Side B of Vaca Muerta: conventional oil production falls by up to 50% and there are provinces in problems

A report that the oil companies manage and that they will present to the Nation and the provinces records that The Gulf San Jorge basin “faces a massive exodus of capital, an alarming drop in reserves, asymmetry of productivity and unsustainable salary costs in dollars”.

During 2025, the Neuquén basin absorbed 86.7% of the total capital allocated to the sector in the country, which was 10,053 million dollars. For its part, the Golfo San Jorge barely captured US$ 1,159 million dollars.

For companies, alarm bells are raised by revealing “how the rise of unconventional crude oil from Vaca Muerta is masking an operational and institutional implosion in the basin that originated the country’s oil history,” back in 1907 by Comodoro Rivadavia.

“What was initially interpreted as a natural process of geological maturity has been transformed into a unsustainable financial crossroads for the Golfo San Jorge region“is one of the conclusions of the document.

The crisis manifests itself on multiple fronts: drop in productivity and, therefore, in investments, production, employment and provincial royalties. A vicious circle that doesn’t stop.

Although the beginning of the decline could be placed at the beginning of this millennium, one of the experts in the sector compares the situation today with that of 15 years ago, in 2011, when Vaca Muerta was barely an illusion; YPF was still in the hands of Repsol and the Eskenazi family, with production already noticeably declining.

At that time, conventional oil extraction in Argentina reached 582,000 barrels per day, of which 257,000 were from San Jorge. Now, conventional production reaches 286,650 barrels per day, with 172,867 from that basin.

In fifteen years, the collapse is 51% nationally and 33% in the south of Chubut and the north of Santa Cruz, although the trend accelerated in the last two yearsafter the withdrawal of YPF to concentrate its investments on the most profitable, which is shale oil from Neuquen.

Conventional wells are already mature. To extract a barrel of oil, more and more water must be injected (secondary recovery) and chemical polymers (tertiary recovery). underground, which increases costs. Above the surface, meanwhile, the challenges for companies are in negotiations with unions for working conditions and the provinces for the collection of royalties.

While Vaca Muerta can be profitable with a price close to $40 per barrel of oil, some fields in the Golfo San Jorge are not profitable at US$60. During 2025, average productivity in the Golfo de San Jorge dropped to a level of “barely” 13.6 barrels per day per well, compared to 250 to 300 barrels per day in the shale Neuquén.

One of the most marked problems that the report points out is the 63% increase in dollars in labor costs starting in November 2023, measured in the official exchange rate, which did not rise at the same pace as inflation.

At the same time, export prices fell to US$22.4 per barrel before the start of the war in the Middle East.

This is the situation that explains why some 10,000 jobs were lost since the moment of greatest production, two decades ago.

For all this, YPF finished withdrawing from the basin two months ago, with the transfer of Manantiales Behr to Pecom, one of the large oil companies that is still betting on conventional oil.

In the Chubut government they aim to Clarion that “the conventional oil crisis is a structural phenomenon that affects all the country’s mature basins.” “Most of the investments of large operators migrated to Vaca Muertawhile conventional fields face natural decline, higher operating costs and permanent need for investment to sustain production,” they add.

For example, Pan American Energy (PAE), the leader of the basin, has been allocating investments of 600 million dollars per year on average – mainly in the Cerro Dragón complex – just so that production does not drop so quickly; If it did not, the rate of decline would be around 15% annually. The country’s largest 100% private oil company employs about 8,000 people in the region.

In this context, The departure of YPF translated into the entry of PECOM and small players for whom conventional assets “represent the core of the business and not a secondary portfolio”, with the intention of preserving some 1,500 jobs.

Chubut reduced royalties from 12% to 9% for base production and 6% for incremental volume, with the aim of encouraging investments; The Perez Companc firm committed to disbursing US$ 205 million in Escalante – El Trébol.

Santa Cruz, in turn, It agreed with YPF to keep its areas and re-tendered them. For new players, it will lower royalties from 15% to 12% if they increase activity and add workers.

The national government, meanwhile, raised the bands on which it charges different rates of export duties (withholdings); Below US$ 65 per barrel there is no tax – it is US$ 45 in non-conventional – and from US$ 80 you pay 8% – versus US$ 60 in Vaca Muerta.

The conventional provides more than 50% of the crude oil needed for the local refining park. In addition, it generates direct and indirect employment in provinces such as Chubut and Santa Cruz, where it represents between 8% and 13% of formal private employment, with salaries much higher than the national average, according to the Austral University.