Argentina’s oil output drops by 6 percent, while gas and renewables go up

Oil production, historically associated with Argentina’s wealth, seems to have fallen from grace, at least according to official statistics that indicate a drop by 6 percent in May, as compared with the same period of 2016. This figure evidences that local extraction is far from 1998 record-hitting levels.

On the other side of the spectrum is gas, a hydrocarbon that took years to obtain global recognition. This resource grew by 0.29 percent from 2016, and although it also dropped by 1.8 percent in May, it attracts higher investments.

While the difference is meager, it is compared with a period in which local production of this resource was beginning to grow. After years of slumber, renewable energies also join this rising group since attracting the interest of local and international investors in the latest tenders organized by the government.

The most notorious example would be Techint, a group led by Paolo Rocca. Through Tecpetrol, which has placed high in the local oil ranking for decades – although far from the first places – the company told President Mauricio Macri it would invest US$2.3 billion in a gas production project at the Fortin de Piedra area, in Vaca Muerta (Neuquén). It is the largest investment project even made during this administration, according to information supplied by the Cabinet of Ministers.

“The fall of oil output stems from various causes, such as union conflicts, protests from indigenous communities, and the costs at some fields, higher than the local subsidized barrel. Natural gas is growing boosted by a transitional price incentive established by the government and the productivity progress made in Vaca Muerta, where large investments are being made in view of the good results in shale production. Another significant aspect is the production levels reached in tight gas fields (another type of unconventional extraction) in this area,” explained former Energy Secretary Emilio Apud.

“As I see it, this fact very clearly shows the conceptual failure In Argentina’s oil policy of the last quarter century, a structural phenomenon that must be changed. This policy is based on an unjustifiable abandonment of oil exploration, the core of any serious policy in the sector. Each chronicle shows that without explorations – which also means no new discoveries – short term palliatives are worthless.

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