The opportunity offered by Vaca Muerta | Themes of …

Production: Javier Lewkowicz

Right or merchandise?

By Arturo Trinelli *

The government said that the first shipment of liquefied gas in the country's history had been shipped from Bahía Blanca port from Vaca Muerta gas. This is the first floating LNG export project in Latin America and the third in the world, a continuation on a larger scale could make Argentina a player in this international trade, strengthening the countries currently exporting such as Malaysia, Qatar, Nigeria and Russia, among others.

The principle is based on the following badumption: in Argentina, self-supply will be guaranteed as quickly as possible by the excess gas generated by Vaca Muerta, while 32 of the 40 ongoing projects are in mbadive development course. Although it is a medium-term trip that requires sustained investment, it seems reasonable to look for markets to entrust production to the impossibility of storing it. However, beyond the political advantage sought, some points should be mentioned:

1. What stands out as an essential difference between this direction and the previous one is actually a consequence of YPF's efforts during Kirchnerism. During this period, huge investments in exploration and infrastructure were made to consolidate the current and future expanded supply, as well as the learning curve required as a result of which other large companies joined the Neuquén group. As always happens in these major development programs, it is the state, directly or through its public enterprises, the biggest risk taker and the one that creates the conditions for subsequent disbursement and innovation of private companies, although the latter then opposed State interventionism.
2. The current context is characterized by an impressive spraying of the power of buying the salary. The rate and the steady decline in economic activity have reduced demand for electricity (more than 30% of the gas produced is for thermal power plants). Indeed, recent CAMMESA data reveal that since 2016, the demand for electricity has contracted from year to year, the last decline of not less than 8.8%. Under the previous administration, demand has had to deal with prolonged peaks forced to reduce supply to industries to ensure their shipment to residential users. This government does not face this dilemma: with manufacturing output at its all-time low (only 9% decline in the first four months of the year), the combination of unpayable bills and production subsidies has quickly allowed a larger export offer to other markets.
3. In this context, decisions were made regarding gas imports that could complicate supply in the winter, forcing the purchase on the spot market at a higher price to meet the demand. The downward renegotiation of the supply contract with Bolivia and the shipping of the Bahía Blanca maritime terminal could jeopardize the supply sources of domestic demand in case of prolonged temperatures below the winter average .
4. In the long term, Argentina should reconsider whether investments for gas production do not conflict with the idea of ​​diversifying the energy matrix in order to increase the impact renewable sources of energy, according to many developed countries and to the legislation of Argentina. It is necessary to go from 4% currently to 25% in six years.

The policy on hydrocarbons should not be marked by a crack as explicit as that observed in other subjects of national interest. The development agenda to be discussed must first determine who will be its main actors and agree on its main beneficiaries, by discussing why we want energy and whether we will produce it to allocate rights. or just another product.

* Center for Studies and Policy Development (CEDEP). UBA teacher, FLACSO and UNPaz.

Add value

By Cecilia Graschinsky * and Lara Bersten **

In order to address the deficit in the energy trade balance and to achieve self-sufficiency, the national state has implemented a series of policies aimed at increasing production. Beginning in 2012, YPF invested in the economically most risky phases in the exploration and development of the Vaca Muerta shale formation. In addition, steps have been taken to improve gasoline prices so that the industry makes the necessary investments to continue the mbadive development of new areas. The production of shale gas in Argentina is now a reality. According to data published by the Ministry of Energy in April 2019, the gas extracted from Vaca Muerta accounted for 22% of total production. This growth in local supply made it possible in 2018 to reduce the volume of gas imported from Bolivia, LNG and the volume of diesel (replacement of gas in power plants during the months when demand was highest).

Therefore, to continue the development of Vaca Muerta, new challenges are emerging for the next government. Among them, one of the most controversial is related to the price and role of subsidies, reflected in two scenarios presented in an antagonistic way: regulation or the free market. In the case of "flotation", consumers would face competition for a limited resource, subject to variations in demand with a marked seasonal bias (winter-summer), international prices and the devaluation of the currency. Will it be the priority of the floating or "predictable" markets in which the State intervenes, guaranteeing fair and reasonable prices allowing the development of the industry and the access to the service of the population? ?

The debate over the price of gas, until recently, occupied the central scenario, however, the increase in production brings new discussions on the "surplus". Among these, the need to expand the network of gas pipelines, which is at its peak in the Neuquén Basin. As a result, one of the questions is: who should pay for the infrastructure investments? Admittedly, this question has no unambiguous answer, especially as regards the final recipient of this gas, and another subject of debate is open: "exports".

The marked seasonality of gas demand causes surpluses during the summer months and an absence in winter, exports may be a solution to this structural reality of gas demand in Argentina, but it should also be noted the the problem that exports can carry if the supply of domestic demand is unregulated.

Finally, the fact that Vaca Muerta is today a reality opens the possibility for industrialization projects to enhance this natural resource. A clear example is the state's impulse to the petrochemical industry.

The challenges are many and become more urgent as the rapid external borrowing promoted by the government of Cambiemos suggests to us that our country will again face the external constraint, either because of the impossibility to continue the process debt. , or by rising international prices for oil products. Therefore, the next government will have the challenge of opting for a political and economic model that would reshape the economy through the export of natural resources or lay the foundation for the development of an industrial model that adds value to our strategic resources.

* Researcher at the Center for Research on Energy Policies (CIPE), Conicet-Ithes.

** Researcher at the Center for Research on Energy Policies (CIPE), UNPaz-UBA.