Mendoza Extended Cerro Fortunoso and Valle del Río Grande Concessions to VENOIL for Ten Years with USD 150 Million Investment Commitments
The Mendoza Government approved the ten-year extension of the hydrocarbon exploitation concessions Cerro Fortunoso and Valle del Río Grande, located in Malargüe and part of the Neuquén Basin. The areas were transferred from YPF S.A. to VENOIL S.A. under the Plan Andes II, with extension through November 15, 2037.
Both concessions are part of the Malargüe Cluster, a set of mature fields with infrastructure and operational capabilities already in place that will operate under an integrated scheme. The province authorized the transfer through Resolution MEyA No. 103/2026 and subsequently conducted a comprehensive assessment of the extension request based on "concrete investment conditions and technical, economic, financial and legal analysis," according to Energy and Environment Minister Jimena Latorre.
Investment Program and Operational Reactivation
VENOIL committed firm investment of USD 91 million for both areas—USD 32.15 million in Cerro Fortunoso and USD 58.85 million in Valle del Río Grande—aimed at reactivating inactive wells, deep maintenance work, conversions of producers to injectors, polymer-enhanced recovery and surface facilities installation.
The plan includes drilling new wells, the first such activity in the areas in more than six years, marking a strategic shift from the previous period. These commitments are supplemented by contingent activities valued at USD 59 million, including additional drilling subject to technical validation mechanisms with thresholds verified by the Hydrocarbon Directorate, bringing the overall program to USD 150 million.
"It is great news that a Mendoza-based company will begin operating these areas with contracts already extended. A revitalization process begins with a focus on increasing production, drilling wells where drilling hasn't occurred for years and developing enhanced recovery projects," said Lucas Erio, Director of Hydrocarbons.
Variable Royalty Scheme and Controls
The decree incorporates a variable royalty regime for liquid hydrocarbons with a scale from 5% to 16% according to realized prices at the wellhead, and a 12% rate for natural gas. The General Directorate of Royalties of the Mendoza Tax Administration will conduct control and validation of declared prices.
According to Erio, "this scheme allows for risk-sharing given international price volatility. If barrel prices decrease and profitability is affected, the royalty percentage declines accordingly; conversely, if prices increase, the Province receives a higher percentage."
Environmental and Compliance Guarantees
The Province maintains inspection and oversight powers throughout the concession term. VENOIL must provide access to areas and facilities, maintain current environmental insurance, keep updated records of environmental liability remediation and execute required remediation work.
The decree incorporates commitments for definitive abandonment of 40 wells for USD 12 million and a Five-Year Program for Evaluation of Inactive Wells applicable to the remaining inventory of the cluster, with quarterly progress reports. Investments are backed by performance guarantees.
"What is approved is not merely a time extension: it is a verifiable program of activities, with a schedule, with guarantee and with concrete consequences in case of non-compliance," concluded Latorre.