Argentina: Taking its Place in the Global Landscape
A new presidency in Argentina means the country is once again open for business in oil and gas and poised to regain its place on the top table of global energy.
Argentina was a longstanding oil and gas player until 2011, when it became a net importer for the first time in its history. Ever since, Argentina’s economy, much reliant on its oil and gas industry as its main economic contributor, has struggled to re-assume its former size, growth and stability. In January this year, with the election of Mauricio Macri as president, the door to a bright oil and gas future has been opened again. Stating that “Argentina has decided to take its place in the global landscape,” President Macri swiftly reversed the policies of his predecessor and is focusing on boosting the economy with free-market measures such as the elimination of foreign exchange controls and reducing subsidies.
Argentina has decided to take its place in the global landscape
Mauricio Macri, President of Argentina
The change in government certainly stirred up the interest of the international oil and gas community, with the Financial Times describing Argentina as “offering a bright spot in LatAm’s oil sector” in March 2016, referring to the newly elected government and Argentina’s unconventional resources in Neuquén’s Vaca Muerta reservoir, the second largest shale reservoir in the world. As Vaca Muerta’s technically recoverable unconventional resources are sufficient enough to supply domestic demand, Argentina’s declared mission is to achieve energy self-sufficiency, highlighting that the former would additionally free up some USD eight billion which the country currently spends on gas imports.
However, as Guillermo Juan Pereyra, Senator of Neuquén, President of the Mining, Energy and Fuels Commission in Argentina’s senate and the General Secretary of the Rio Negro, Neuquén & La Pampa Oil & Gas Union, pronounces, “in reality Argentina does not have enough financial capacity to explore and exploit the different existing basins in its territories; nevertheless, the national oil and gas exploration and exploitation activities need to be developed in order to achieve energy autonomy”, hence why Pereyra stresses that “the challenge behind this potential is to attract the funds needed to allow its exploitation”.
The kick-off to exploiting Vaca Muerta, however, seems to be in full throttle with Exxon Mobil having committed to a USD 229 million pilot, Argentina’s YPF in collaboration with Dow Chemical to a USD 500 million pilot, and Petronas USD 500 million for the current pilot and USD five billion for long-term development. Private investments for the benefit of the oil and gas industry are needed elsewhere, as Ricardo Delgado, sub secretary of Public Federal Works in the Ministry of Interior, explains, “investments into infrastructure must reach six percent of our GDP (USD 30.6 billion) in order to be able to develop the Argentinian infrastructure”. Despite the estimate, Delgado realizes that there is significant need for private investments as “currently we are investing less than 2.5 percent of our GDP into infrastructure”!
The Minister of Transport, Guillermo Dietrich, aligns with the former statement, elaborating on the infrastructure challenge regarding the energy industry at the Club del Petroleo, an entity with social purpose which brings together leading stakeholders of the Argentinian oil and gas industry. Dietrich states that the ministry “is developing several projects related to all the different transport means in order to improve the logistics and efficiency of the energy industry in Argentina”. Nonetheless, Dietrich is aware that the government will not be able to meet the country’s oil and gas infrastructure challenges alone; the ministry’s projects are an “improvement” which must be complemented by the combined efforts of all stakeholders including “companies, unions, provincial governments and employees” alike. In discourse with the leading oil and gas stakeholders at the Club, Dietrich stressed the fact that “Argentina is a land full of energy business opportunities”. Argentina’s vast resources, the repositioning of the government and willingness to enhance the country’s attractiveness for FDI certainly underlines Dietrich’s statement and it seems as though all relevant stakeholders within the government have rallied together with the aim to have Argentina —as president Macri says— “take its place in the global landscape”.
Writer: Jannes Peemoeller