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ECONOMY | 07-03-2023 17:07

Shale oil exports to spur Argentina's trade surplus, official says

Booming oil production out of shale patch Vaca Muerta will create surpluses in energy trade for Argentina to the tune of US$8 billion within a few years, says top official.

Booming oil production out of shale patch Vaca Muerta will create surpluses in energy trade for Argentina to the tune of US$8 billion within a few years, Energy Undersecretary Flavia Royón said in an interview.

Drilling is picking up fast in Vaca Muerta after a series of false dawns over the past decade with top developer, state-run YPF SA, poised to ramp up investments.

Pipeline expansions, a major bottleneck to production, are finally under construction. A duct to Chile that’s been abandoned for years will start to ship crude in May, Royón said. YPF is also leading plans for a new cross-country conduit to the Atlantic coast, where a new port would also be built. That’s in addition to current work to double similar existing facilities.

Argentina’s chronic shortage of US dollars is a key source of imbalances in its crisis-prone economy, and over the years has led to unorthodox policies including capital controls and debt restructurings. Trade surpluses are key to improving the situation.

“In three or four years we’ll have a positive energy trade balance of US$8 billion driven by crude exports,” Royón said at a conference in Toronto.

The government is expecting energy trade to be balanced this year after a long time in the red – including a US$5-billion deficit in 2022 – as fuel imports hampered a nation that was once comfortably a net exporter.

Other highlights from the Royón interview:

– Argentina is in talks with lenders to finance an expansion of its natural gas and power transportation networks
– The government is negotiating with different funds for the US$3 billion it still needs to build the second stage of the Néstor Kirchner duct, which would take Argentina’s Vaca Muerta shale gas toward Brazil
– It’s also looking for international financing to expand the country’s high-tension power lines
– Without expansion, Argentina can’t bring any more big renewable energy farms online.

Fuel prices:
– Government plans to sit down with the oil industry to agree on petrol and diesel price rises with the current deal expiring this month
– An agreement over three or four months is best, Royón said, since it would anchor CPI expectations

FX loophole:
– A decree giving drillers greater access to hard currency amid FX controls will be enforced in the coming days after several companies put in requests to make use of it

Power:
– A “scouting” of candidates interested in buying electricity distributor Edesur from Italy’s Enel should start this month
– The chief government theory behind a fire that caused a nationwide blackout last week is still sabotage, especially since President Alberto Fernández was delivering a major speech that day
 

by Jonathan Gilbert & James Attwood, Bloomberg

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