Argentina has been a member of World Energy Council since its creation in 1923, when it was part of the Argentine Engineers’ Center. In 1991 it became an independent NGO with its own legal standing. CACME’s mission is “to promote and support the World Energy Council's efforts, aimed to enhance a sustainable supply and use of energy for the greatest benefit of all people”. CACME aims to collaborate in the process of transforming the national energy sector, through the communication of global trends and the dissemination of the work and reports of the World Energy Council. CACME was chosen to organise the first World Energy Congress in Latin America in 2001.
Energy in Argentina
Comparing the results of 2019 and 2020, Argentina’s energy leaders continue to perceive issues surrounding the nation’s economic balance as uncertainties. Action Priorities continue to be led by the developments in the Vaca Muerta shale basin and by energy efficiency improvements used as instruments to strengthen the financial sustainability of the sector.
Capital Markets emerge as the biggest Critical Uncertainty. Perceptions this year are influenced by the fixing of a set dollar exchange rate below the market rate for oil contracts, which raises uncertainty around the cost of project funding.
Energy Subsidies move to the Critical Uncertainties section. In March 2019 the Energy Secretariat announced that US$100 million would be allocated to subsidies to compensate gas companies hit by domestic price increases. The move raises total government spending on energy subsidies to at least 2.25% above budget. In September, additional subsides were announced to compensate oil companies and sustain business activities affected by the fuel price freeze. Even with the subsidy, however, the price per barrel remained below the international price.
Economic Growth is seen with lower uncertainty and higher impact, possibly reflecting a diversity of expectations towards the incoming administration of president-elect Alberto Fernández and its approach to economic reform. At the same time, it is worth noting the position of China as a leading investor in energy infrastructure in Argentina. Chinese-backed projects such as the Caucharí Solar Park complex, currently the largest solar park in Latin America, are examples of China’s growing influence as a financier of new projects that contribute to growth.
Energy Efficiency remains an Action Priority for the fifth consecutive year. Recent measures include the adoption of an Energy Efficiency Label by five argentine provinces as part of a national programme to evaluate energy requirements for heating, cooling, water heating and lighting. The label is designed as an additional decision-making tool for real estate investments and ultimately influence the value of properties with sustainability standards.
Unconventionals persist as the leading Action Priority. Independent producer Vista Oil & Gas raised US$100 million in July 2019 on the New York Stock Exchange, after becoming the first company to export shale oil from Vaca Muerta. This has raised prospects for profitability of what is considered to be the most promising shale oil and gas basin outside the US. In 2019, around US$350 million worth of investments were made in the Vaca Muerta basin.
LNG moves to the Action Priorities space as the state-run oil company, YPF SA, shipped its first commercial LNG cargo from a new floating facility. This milestone, together with the developments in the Vaca Muerta basin and the prospects of increased domestic gas production, will boost Argentina’s chance of capitalising on its LNG export potential.
Argentina has set a target of doubling its oil and natural gas production over the next five years and increasing its renewable generation to 20% by 2025. However, it may take longer as political instability threatens to slow investment. Vaca Muerta is clearly an export project for Argentina, and it seems to have the potential to be a key factor to mobilize other resources. It can be a driver for picking up the growth in the country and a way to increase productivity for the whole economy by lowering the cost of energy. The challenge is that Argentina has a benchmark interest rate of 60%, the highest in the world and this is a key factor to lack of investment.