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Oil and Gas Sector
Oil and gas exports is a leading sector in Argentine fiscal output, contributing 20% of the GDP, second only to manufacturing exports which makes up 35% of the GDP. Argentina is a net oil exporter and the largest natural gas producer in Latin America. It is the third-largest electricity market and the third-largest energy consumer in Latin America.
Argentina is the third largest oil producer in Latin America behind Venezuela and Brazil with an average oil production rate of 800,000 barrels of oil per day (bbl/d) over the past five years. Argentina’s oil consumption has grown year-over-year in the past five years and currently uses over 60% of the country’s oil production with the balance exported primarily to Brazil and Chile. Argentina is also the largest natural gas producer in Latin America currently producing at an average rate of 4.34 billion cubic feet of gas per day (Bcf/d). Argentina’s natural gas consumption has increased significantly over the past decade and it has become the second largest consumer of natural gas in Latin America. Natural gas is Argentina’s dominant fuel source, where it consumes nearly 85% of natural gas produced in the country, with the balance exported primarily to Chile. Argentina currently has an estimated 2.95 billion barrels of proven oil reserves and 27.1 trillion cubic feet of proven natural gas reserves.
Argentina relies upon three major oil pipelines for transport and distribution of crude oil; two domestic pipelines and one international pipeline connecting Argentina to a refinery in Chile. Repsol-YPF, Shell and Esso dominate the downstream oil industry in Argentina, however, in 2007, the Argentine government, in collaboration with several private oil companies, unveiled a plan to build a new $1.6 billion oil refinery for domestic consumption and export. Argentina also has an extensive natural gas pipeline network with a domestic system comprised of Transportadora de Gas del Sur connecting the southern region to Buenos Aires and Transportadora de Gas del Norte connecting the northern and western regions to Buenos Aires. Both operators are currently increasing the capacity of their pipelines to meet rising demand. International natural gas pipeline linkages primarily connect Argentina with Chile and Brazil for exports and Argentina with Bolivia for imports.
Argentina’s natural gas production has not kept pace with its demand, making the country increasingly reliant on imports from Bolivia and forcing export reductions to Chile through taxes and export quotas in order to meet domestic needs. In October 2006, Argentina signed a deal for it to import natural gas from Bolivia for an additional 20 years. Under the terms of the deal, Argentine imports from Bolivia will eventually quadruple and the price of natural gas will rise to $5 per million Btu, ultimately linking more closely to market rates. This provides incentive for Argentina, which sells natural gas at less than $2 per million Btu, to continue increasing its own natural gas production, which would require higher prices. In this regard, the Argentine government has recently eased price controls on natural gas for all but the residential sector in order to encourage natural gas development.
High demand for energy in Argentina is largely driven by a fast-growing economy that fuels higher demand for energy and an open-market economy that attracts strong foreign investment. The government of Argentina recognizes that continued economic improvement is dependent upon growth in energy supplies and foreign investment. Argentina is one of a decreasing number of countries in the global oil and gas arena where international oil companies have relatively free and open access to oil and gas exploration and development. As a consequence of these dynamics, Argentina continues to enjoy strong investment from foreign oil and gas companies.