“A change of era”: what will be the next stage of the energy industry in Argentina

Argentina's energy industry is experiencing a profound transformation, marked by the expansion of the Vaca Muerta shale formation, record energy exports, the advancement of a liquefied natural gas (LNG) project, and the implementation of the RIGI (Regulatory Framework for the Promotion of Large Investments).

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If we look at the international scenario, Argentina is far from the war conflicts, with an extraordinary asset that is tremendously proven and with record production, and also facing a group of countries that have the opportunity to diversify supply risk. In this context, I believe that Argentina is in a situation where its opportunity is magnified; at the same time, a need or convenience to accelerate execution is probably beginning to roar.

Daniel Dasso, a tax partner and leader in EY Argentina's Industry, Energy, and Mining sector, discussed the sector's potential and challenges. He noted that Argentina's geographical distance from global conflicts, its proven hydrocarbon reserves, and record production place it in a strong position to offer supply diversification to other nations. "Argentina is in a situation where its opportunity is magnified," Dasso stated, emphasizing the need to "accelerate execution."

Dasso described the current phase as one where "action" will be paramount. He recalled a year ago when discussions centered on a "century of wealth" for Argentina that the country could not afford to miss. Recent studies on Vaca Muerta indicate that the recoverable oil capacity has nearly doubled, increasing from an estimated 16 billion barrels to over 30 billion. This translates to approximately 100 years of remaining production, underscoring the significant opportunity at hand.

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action

He stressed that delaying decisions incurs an opportunity cost, as resources not produced today may be worth significantly less in the future. "The importance, the need for execution and its speed," Dasso explained, is critical. This paradigm shift demands a "fierce call for productivity and competitiveness." While Argentina possesses competitive advantages, it also faces disadvantages, such as logistical challenges in reaching certain markets. These must be offset by efficiency and productivity gains.

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It's no longer 16 billion barrels, it's 30 billion or more. If you look at it in terms of total production, it means that, magically, again, 100 years of remaining production appear. In this context, the issue is that there is an opportunity cost in every decision that is delayed. What is not produced today will probably be worth much less in several years or its economic value will be nil. Hence the importance, the need for execution and its speed.

However, productivity and competitiveness are constrained by several factors in Argentina. These include infrastructure limitations for resource extraction in Vaca Muerta, the need for adequate human resource management, financing issues, cultural aspects, and logistical hurdles. For instance, transporting essential materials like sand for fracking over long distances on poorly maintained roads leads to delays and increased costs, impacting overall efficiency.

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call almost fierce for productivity and competitiveness