Macri's change in energy position worries investors

The fall of the Argentine peso and the government's difficulties in coping with the rise in inflation are worrying companies that are developing Vaca Muerta, one of the largest deposits of oil shale and gaseous in the world.

initiative to liberalize Argentine energy markets, President Mauricio Macri eliminated consumer subsidies in 2016 and increased tariffs. Local oil prices have risen and, at the end of last year, have converged with international oil prices, which has boosted the companies of Vaca Muerta, the most attractive investment in Argentina

But the government has now limited the price at which oil companies in Argentina can sell them to refineries, with the price of gasoline for the consumer, to protect consumers from the world's oil prices and prevent them from falling into the water. inflation continue to rise.

Companies now have to sell at prices considerably lower than the international level, which was Thursday higher than $ 77 a barrel of Brent crude, the world's benchmark. This, in addition to the devaluation of the peso, affects profitability and forces companies to re-evaluate their plans at Vaca Muerta.

Only four years ago, the national oil company YPF calculated that the price of oil balance needed for Vaca Muerta's wells was economically viable at about $ 80 a barrel. Wood Mackenzie, the energy consultant, now estimates that the price of equilibrium is $ 56 per barrel. After the commercial production of the first well began in 2013, Vaca Muerta now produces 120,000 barrels a day, or more than 10% of the national production.

Since Javier Iguacel replaced Juan José Aranguren as Minister of Energy As part of a reorganization last week, the government's plans remain uncertain. Aranguren, a former chief executive of Royal Dutch Shell, has been widely praised by the private sector for raising the rates that consumers pay for electricity and natural gas, which has allowed the government to cut subsidies to try to reduce the budget deficit. But this is not popular among voters.

The way Iguacel, an oil engineer who also has a history in the private sector, depends on a precarious political scenario for Macri, who will attempt to be re-elected next year. Rate increases (as well as a $ 50 billion bailout from the IMF in response to the currency crisis) were one of the main reasons unions held their third national strike last Monday. Macri came to power

The freeze in consumer prices of gasoline can help satisfy voters, although the impact that this could have on inflation, which exceeds 25 % per year, is debatable. But international companies are not interested in financing, in practice, Macri's "gradualist" economic reform program, which aims to cushion the impact of austerity on the poorest Argentineans.

However, badysts are generally optimistic about the prospects for Vaca Muerta, which has seen a sharp drop in costs in recent years, while production has risen drastically. Argentina may even have an oversupply of natural gas this summer, as demand weakens, says Amanda Kupchella, an badyst at Wood Mackenzie.

"Operators know that price control and collaboration with trade unions come with Argentina territory," said Kupchella. "The productivity of Vaca Muerta is so good that it does not seem to scare investors. "

Alejandro Bulgheroni, president of the Pan American Energy Group, hopes that in two or three years it will be as cheap to drill wells at Vaca Muerta as in the United States"

"Let's hope that this will be solved and we will return to international prices, "said Bulgheroni. Although it is a "difficult time," he said, "we have had much more difficult times."