A silver lining to Argentina’s financial crisis is an opportunity to rethink its faltering energy plan, now overly dependent on unconventional (“fracking”) oil and gas reserves in Vaca Muerta, located in northern Patagonia. A newly constructed plan could become an important foundation to put Argentina’s house in order with a more strategically prudent use of oil and gas assets that reduces domestic prices while stimulating economic growth. The Vaca Muerta energy resource alone cannot revive the Argentine economy, but is an important asset in developing a balanced energy plan that includes abundant solar and wind resources.
Argentina’s 2018 energy plan called for a doubling of natural gas and oil production within five years. Most of the production growth was expected to come from unconventional production in Vaca Muerta with special involvement of private companies. Rising production levels were to be achieved through a partnership of large, global oil companies, smaller Argentinian-based producers and the Argentine government. The goal was to produce oil and gas at levels that would both meet Argentina’s domestic needs and allow for an expansion of export sales. The profits from exports could then be used to enhance the Argentine economy and create jobs and fiscal stability.
The plan, however, is failing to meet its goals and has become a drag on Argentina’s economic recovery. The recent political and financial upheaval, including large stock losses and bond downgrades for Argentine energy players also threatens the continued participation of foreign investors. Meanwhile, the price of oil and gas for Argentine consumers remains unacceptably high. The Vaca Muerta asset is at risk of becoming an Argentine liability.
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Press release: IEEFA update: Argentina’s financial crisis offers chance to rethink national energy plan