Fracking transformed a small town in Argentina, but what about the entire country?

Mechanic Fabio Javier Jiménez found himself in the right place at the right time.

When his father moved the family’s tire repair shop to the rural Argentinian town of Agnello, it was a quiet little place about 1,000 kilometers (600 miles) southwest of Buenos Aires.

There was no running water or gas, and the electricity supply was frequently cut off.

The city began to boom in 2014 as fracking began to extract oil and gas in the surrounding area.

“We set up our tire repair shop in the middle of the dunes, away from the city center,” Mr. Jimenez said. “Then the town grew up and passed us by.”

Fueled by newfound energy wealth, Anilao’s population will soar from 10,788 in 2010 to 17,893 in 2022. An increase of more than 60%.

In addition, Agnello has approximately 15,000 workers entering the town every working day.

This makes the road very busy, including the passage of many oil tankers.

Official figures show 24,956 cars entered the town every day last year, 6,400 of which were trucks. Mr Jimenez’s workshop on the main provincial road can help anyone in need of new tires.

Agnello is located in the heart of Vaca Muerta, a 30,000 square kilometers (12,000 square miles) geological formation rich in oil and natural gas. It was discovered as early as 1931, but the deposits could not be mined commercially until 2014, when fracking was legalized in Argentina.

Fracking is a mining method that first became popular in the United States in the early 2000s in which a high-pressure mixture of water, sand and chemicals is injected into the ground. This cracks or fractures the rock, allowing gas or oil trapped within to be brought to the surface.

The first hydraulic fracturing operation in Vaca Muerta is a joint operation between Argentina’s state-owned oil company Yacimientos Petrolíferos Fiscales (YPF) and US giant Chevron.

As of February this year, a total of 3,358 wells were actively producing in Vaca Muerta, according to Argentina’s Petroleum and Gas Institute. Of these, 1,632 were oil and 1,726 were natural gas.

That “accounts for more than half of Argentina’s oil and gas production,” said Nicolás Gadano, chief economist at consultancy Empiria and a former YPF official.

He added that the cost of fracking oil is cheaper than conventional extraction elsewhere in Argentina because the latter now contains very old deposits and the remaining oil is difficult to extract.

Nicolás Gandini, director of Econojournal, a media outlet specializing in energy, agrees. “With the exception of conventional gas deposits offshore in the Southern Basin, we have been unable to find new conventional deposits that are very cost-competitive,” he said. “All other onshore deposits are three to four times more expensive than Vaca Muerta.”

Vaca Muerta’s oil and gas have made Argentina energy self-sufficient, reversing decades of energy shortages and the need for costly imports. It also allows Argentina to export oil and natural gas, helping it earn foreign currency.

“Last year, the energy industry had an external surplus of up to $6bn (£4.6bn),” Mr Gardano said. “This year we are targeting a similar figure, with higher volumes but lower prices due to lower international prices.”

Mr Gandini added that the fact that Argentina now exports more energy than it imports is “very important” for the country, “especially when two or three years ago we were in the red”. But he added that it would not be a “magic bullet” to heal Argentina’s economy, which has long struggled with high inflation and public spending as well as defaults on its national debt.

“I think the value that Vaca Muerta brings to solving the structural problems facing the Argentine economy is overestimated,” he said.

“However, if you look at what Argentina has today to create more dollars, you see that Argentina doesn’t have much in the way of other industries besides Vaca Muerta. It has agriculture, but agriculture also has problems: the country has been unable to expand its agricultural production base. Besides agriculture, mining also lags far behind.”

Other commentators believe oil and gas extraction in Vaca Muerta cannot reach its full potential because Argentina’s poor credit rating deters international investors.

They also noted that there are strict limits on the number of pesos that companies can exchange for foreign currency. This approach has long been used to curb capital flight and protect Argentina’s central bank reserves.

“The company said, ‘Everything is fine in Vaca Muerta, but I haven’t been able to get a dollar from Argentina in 15 years, so we made money, but we have to forcefully reinvest the money there,'” Mr. Gardano explained. “That’s not how the world works and that’s not how companies work, especially large international ones.”

President Javier Milei’s government lifted exchange controls on individuals last April, and with his party’s victory in last month’s midterm elections, restrictions on businesses are expected to be lifted soon as well.

Other critics say the Vaca Muerta project is being hampered by insufficient pipelines, poor road conditions and a lack of rail connections.

Gustavo Medele is the energy minister of Neuquen province, where the town of Agnello and most of Vaca Muerta is located. He said the provincial government is “doing what it has to do and what it can do.”

What continues to help Vaca Muerta is the political consensus it already has – all major parties support increased mining. “All the political forces involved agree that this is an industry that needs to grow,” Mr Gardano noted.

That consensus has become a problem for those who have expressed environmental concerns since fracking began in Vaca Muerta.

“We really lost the public debate,” said Fernando Cabrera, director of the environmental pressure group Observatorio Petrolero Sur. “There’s a very clear disparity in the public and the media’s ability to influence; provincial legislatures are largely supportive of exploitation, as are the national chambers of commerce, so it’s a very uneven dynamic.”

Back in Mr. Jiménez’s garage, business was so good that he opened a second location. “When we came to Agnello, we were happy to service two vehicles a day. Then we serviced 10 vehicles and now we service 20 vehicles a day.”

But he expressed doubts that oil and gas extraction would solve all of the country’s problems. “Yes, there will certainly be oil and gas for many years to come, but that doesn’t mean Argentina won’t continue to experience economic and political ups and downs.”