where the oil and gas are recovered and the fracking fluid is disposed of or cleansed for reuse (Pearson, 2019). Eventually, collection and long-distance distribution pipelines are needed to transport the oil or gas to shipping or utilization points. OilfirstwasdiscoveredintheNeuquén.The US Energy Information Administration (EIA) reported in 2013 that there were approximately 307 trillion cubic feet (Tcf) of gas and 14.41 barrels of oil equivalent (BOE) in all of Vaca Muerta (US EIA, 2013). The first conventional well drilled was Filo Morado 25 in 1991, which delivered 533,000 barrels of oil between 1991 and 1995 (Macellari & Whaley, 2019). The first unconventional shale gas testing well, PSG.x-2, was drilled in Loma La Lata in 2009 by Repsol Yacimientos Petrolíferos Fiscales (YPF).1 The ability to perform horizontal drilling allowed a significant increase in recovery from 218 1Repsol YPF and YPF essentially are the same company. YPF originated as Argentina’s government-owned oil and gas extraction company. YPF was bought in 1999 by the Spanish company Repsol and then renationalized in 2012. Repsol YPF, versus YPF, refers to the period before 2012 (Costamagna et al., 2015). million BOE in 2013 to 872 million BOE extracted in 2019 (Macellari & Whaley, 2019). The oil and gas extraction in Vaca Muerta finally was in full swing. Officials predicted that there would be a steady flow of shipments by the end of 2019, but this did not happen. In April 2020, the fracking of Vaca Muerta came to a standstill due to the global recession caused by COVID-19 and the economic instability of Argentina (Cunningham, 2020). Oil and natural gas prices fluctuated dramatically throughout the pandemic, adding more instability to extraction in Vaca Muerta. Oil companies did not want to buy mineral rights when the price of oil was low. The effects of COVID-19 could be a preview of future economic issues to come from either unexpected global catastrophes, or advancements of renewable power. As technology moves to more green forms of energy, Vaca Muerta may not prove as profitable in the future as portrayed. Economic Implications The economics of large-scale oil and gas fracking are complex. While the potential for national economic growth is large, as witnessed by President Macri’s proclamation, despite its hyperbolic world power claim, it is not an absolute given. The cost of fracking infrastructure is equally large, and payback is dependent on world market pricing points for oil and gas. At more local and regional levels, fracking can bring new employment opportunities, increase tax revenues, and contribute to population growth, which, in turn, can expand additional spending levels. That said, the positives of such a boom economy can almost as quickly prove to be a bust in the face of economic downturns. A full understanding of these complexities will help Argentina determine the most appropriate path regarding fracking going forward. Shale oil and gas fracking is an expensive proposition. Early on, Argentina realized it did not have sufficient funds to rapidly expand such drilling on its own, so it sought foreign direct investment (FDI) funds to accomplish its goals. To encourage FDI, the Argentine government offered subsidies to commence drilling in Vaca Muerta; however, these subsidies proved too
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