Latin America embraces unconventional oil and gas exploration

According to Wood Mackenzie’s latest Global Unconventional Roundup, Mexico and Argentina have significant potential for increased oil and gas production through unconventional resource development.  

“As conventional reserves decline globally, we're seeing a resurgence of interest in unconventional resources across several continents. This shift is particularly pronounced in Latin America, specifically in countries like Argentina and Mexico, with Argentina leading the efforts while Mexico is starting to have discussions about it. Increased development of these resources could potentially transform the regional energy landscape," said Josh Dixon, Senior Research Analyst at Wod Mackenzie.  

Vaca Muerta drives growth in Argentina 

Argentina has already made significant strides in this area, particularly with its Vaca Muerta shale play. The country aims to increase oil exports to 1 million b/d by 2027, driving investment in midstream infrastructure. In this context, the Vaca Muerta shale play remains the largest unconventional oil project outside North America. 

The North Hub area currently produces 27,000 b/d, and it has the potential to increase its output by 280,000 b/d, but requires additional pipeline capacity. 

“The North Hub area of the Vaca Muerta has the greatest room to grow. Today it produces around 6% of total Vaca Muerta liquids, but that could grow to almost one-third if undeveloped areas are brought online. Pipeline buildout and prompt agreements on  areas announced as potential divestments by TotalEnergies and Equinor will be essential to facilitate growth,” said Adrian Lara, Principal Analyst at Wood Mackenzie.  

Mexico’s aspirational targets face challenges 

While Argentina is leading the efforts, Mexico has established ambitious goals for its energy sector, aiming to produce 1.8 million barrels per day (b/d) and 5 billion cubic feet of gas per day (bcfd) by 2030. However, delivering these production targets solely through traditional extraction methods appears unlikely. 

"Given this scenario, tapping into alternative energy resources could offer a viable solution, as Mexico possesses untapped unconventional resources in various regions across the country," said Marcos Bernabe, Analyst at Wood Mackenzie. 

According to Wood Mackenzie's analysis, the Agua Nueva formation, equivalent to the Eagle Ford shale in the US, is considered Mexico's most promising area for shale gas development. In an optimistic scenario, this region has the potential to produce up to 2.5 bcfd of natural gas. While unconventional production volumes to date have been limited, the region contains substantial unconventional gas resources with significant development potential. 

"Mexico's renewed interest in this area could reshape its energy landscape. However, project capitalization, a non-existent specialized supply chain, and infrastructure present significant challenges that would likely make its immediate development difficult," said Ismael Hernandez, Analyst at Wood Mackenzie. "However, our view is that Mexico would likely tap into unconventional resources due to their vast potential," he added. 

Argentina and Mexico are increasingly viewing unconventional resources as a means to achieve multiple energy objectives, ranging from enhancing energy security to meeting domestic demand and increasing export revenue. Argentina's progress in the Vaca Muerta continues to prove unconventional resources can grow outside North America. Mexico's ambitious goals coupled with promising formations like Agua Nueva may further reshape Latin America's energy landscape. 

"However, success will depend on continued investment, technological advancements, and supportive policy frameworks. If the right conditions are met, this could significantly boost domestic production, reduce reliance on imports, and potentially create new export opportunities," finalized Dixon.