McKinsey: Sustained, coordinated investment required to unlock Vaca Muerta’s potential

Developing Vaca Muerta represents a significant long-term growth opportunity, but unlocking its full potential will require substantial, coordinated investment across the entire oil and gas value chain—from upstream development and midstream infrastructure to export capacity and domestic energy markets, according to McKinsey & Company.

Four interconnected segments that would need to be developed: upstream, midstream, export, and domestic consumption infrastructure. Based on McKinsey’s analysis, overall, this would require investment of $125-170 billion over the next decade—roughly 10-15% more annually than the total investments in 2025.

Vaca Muerta’s resources are estimated to be able to support gas production of 70-100 billion cu m (bcm) annually by 2035, up to double Argentina’s current output. Additionally, developing Vaca Muerta’s oil reserves could lead to oil production exceeding 1.0 million b/d by 2030 and 1.7 million b/d by 2035—about twice the current levels—helping meet global demand and promote domestic energy security.

Modeling analysis by McKinsey Energy Solutions indicates that, although the LNG market may experience a supply surplus through 2030—driven by new capacity additions in Qatar and the US—the supply gap is projected to widen to 135-220 million tonne/year (tpy) by the mid-2030s. This deficit will need to be met by new projects currently in the "pre-FID" stage that are slated to come online in the early 2030s.

With a vast natural gas reserve base, Argentina is positioned to help bridge the supply gap. According to McKinsey, although Argentina’s LNG projects currently occupy a mid-tier position in cost competitiveness relative to global benchmarks, its offering is strengthened by factors increasingly prized by LNG buyers: flexibility, reliability, and investment partnership potential. As such, Argentina could approach global cost competitiveness in LNG supply and help meet the growing global supply gap.

A recent McKinsey survey of LNG buyers reveals that flexibility regarding destination and supply volume has supplanted price as buyers' primary consideration, followed closely by supplier reliability and transparent emissions reporting mechanisms. Argentina’s geographic advantage—situated adjacent to Atlantic trade routes—positions it to emerge as a new entrant capable of meeting shifting demand profiles, especially as buyers seek to diversify from geopolitically exposed regions.

Argentina’s government has promoted Vaca Muerta as a strategic pillar for economic growth, foreign currency generation, and energy security. According to McKinsey, under favorable execution and market conditions, the development of Vaca Muerta could account for up to 5% of Argentina’s GDP by 2030, generating as much as $30 billion in annual exports, and creating 25,000 additional oil and gas jobs per year—as well as substantially more jobs to support this activity.

Upstream

To expand production capacity in Vaca Muerta, the intensity of drilling and completion operations must be significantly increased—the annual number of unconventional wells drilled needs to rise from to over 900 by 2030 from around 450 in 2025. This level of operational intensity is projected to plateau around 2035, according to McKinsey.

“Our analysis suggests that annual upstream investment, currently sitting at about $7 billion, would need to double to $14 billion by 2030 in the same mid-case scenario, with about 90% of spending directed to drilling and completions. We have seen this in other shale basins that have matured and moved to the ‘factory model.’ For reference, in the Permian basin in the US, $46 billion was spent on similar activities in 2024,” said McKinsey.

“Sustaining this ramp-up would require between 15 and 25 new high-spec drilling rigs to be deployed over the next 5 years—an increase of between 40 and 75%, depending on the scenario. While Argentina currently operates just over 30 such rigs, more than 200 high-spec idle units are available across North America, presenting an opportunity for redeployment and technology transfer. Ancillary equipment would need to expand, while frac pumping units, coiled tubing systems, and proppant supplies would all have to scale 1.7 to 2.6 times by 2030 compared to current usage levels.

“Managing upstream costs will be critical. Currently, average costs for a well can range from $12 million to $16 million for a 2,800-meter well. When normalizing for geology, this is 30 to 40% more expensive than comparable wells in the Permian Basin in the US. Without narrowing this gap, Argentina risks structural disadvantage in global LNG markets.”

Midstream

The next phase of Vaca Muerta’s growth will depend not only on upstream drilling activity, but also on coordinated investments across pipelines, processing infrastructure, export terminals, refining capacity and supporting services. While the shale basin has already transformed Argentina into a growing regional oil and gas producer, infrastructure bottlenecks and fragmented development continue to limit its full potential.

According to McKinsey, Vaca Muerta would require more than $10 billion, and as much as $21 billion, in midstream investment to 2030, encompassing long-haul pipelines, gas processing plants, natural gas liquid (NGL) fractionation plants, and gathering systems.

“Long-haul pipelines would be necessary to anchor Argentina’s future LNG export capability. In our base-case scenario, around $1.6 billion in midstream capital would be needed to finance a 450-km (280-mile), 36-in. gas pipeline linking Vaca Muerta to the first floating LNG terminal. In a high-case scenario, the investment required could reach $5 billion to build a larger, 48-in. trunkline extending to Punta Colorada, which would unlock associated liquids value and secure long-term gas evacuation routes.”

McKinsey said achieving large-scale integration across the energy chain could significantly improve operational efficiency, lower transportation costs and strengthen Argentina’s competitiveness in global energy markets.

As LNG exports scale, the ability to recover and monetize NGLs from rich gas streams becomes important to lowering effective feed gas costs and improving project economics. McKinsey’s analysis indicates that NGL production could increase 3.5 to 4.6 times by 2030, implying $6-11 billion of cumulative investment in processing plants, fractionation units, and associated liquids handling infrastructure in the next decade. Without this build-out, liquids handling could emerge as a binding constraint on both gas and oil production.

On the oil side, the Vaca Muerta Oil Sur (VMOS) pipeline (under construction) and existing Oldeval systems are expected to provide enough transport capacity through mid-2030, but additional expansions will likely be needed afterward as production continues to grow.

Gathering systems inside the basin must also expand alongside drilling activity, with roughly $290–320 million/year needed through 2035 to connect new wells and support processing and export operations.