Argentina’s energy sector regulatory framework seeks to provide greater market certainty and attract foreign investment to boost oil and gas production for exports. Given its current economic challenges, the Argentine governments at the federal and provincial levels continue to play a significant role in critical industries of the economy, such as energy and mining. The Government of Argentina (GOA) sees the oil and gas sector as a major driver of exports and as a generator of foreign currency. The government is keen to attract foreign direct investment to spur economic growth.
Argentina possesses the world’s fourth-largest shale oil and second-largest shale gas reserves. The Vaca Muerta shale formation is located in the provinces of Neuquén, Mendoza, and Rio Negro, and only a fraction has been developed for oil and gas production. Vaca Muerta’s shale quality, production incentives, tax exemptions, and negotiated labor concessions have contributed to lowering operational costs and increased efficiency. Investments have slowed because of Argentina’s broader economic challenges as well as policy uncertainties that include foreign exchange controls that hinder repatriation of dividends. Major global exploration and production companies including Chevron, ExxonMobil, Petronas, Raizen (Shell), and Total are present along with many local firms. Argentina’s majority state-owned energy company, YPF, holds the largest upstream sector market share. Industry reports a continued need for small- and medium-sized service companies with shale expertise to enter the market to further improve efficiency and lower costs.
The province of Neuquén, home to the largest portion of the Vaca Muerta formation, continues to be a key driver of industry growth. The total production of unconventional oil and gas increased about 11 and 26 percent year-on-year, respectively.
The GOA launched “Plan GasAr,” which is a natural gas plan to increase local production and reduce gas imports by providing a framework that ensures access to foreign exchange and government support for increased production. On July 9, 2023, the GOA inaugurated Phase I of the President Nestor Kirchner gas pipeline, which cost the GOA an estimated $2.5 billion, and stretches from the Vaca Muerta basin in Neuquén to Buenos Aires province. Once fully operational, the pipeline will save billions of dollars in liquified natural gas (LNG) and other fuel imports. The current administration is evaluating funding sources for Phase II, which will reach Santa Fe province. The tender for construction of Phase II is to be launched in September 2023, with a projected completion date of April 2024.
Phase I of the pipeline has a current transportation capacity of 11 million m3/day. Capacity is projected to increase to 25 million m3/day once two new compression plants, currently under construction, are operational. Further, once Phase II is finalized, transportation capacity is expected to increase to 44 million m3/d. There are some midstream projects being considered, which include the expansion of an existing oil pipeline from Neuquén to Buenos Aires that could be instrumental in increasing oil exports.
The market is awaiting the government’s introduction of a hydrocarbon bill, which might include a hydrocarbon investment promotion regime to provide the industry with tax and fiscal stability. The bill is expected to stimulate incremental oil and gas production for domestic and international markets and to promote production continuity of mature wells through secondary and tertiary recovery, which represent approximately 80 percent of the country’s conventional hydrocarbon production, and secure access to foreign currency.
While the market still waits for Congress to pass the hydrocarbon bill, a recently introduced LNG bill has taken center stage. Both bills are expected to stimulate incremental oil and gas, and LNG production for domestic and international markets.
- Secretariat of Energy (Spanish)
- Integración Energética Argentina - IEASA (Spanish)
- Argentine Institute of Petroleum & Gas - IAPG (Spanish)
- Argentina Oil & Gas Expo - AOG (Spanish)
For additional information, including market analysis, trade events, contacts, and the products and services that the U.S. Commercial Service can provide to help you succeed in the Argentine market, please contact Marcelo Amden, Industry Specialist