EnergySector Argentina - EMIS Insight - Argentina... · The development of crude oil and natural gas resources in Argentina includes conventional onshore and offshore resources, ...
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In Q3 2014, Argentina's economy suffered from a decline in exports (by 8.4% on annual basis), imports (by 15.2%) and private consumption (by 4.7%).
In early 2014, Argentina introduced a new inflation index, which measures prices nationwide. Prior to that, the index was based on Buenos Aires and the
surrounding metropolitan area, which was not deemed credible by IMF. Statistics for 2015 show a decrease of the inflation rate in annual terms: from 18%
in February to 16.5% in March.
Main Macroeconomic Indicators for Argentina
National Statistics & Census Institute, World Bank
Source 2009 2010 2011 2012 2013 2014
Population, million persons NSCI 40.13 40.79 41.26 41.73 42.20 42.67
The electricity mix is dominated by thermal power. By the end of 2015, more than two-thirds of the electricity will be generated from oil-, gas- and
coal-fired power plants. Hydropower is the second-largest power source. The government has expressed ambitions to expand its nuclear industry,
indicating a national goal of 15-18% of nuclear power in the electricity mix by 2025. The country has potential to develop non-hydropower
renewables, especially wind, but current policies do not point to any significant growth in the sector.
According to a global assessment conducted by the U.S. Energy Information Administration in 2013, Argentina has the second-largest technically
recoverable shale gas reserves in the world (estimated at 22.7 trillion cubic metres) and the fourth-largest technically recoverable shale oil reserves
(27 billion barrels).
Even though Argentina is positioned among the most attractive countries in terms of the resource potential, the financial viability of these
investments and reserve recovery efforts will depend on the prevailing domestic economic and regulatory conditions, as well as on the international
market prices of hydrocarbon products.
Argentina relies heavily on natural gas and oil, which comprise 51% and 35% of the primary energy mix respectively.
The drop in oil prices in the end of 2014 relieved consumers in the country, but presented budgetary and investment challenges. The import and
refining capacities in Argentina are at their maximum, catching up with rising consumption. Oil and gas revenues in the state budget have
diminished significantly: in 2014, they accounted for about 3% of the budget revenues, as opposed to over 8% in 2008.
Unconventional shale oil and gas reserves have already attracted investors’ interest.
Overview
Shale Prospects
Power Sector
Source: BP, World Bank, EIA
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Oil rents are a function of production output, international oil prices, and production costs. On the one hand, oil and natural gas production is has been
decreasing, oil prices have been falling. On the other hand, production costs are either stable for conventional exploration, or still high for unconventional
exploration.
Argentina Oil & Gas Rents, % of GDP Crude Oil Reserves Long-Term Forecast, mn bbl
EMIS Insight estimate, World Bank, BMI Research estimate
2,984.00
3,021.10
3,053.50
3,100.503,091.90
2019 2020 2021 2022 2023
3.4
1.51.1 0.9 0.7 0.7 0.4
4.8
2.93.1 3.3
2.8 2.52.5
2008 2009 2010 2011 2012 2013 2014
Oil rents (% of GDP) Natural gas rents (% of GDP)
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Per capita energy consumption in Argentina is second largest in Latin America after Venezuela. The energy mix of the country relies heavily on oil and gas
for respectively 35% and 51% of the primary energy mix. Hydropower is the main source of renewable energy.
The energy sector in Argentina is regulated by the Ministry of Federal Planning, Public Investment, and Services.
Primary Energy Consumption by Fuel, 2013 Energy Use Indicators, 2013
BP Statistical Review, World Bank
Energy use, mn toe 84.5
Energy use per capita, toe 2.04
Fossil fuel energy consumption, % 73.3%
Share of oil imported, % 12%
Energy imports (net importer), % 3.6%
CO2 emissions, total mn t 194.5Oil
34.8%
Coal0.8%
Natural gas51.1%
Nuclear1.7%
Hydropower10.9%
Renewables0.8%
Total: 84.5 mn toe
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The development of crude oil and natural gas resources in Argentina includes conventional onshore and offshore resources, as well as
unconventional shale plays. Offshore development has been slowed down, as ENARSA – the state company that own all offshore resources – does
not have enough financial and technical resources to develop them alone. The current low oil prices are also a factor to postpone shale oil and gas
development, as the cost of oil production in the Vaca Muerta formation is estimated at USD 80-85 per barrel.
Development
Reserves
Hydrocarbon Commission
Legislative Changes
The proven oil reserves of Argentina were estimated at 2.8 billion barrels in 2013, and the technically recoverable shale oil reserves were estimated
at 27 billion barrels. One of the most important deposits is the Vaca Muerta field, which requires significant investment in development. According
to officials of YPF, the largest state energy company, developing 15% of Vaca Muerta would be sufficient to stop the need for energy imports. A
number of foreign companies have already invested in exploration and test drilling.
The Hydrocarbons Commission was founded in 2012 to address market asymmetries in the oil and gas sector, to encourage new exploration and
production activities onshore and offshore, to expand oil refining capabilities, as well as to maintain adequate supply of fuel at reasonable prices. The
Commission determines the reference prices for oil and gas. All companies in the sector must be registered in the National Hydrocarbons
Investments Registry and must submit an annual investment plan for approval by the Commission.
In October 2014, the Argentine government approved amendments to the 1967 Hydrocarbons Law, which is designed to attract private investment in
the development of unconventional oil and gas resources and offshore deposits. The most important changes are: shortening the duration of
exploration permits, providing export tax reliefs for concessionaires that invest more than USD 250 million over a three-year period, and restricting
provincial governments from imposing new taxes. The exploitation period under a concession has been extended to 25 years for onshore
conventional sources, 30 years for offshore resources, and 35 years for unconventional oil and gas.
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National production of refined crude oil products has declined gradually by a total of 10% in the period 2009-2013. Refineries in Argentina operate at almost
full capacity (>95%). The loss of production is attributed mainly to lower quality of oil and to lower efficiency in oil processing.
While crude oil sales prices are declining in the international market, prices of refined products remain high, which makes imports expensive and leaves
fueling stations with shortages of diesel. The government and YPF have planned investments to increase the refining capacity.
YPF owns three refineries, holding 50.4% of the refining capacity in the country. Other large producers of refined crude oil products are Royal Dutch Shell,
Axion Energy in partnership with China National Offshore Oil Corporation Ltd (CNOOC, China's top offshore oil producer), and Oil Combustibles.
Refineries in Argentina as of December 2014 Major Products of Oil Refining, mn litres
Enerdata, Ministry of Federal Planning, Public Investment and Services
Argentina became a net natural gas importer in 2008. Gas imports have tripled since 2010, reaching 10 billion cub m in 2014. Pipeline imports are
mainly from Bolivia, while LNG sources are multiple. Since 2009, Argentina has been receiving LNG at a floating terminal with capacity of 4 bcma at
Bahia Blanca. A second LNG import terminal (5.8 bcma) started operation in 2011 close to Buenos Aires.
Even with greater domestic supplies of associated natural gas production from the Vaca Muerta field, the country's gas trade deficit is expected to
remain.
LNG imports are expected to gain a bigger share in the total import balance, whereas pipeline gas imports are decreasing.
Natural gas is the main energy source in Argentina. It also generates more than half of the electricity in the country. In 2014, it was responsible for
about 80% of the thermal electricity generation and 54% of the total electricity generation.
Argentina is the largest natural gas producer in South America. Peak levels of natural gas output were reached in 2006, and production is declining
ever since by 3% per year on average. The government is trying to match the lower local production and the peak winter demand through import
agreements.
The main natural gas fields of Argentina are Neuquina, Austral, and Noroeste. According to data from the National Institute of Statistics, the three
fields combined form about 85% of the natural gas production in Argentina.
According to EIA’s assessment of shale gas resources worldwide conducted in 2013, Argentina’s reserves of technically recoverable shale gas is
almost 60 times that of its current tested natural gas reserves. The most important reserve is in the Vaca Muerta formation (Neuquina Basin). The
unconventional gas formation is found at depths between 2500 and 4000 metres, about 2 km below the water table.
Reserves
Domestic Importance
Trade Balance
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According to YPF estimates, the natural gas consumption in Argentina was about 48.6 billion cub m in 2014. Approximately 8mn consumers were
connected to gas distribution grids in in the end of 2014.
Recent regulatory changes are related to giving absolute priority to domestic supply of gas at stable prices in order to sustain economic recovery. On days
when a gas shortage occurs, the exports of natural gas and the provision of gas supplies to industries, power plants and fueling stations selling CNG are
interrupted for priority to be given to residential consumers at lower prices.
Preliminary data for Q1 2015 estimates natural gas production at 6.8 billion cub m.
Natural Gas Production & Consumption History, bn cub m
BP Statistical Review, YPF, Argentina Energy Secretariat
Argentina's natural gas exports have fallen significantly since 2007 because of the deficit in the domestic market.
Net imports of natural gas for 2014 are estimated at 10.4 billion cub m. LNG imports accounted for about 54% of the total gas imports. They came mainly
from Trinidad and Tobago (46%), Belgium 15%, Qatar 14% and Egypt 9%.
LNG imports are expected to increase their share in the total import balance, whereas pipeline gas imports are decreasing. This is due to Argentina’s
intention to decrease dependence on Bolivian pipeline imports.
Argentina LNG Imports by Country, 2013, bn cub m Natural Gas Net Exports Forecast, bn cub m
BP Statistical Review 2014, BMI Research
Trinidad and Tobago
3.61
Nigeria0.51
Egypt0.16
Qatar0.88
Rest of Europe0.60
Belgium1.04 Norway
0.08
Brazil0.04
-6.2 -6.1 -6.1 -5.7-5.1
-3.8 -3.9 -4.0 -4.3-4.9
-10
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
2015f 2016f 2017f 2018f 2019f
LNG net exports Pipeline gas net exports
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The material is based on sources which we believe are reliable, but no warranty, either expressed or implied, is provided in relation to the accuracy or completeness
of the information. The views expressed are our best judgment as of the date of issue and are subject to change without notice. EMIS and Euromoney Institutional
Investor PLC take no responsibility for decisions made on the basis of these opinions.
EMIS Insight is a unit of EMIS that produces proprietary strategic research and analysis. The service features market overviews, industry trend analysis, legislation
and profiles of the leading sector companies provided by locally-based analysts.
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