Related Articles
Forward article link
Share PDF with colleagues

Reforms bring Argentinian self-sufficiency closer

New energy investments are reducing Argentina’s import needs

Argentina is pushing new frontiers in shale, offshore and renewables, aiming to regain its prized energy independence.

Slashing the country's cash-draining energy-import dependence has been near the top of the agenda for President Mauricio Macri's government since he came to office in 2015. To reach the goal, Macri has instituted a number of market-friendly reforms. His administration has made it easier to move cash and kit in and out of the country, reduce domestic energy subsidies, provide incentives for new shale oil and gas projects and work with labour unions to reduce costs. He has also opened new investment areas for private and foreign investors.

Those measures are clearly paying off in the country's Vaca Muerta shale play, a key source of future oil and gas growth for the country and its best hope to eliminate fuel imports.

Production levels are still relatively low. Tight oil output has doubled from around 20,000 barrels a day in late 2014 to around 40,000 b/d today, thanks largely to the YPF and Chevron Loma Campana shale project. Because of declines from mature fields, this has only managed to keep the region's oil production flat. Shale gas output has risen faster. From a trickle in early 2014, shale and tight gas output from Vaca Muerta has risen to around 1.1bn cubic feet a day, that's around a quarter of the country's total output (4.4bn cf/d) in the first quarter of this year. That first-quarter figure is up around 10% since Macri took office.

Beyond the production that has hit the market so far, Macri's reforms have spurred a wave of new investment plans from international majors. ExxonMobil, Total, Shell and BP have outlined early-stage production projects that will see at least $3bn pumped into the Permian. The authorities are also encouraging private Argentine investment. Tecpetrol, a Buenos Aires-based producer, plans to spend $2.3bn at its Fortín de Piedra shale gas project through 2019.

Rystad, a consultancy, sees total shale output rising to around 165,000 barrels of oil equivalent a day by 2020, up from 76,000 boe/d last year.

LNG elimination goal

That rising output is already leading Argentine policymakers to reassess the country's gas purchases from abroad, which include piped imports from Bolivia as well as liquefied natural gas. Earlier this year, Daniel Redondo, secretary of energy planning, said higher Vaca Muerta output meant that by 2020 the country would be capable of meeting its own demand, except during the winter months when demand spikes. He hopes the country can work out a deal with Bolivia to raise imports during these times to eliminate LNG imports altogether.

Key to facilitating that growth will be a major buildout of the energy infrastructure around the Vaca Muerta play. Later this year, the government plans to tender for a $500m rail line from the Atlantic port of Bahia Blanca into the area. The rail link would make it far easier to move things like sand and steel, which are currently trucked, into the region and help reduce costs.

Macri also hopes his business-friendly reforms will nudge a nascent offshore oil industry into action. In 2016, Total started producing from the offshore Vega Pleyade gas project. Macri and his energy team hope to capitalise on this, as well as the interest spurred by vast discoveries in neighbouring offshore Brazil, to draw in more investment. From July through November, huge swathes of Argentina's offshore acreage will be put up for bidding.

Renewables are another key part of Macri's energy strategy. Macri wants to see 8% of the country's electricity come from renewables this year and 20% by 2025. A series of renewables auctions have pushed things in that direction. Wind, solar and small-scale hydropower projects have been awarded that will install 2.4 gigawatts of capacity and generate more than $3bn of investment in the next couple of years. Sebastian Kind, the country's undersecretary for renewables, points out that each 1GW of renewables capacity saves $300m in liquid fuel imports a year.

Also in this section
Libyan production languishes under ‘illegal blockade’
4 August 2020
National Oil Corporation reports its lowest production since the blockade started in January as external forces gear up for clash over Sirte basin oilfields
Turkey’s ambitions have imperial echoes
4 August 2020
Facing the challenge of a domestic economic crisis, President Recep Tayyip Erdogan hopes that successful military interventions in the surrounding region will foster nationalist solidarity
Bolivian election delay further dampens gas investment appetite
31 July 2020
The Andean country’s natural gas sector will be a casualty of a second vote being pushed back yet again