Amid a global rout in oil prices, Argentina’s energy sector remains an attractive investment option thanks to state subsidies and regulated oil and gas prices, a senior official at state-run Argentine energy company YPF said yesterday.
Argentina’s economy is seeking to ramp up investment in its energy sector to eradicate an energy deficit it started running in 2011, which is draining its perilously low foreign reserves.
Strategy Officer Fernando Giliberti said YPF was always looking for partners to develop in particular the Vaca Muerta shale oil and gas formation, thought to be one of the biggest such reserves in the Western Hemisphere.
He added that YPF was hopeful the 47 percent tumble in international crude oil prices since June should not impact investors’ appetite for Argentina.
“We have hopes because of two things,” Giliberti said yesterday in Istanbul on the sidelines of a preparatory meeting for next year’s 9th NOC forum which YPF will host in Argentina.
“We have a support in the natural gas price in Argentina. And the government has also decided to support the development of unconventional energy, allowing us to have internal prices which are higher than international prices.”
For producers in Argentina, the price of natural gas and oil is fixed at US$7.5 per million British Thermal Units (BTU) and US$77 per barrel respectively, well above international prices.
Critics say so much state intervention may, on the contrary, put off investors.
YPF has said developing Vaca Muerta and securing energy independence will cost up to US$200 billion in the next 10 years. It intends to raise part of that on international debt markets, despite high yields for Argentine assets due to the country’s record default in 2002 and messy ensuing legal battle with creditors.
“Our Chief Financial Officer is really keen on jumping onto the international markets to get more finance for our projects any time, so we regularly get approvals internally for us to be ready to go for it,” Giliberti said.
Date: March 6, 2015