Argentina pitches Patagonia as data centre base for AI expansion

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Patagonia data centres for AI

Highlights

Developers and the Argentine government are promoting Patagonia as a data centre hub using stranded gas and renewable power, targeting U.S. investors amid policy shifts elsewhere.
Pampa Energy announced 800MW available in Neuquén, and Green Capital unveiled a $3 billion Chubut project, but Argentina’s existing data centre capacity remains under 40MW versus Chile’s 400MW.
Infrastructure bottlenecks and political opposition persist, with almost 6GW of renewable projects stalled due to grid constraints and uncertainty surrounding Milei’s 500MW OpenAI-linked project.

Patagonia plan targets stranded energy

As reported by Financial Times, developers and government allies are presenting Patagonia as a destination for data centres that can use gas and renewable power that would otherwise go underused. The pitch centres on remote areas near Argentina’s shale production, where operators say excess gas, flaring and weak transport links create an opportunity to bring computing demand directly to energy supply.

Tomás Ocampo, founder of Unblock Energy, says the company is planning a facility of several hundred MW in rural Argentina after operating a 12MW data centre powered by gas that would otherwise be flared from nearby shale drilling. He says interest from potential U.S. investors and clients has accelerated after the U.S. midterms, when Democratic victories and ballot measures targeting data centres raised concerns about the sector’s expansion elsewhere.

Milei is presenting data centres as a pillar of his goal to make Argentina an AI hub. He is advancing a bill with tax breaks for the facilities, pledging no regulation for AI and arguing that the country’s abundant energy and large sparsely populated territory can make it globally competitive for new projects.

Energy companies are also beginning to market available capacity to developers. Pampa Energy said in October that it has 800MW of energy capacity available in Neuquén province for a potential data centre, while Poland’s Green Capital has announced a $3 billion project in Chubut.

Supporters argue Patagonia could help solve a mismatch between Argentina’s energy production and domestic demand. Oil output at Vaca Muerta has more than doubled since 2024, but gas production growth is constrained by limited transport infrastructure, and Unblock estimates drillers waste about 600MW of potential electricity generation through flaring while up to 3GW of gas remains in the ground because of weak demand.

Grid constraints and political pushback persist

Argentina remains far behind regional peers in existing data centre capacity, with less than 40MW compared with about 400MW in Chile. U.S. technology groups have so far chosen Uruguay, Mexico and Brazil for their first Latin American data centres, and Milei’s previously announced 500MW project linked to OpenAI has yet to show further progress.

Sur Energy, the Argentine infrastructure company leading that project, told local media in August that progress depends on OpenAI, but an OpenAI spokesperson told the Financial Times that the company is only a potential offtaker and that any eventual purchase depends on Sur Energy developing the site. That leaves uncertainty around one of the administration’s most prominent projects.

Infrastructure is another major obstacle. Argentina’s ageing power grid is limiting expansion, and the government said in September that new large projects in any sector must provide infrastructure for 80 per cent of their electricity needs to avoid overloading existing capacity. At the same time, almost 6GW of renewable projects are awaiting approval or facing restrictions because of limited grid capacity.

Critics also say the economic and social returns are unclear. Civil society groups argue data centres could intensify water stress in Patagonia, create relatively few jobs and reduce the state’s ability to intervene if resources become scarce, while opponents in Congress have challenged Milei’s broader tech agenda and his ties to investors such as Peter Thiel.

Analysts say Argentina’s location limits its role in latency-sensitive AI workloads that need to stay close to end users, though Patagonia may still appeal for model training that can be done remotely. Daniel Yankelevich of Fundar argues the country should focus on investments where local companies add more value, such as software and technology services, rather than relying mainly on land and energy provision.

Our earlier article on the U.S. AI data center boom examined how soaring financing costs, construction delays, and tightening power availability are starting to undermine developers’ expansion plans. We also noted that rising community and regulatory pushback is forcing more projects to secure dedicated energy supplies, increasing both complexity and capital needs.

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