Train to Vaca Muerta: new extension to reduce costs and increase resources

The government is negotiating with China and private companies for railroads to reach the shale oil reservoir from Bahía Blanca

The government is trying to negotiate a railroad extension that would connect the shale oil reservoir Vaca Muerta to one of Argentina’s main ports in Bahía Blanca. The works will include financing from China of almost US$1.2 billion that is still being negotiated, but there is also interest from the private sector. The expansion of the railroad structure will lower costs for the arrival of inputs and increase transport capacity up to six times. 

“In order for Vaca Muerta to meet its currently huge production projections, we must provide it with resources, and for that, we must add the train to the area’s production development,” said Silvestre Fontana, the chief of staff, management. and infrastructure at ADIF, the Transportation Ministry’s agency in charge of railroad infrastructure. 

The infrastructure needed for the North Patagonian Train to reach the Argentine economy’s gold star sector will consist of two stages. On one hand, “fine-tuning” the renewal of tracks on the existing 755-kilometer route between Bahía Blanca, in the province of Buenos Aires, and the Contraalmirante Cordero station in General Roca, Río Negro. On the other, building a further 77 kilometers of new railroad from Contraalmirante Cordero to Añelo, Neuquén, the city that sits in the heart of Vaca Muerta. 

The Ministry of Transportation is negotiating US$1.2 billion of financing for both public works. 

“Getting the infrastructure ready costs US$1 billion, which is being negotiated with China. We need to renew all existing roads to transport the quantities that we think will be needed,” Fontana said.

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Fontana revealed that there are business sectors interested in investing specifically in the new section of the train, which will cost US$180 million. “Oil companies in the area are very interested in investing because of the improvement this will bring to their competitiveness,” Fontana added.

The government’s current priority is the section that reaches Vaca Muerta — 83 kilometers of new railroad. The ongoing works are what is known as a “railway yard,” with a state investment of US$9 million. Transport ministry sources dare to say that the new section of the train could reach Añelo by 2025. “It’s an ideal deadline,” said Fontana.

Vaca Muerta aims to reach a rate of one million oil barrels per day. Beyond production or employment, Transport Ministry staff have identified that the next bottleneck to prevent is in supply transportation. They estimate that the train has to increase its frequency fivefold — it currently runs just once a day — and increase the size of the fleet.

The official view is that the railway is the only way to offer the scale and costs that make regional projects competitive. The total projected demand for raw materials and inputs in 2018 was 1.58 million tonnes: that number is expected to increase to 4.15 million tonnes by 2030. This includes products such as methanol, steel sand, pipes, cement, and other materials.

The demand for sand, a key input for fracking, is expected to see the biggest jump. While in 2018 Vaca Muerta was estimated to require 985,000 tonnes, by 2030 the demand through railroad transport is expected to be 2.73 million tonnes. 

“We are thinking about fleets of 80 wagons to transport sand, which today is the most required and complicated input, because the way to transport it is very expensive,” Fontana explained. “But there could also be a higher demand for machinery, which Vaca Muerta requires all the time for exploration.”

According to official estimates, the price of freight transportation by train could be a tenth of the cost by truck.

Originally published in Ambito.com / Translated by Agustín Mango

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