Argentina Energy Production Trends

How The Energy System Is Structured

The Argentinian energy sector is passing through a dynamic and crucial phase. Energy is one of the top priorities of President Mauricio Macri and a new long-term policy to revitalize the energy sector was promised during his campaign. Some important changes have already taken place.

Energy (including hydrocarbons and electricity) and mining were formerly managed by different secretariats, but in 2015 the President elevated them to the level of ministry by creating the Ministry of Energy and Mining (Ministerio de Energía y Minería). The Ministry is charged with setting standards, developing policy and regulations, and making crucial improvements in the sector. One of President Macri’s energy goals was to make the sector more market-friendly, and perhaps an indication of this is that former Shell Argentina Executive Juan José Aranguren was placed at the helm of the new Ministry. Since 1992, the generation and distribution activities have been open to the private sector. However, several nationalized companies are among the biggest in the country (i.e. YPF and Enarsa). Overall the market is relatively fragmented among more than ten large companies (private and nationalized).

Non-renewable

Energy from non-renewable sources is produced and provided by large companies (including both private and state-owned) in a largely liberalized competitive market. The future of non-renewable energy in Argentina hinges on a region called Vaca Muerta (literally ‘dead cow’ in Spanish). The area, located in Neuquén Province, was first developed by YPF and holds vast (among the world’s largest) deposits of shale oil and shale gas. Top energy companies including YPF, Chevon, Petrobras, Total, ExxonMobil, etc. are now vying to access and profit from the relatively untapped resources of the region. Economists view Vaca Muerta as solution to fixing Argentina’s energy deficit, allowing it to satisfy growing demands and regain its position as an oil and gas exporter.

Renewable

The market for renewable energy in Argentina is much newer and less developed than that for non- renewables, but there are some encouraging signs. In the past, the sector has struggled to attract investment. However, President Macri recently launched a decade-long plan to attract billions in investment and to boost the amount of electricity produced. The first step was an auction calling for companies to bid on contracts to produce 1,000 megawatts of power from renewable sources. According to President Macri, by increasing renewable energy output Argentina can save $300 million annually (reducing imports of natural gas and other fuels) and reduce greenhouse gas emissions by around 2 million tons a year.

Although they are not yet operating on the size and scale of non-renewables, renewable energy companies are seizing the moment and betting on Argentina’s ability to improve its energy matrix. One fascinating case study involving someone with experience on both sides of the energy game is Doris Capurro, a former communications vice president of YPF who now heads Luft Energia, a renewable energy company. In a recent interview she told the Buenos Aires Herald that she was frustrated with YPFs failure to invest in renewables. Furthermore she said the current administration has taken
many measures to make investors feel comfortable in Argentina. She hopes that Argentina can make significant improvements to its energy matrix in the coming years and wants her company to play an important role in this transition.

Sources of Energy

The country’s energy matrix indicates heavy reliance on fossil fuels while renewable energy (with the possible exception of large hydropower) sources remain marginal. The current situation is critical as energy is the highest greenhouse gas emitting sector in Argentina.

Profiles of Leading Energy Companies:

YPF: The largest energy company in Argentina is YPF (Yacimientos Petroliferos Fiscales), a vertically integrated billion dollar company engaged in producing and providing petroleum, natural gas and petrochemicals. YPF was founded in 1922 as a state enterprise, but in 1993 YPF was privatized and bought by Repsol SA (a Spanish energy firm). However, in 2012 the company was ‘re-nationalized’ when the Argentinian government purchased the majority shares from Repsol. Today the company has operation sites across the country (e.g. Cuyana, Nequina, Golfo San Jorge, and Austral) and produces over 200 million barrels of oil equivalent annually. It is also operational in the neighboring countries of Brazil and Chile.

Pampa Energia: The second biggest company Argentinian energy scenario is Pampa Energía, a Buenos Aires based company founded in 2005 providing electricity to millions of Argentinians. Pampa is one of the major companies that may be shifting its focus towards renewable energy. Earlier this year Pampa bid to invest around $400 million dollars in renewable energy (mostly wind and solar). According to CEO Marcelo Mindlin, renewable energy is a ‘hot sector’ and his company wants to be a key player.

Source: Secretaría de Energía de la Nación, 2012