Read for 5 minutes BUENOS AIRES, Argentine Republic, June 30 (Reuters) – Argentina, which had progressively climbed out of a significant energy deficit to post a slim surplus last year, is on track to slide back into a $1 billion energy hole this year due to local natural gas shortages, necessitating costly LNG imports. The South American country, which is home to the massive Vaca Muerta shale formation, has had a two-speed recovery from the coronavirus pandemic, with oil production surging but gas output stagnating. Oil output recovered more quickly, thanks to regulations such as a higher local “criollo barrel” price that protected producers, while a price freeze on domestic gas – used for cooking and heating – pushed businesses away from natural gas. Former energy officials and analysts told Reuters that efforts to revive gas production, such as a state Gas Plan that went into effect on Jan. 1, arrived too late for winter demand, necessitating imports, prompting Argentina to build a second regasification unit in the port of Bahia Blanca to receive LNG cargoes. Jose Luis Sureda, the country’s previous secretary of hydrocarbon resources, remarked, “It was too late to get the gas for the (Southern Hemisphere) winter.” “There was no activity in 2020. In Neuquen, all of the fracking equipment was dismantled “Added he. According to Daniel Dreizzen, an analyst at consultancy Ecolatina and a former secretary of energy planning, the energy deficit will be close to $1 billion by the end of the year, draining dollars from the central bank as the country tries to recover from a recession and replenish foreign currency reserves. “The energy forecast is just not cooperating with the macroeconomy; in fact, it is putting it in jeopardy,” Dreizzen added. Argentina’s net reserves have plummeted since 2019, owing to debt and currency crises that prompted the government to impose strict capital controls to prevent the outflow. The government is also in discussions with the International Monetary Fund to restructure $45 billion in debt that it cannot repay. The government implemented a gas stimulus plan to ensure a production floor at a competitive price, with the goal of replacing gas imports, albeit this has yet to have a significant impact. “The energy situation, the energy deficit in Argentina, is getting worse,” said Agustin Monteverde, an economist with the Massot / Monteverde y Asociados consulting firm, who agreed with the estimated $1 billion deficit. According to Sureda, the gap might be substantially larger. The ministry of energy has not responded to multiple requests for comment on this article. Argentina enjoyed a small energy surplus in the first four months of the year, but that is projected to change as the southern winter brings much higher gas demand. ‘PERFECT STORM’ is a song by the band PERFECT STORM. According to Dreizzen, oil exports would climb by 20% to 90,000 barrels per day this year, up from an average of 77,000 bpd in 2020. That means oil exports would reach $2 billion, more than doubling the $930 million in 2020. On the import side, the country will treble its LNG purchases in volume, putting a strain on the energy balance due to prices that have tripled since last year. With a 20% rise in gas imports from Bolivia, gas exports to Chile would plummet. “Today’s worldwide import prices are sky-high, and we’ve allowed domestic output to dwindle. This is the ideal storm, “Sureda, a former energy official, went on to say. During the pandemic, health workers staged demonstrations in April, blocking access roads to crucial parts of Vaca Muerta, the world’s fourth largest shale oil reserve and second largest shale gas reserve. Argentina is reliant on the formation’s development, which spans a region the size of Belgium and is known as the “Dead Cow.” YPF, the state-owned energy company, is driving development. According to industry insiders, the capacity of gas pipelines has slowed the recovery, with capacity expected to be reached by August as companies struggle to meet targets set out in the government’s stimulus package. Strict capital controls in the country, which have been in place since 2019 to safeguard the local peso currency and defend diminishing dollar reserves, are preventing that investment, but this complicates operations. Inflation is nearing 50% on an annualized basis, and the national and many regional governments have been involved in debt restructuring negotiations for the past two years. “It’s difficult for me to envision a new influx of cash. There are numerous issues with financial operations, whether you wish to bring money in or take it out “Dreizzen remarked. Eliana Raszewski contributed reporting, and Nicolas Misculin, Adam Jourdan, and Marguerita Choy edited the piece. Continue reading
