Overview

Argentina is one of the world’s most promising gas provinces, yet it continually mismanages its resources and ends up on the verge of an energy crisis. The country sits on the Neuquén Basin, one of the world’s most prospective unconventional gas plays, but it is struggling to develop this because of poor management of the energy sector.

Energy subsidies, implemented in 2002 after the economic crisis, kept the price of gas low, removing the incentive to develop the country’s unconventional gas reserves. Gas production peaked in 2006, while subsidies enabled consumption to grow unabated, and Argentina is now a net importer of gas relying on expensive LNG imports. Unable to face the escalating cost of imports, the government has relaxed wellhead prices allowing companies to charge up to $7.50/MMBtu for additional gas production to encourage companies to develop the country’s unconventional reserves.

The nationalisation of YPF in April 2012 was the result of frustration that energy companies were failing to develop the nation’s gas reserves. The company has not improved its efficiency under state ownership, but is implementing a plan to develop the highly prospective Vaca Muerta shale gas play, with commercial production expected in 2014. In the meantime, the country is considering more LNG import terminals to meet growing demand.

Profile first uploaded 25/03/2013