Underground wealth, above ground worries

In a recent announcement, Argentina's Deputy Economy Minister for Energy & Mining, Daniel González, revealed that a new study has doubled the estimated oil resources in Vaca Muerta, a deep shale formation. Originally estimated at 16.2 billion barrels by the US Energy Information Administration (EIA) a decade and a half ago, the updated figure now stands at 30 billion barrels.

This significant increase in oil reserves has caught the government's attention, as it signals the continuation of the project's infancy stage. The newfound wealth generated from Vaca Muerta's exports is expected to generate a trade surplus of US$13.5 billion this year, with the benefits potentially extending to the country's next president, who is set to take office in 2031.

With the energy boom anticipated to double production and fully operational liquefied natural gas projects, Deputy Economy Minister González urged the nation to shift its focus from scarcity to managing abundance. However, as the 2027 presidential race approaches, the question arises as to who will ultimately reap the rewards of this newfound abundance.

President Milei, the country's current leader, has prioritized supporting large companies through the RIGI investment programme, which has seen 43 large projects committed to investing nearly US$200 billion over the next 30 years. The majority of this investment is expected to begin once Milei secures re-election. However, not everyone is satisfied with the current distribution of resources.

Governor Rolando Figueroa of Neuquén, a province rich in Vaca Muerta oil reserves, asserts that his province only receives 13 percent of the value generated from every barrel extracted, with significant portions going to production costs, company profits, and federal taxes. Furthermore, Neuquén, along with other provinces, faces a lack of funding for public works, exacerbating the disparities in resource distribution.

While abundance may seem like a dream scenario, it can also highlight the scarcity faced by other areas. For instance, the successful RIGI policy that has brought Argentina back into the investors' spotlight contrasts with the shortage of policies addressing other critical economic issues, such as household delinquency. With delinquency rates at a decades-long record high, the growing wealth generated by Vaca Muerta is not automatically translated into improved livelihoods for everyday Argentinians.

Milei's administration appears to prioritize macroeconomic policies over the micro-level concerns of ordinary citizens, potentially leading to challenges in his re-election bid during the 2027 presidential race.