Argentina presented investment opportunities in the energy sector for US $ 30,000 million

Monday, March 11, 2019

The Minister of Finance, Nicolás Dujovne, and the Secretary of the Government of Energy, Gustavo Lopetegui, presented today to more than 120 entrepreneurs the investment opportunities offered by Argentina in the energy sector, in a lunch organized by the headquarters of the Argentine Institute of Oil and Gas (IAPG) in Houston.

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Dujovne referred to the measures that the government is taking to stabilize the macroeconomy and resume the growth that the country was bringing up until the middle of last year. The official stressed that "as President Macri said, Argentina is in a much better situation than in 2015. Last year was a difficult year for many families and companies, but we have begun to lay the foundations for sustainable growth and power. develop our full potential. "

On the other hand, Lopetegui referred to the increase in the production of Vaca Muerta between January 2018 and January 2019, which reached 87% in shale oil and 215% in shale gas, and assured that each month they continue to break records of unconventional production of hydrocarbons.

"The success we are seeing in Vaca Muerta, which already represents approximately 20% of the oil production and 40% of the gas production, is just the tip of the iceberg, we are only exploiting 4% of the total surface", affirmed the Secretary of Energy. "To continue on this path of growth of investment and production we have to continue working at the table of Vaca Muerta with employers, unions and the provincial government," he added.

Lopetegui highlighted the investment opportunities presented by Argentina for the coming years for approximately US $ 30 billion in oil and gas (US $ 10 billion), infrastructure (US $ 8.2 billion), electricity and renewable energy (US $ S 12,000 million) and access to new markets (US $ 3,000 million).

As for the gas market, it made a brief evolution of the main variables during the last years. Between 2005 and 2015 there was a systematic replacement of exports and local production, with sunken prices that reached a floor of US $ 1.9 per million BTU in 2012 for the importation of Liquefied Natural Gas to about US $ 8 per million BTU.

In 2015, gas imports exceeded 25% of the total injected. As of 2016, "we managed to change the trend, this year we will supply more than 85% with local production, and at the same time, we have already begun to export again," Lopetegui said.

Exports, in fact, resumed last year after being abruptly suspended in 2007 and will grow every year, as more gas will be available in excess of domestic consumption. In February, they reached 6.3 million cubic meters per day. The government is in talks with Chile to establish mechanisms to ensure exports to the neighboring country, initially in the eight months from September to April. The country still needs to import LNG in the four months from May to August.

The next steps

To continue increasing production, however, Argentina requires significant investments in infrastructure. In this regard, the Energy Secretary announced that in August the tender for the construction of a new gas pipeline to connect Vaca Muerta with Buenos Aires and the port and potential additional extensions to existing pipelines will be awarded. The construction of a new gas pipeline involves investments of around US $ 1,500 million.

In addition, the government presented a call to public consultation last Friday to establish a Gas Import Replacement (RIG) program through an auction whose base price will be the equivalent of the import price of Liquefied Natural Gas (LNG), with a top of 8 dollars and discounts that increase over the years. The contracts that result from the auction will have a duration of 4 years and will be applied to the 4 months that go from May to August.

Lopetegui also referred to the projects that are under evaluation by companies to build a liquefaction plant to export Liquefied Natural Gas.

In oil, Argentina has idle evacuation capacity and internationally aligned prices. During the last months Shell, YPF-Petronas and Vista made investment announcements for U $ S 7,500 million in four years, which will increase production by an equivalent of 40% of current production. "By the end of this year we will begin to be exporters of light oil, something unprecedented for Argentina," the Secretary said.

In addition to the opportunities presented by Vaca Muerta, Lopetegui highlighted the advance of renewable energies, which already totals 126 of projects in development for 4,593 MW of installed power, and represented an investment of more than US $ 6,800 million in execution. In December 2019, wind and solar energy will account for 12% of electricity consumption, versus 2% represented 4 years ago.

The event was attended by representatives of, among others, the following companies: Exxon Mobil, Chevron, Total, Shell, YPF, Pluspetrol, BP, Tecpetrol, Panamerican Energy and Schlumberger. In the afternoon, officials will participate in an event with business leaders and opinion leaders at Rice University.

This Ministry of Finance release was published using an automatic translation system.