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A silver lining in Argentina’s financial crisis: An opportunity to rethink its energy plan

September 01, 2019
Tom Sanzillo and Kathy Hipple
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Key Findings

E&P companies claim they can extract oil and gas profitably: can they?

Infrastructure needed for exporting natural gas will require some US$50 billion.

Once built, renewable energy has no fuel cost.

Executive Summary

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. 

Please view full report PDF for references and sources.

Press release: IEEFA update: Argentina’s financial crisis offers chance to rethink national energy plan

Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

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Kathy Hipple

Former IEEFA Financial Analyst Kathy Hipple is a founding partner of Noosphere Marketing and the finance professor at Bard’s MBA for Sustainability. She worked for 10 years with international institutional clients at Merrill Lynch and then served as CEO of Ambassador Media.

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