In respect of power prospects Argentina remains one of the most underestimated countries of Latin America. Possessing an essential energy potential, Argentina continues to have considerable deficiency in own rather cheap energy. However, the country expects solving a problem with the help of foreign investments including Russian.
Argentina possesses rather developed and diversified fuel and energy complex (FEC). At the same time its characteristic is the key role which fossil types of fuel play, first of all, oil and gas, both in fuel and in power balance of the country. So, following the results of 2018 the general consumption of fuel in the country made 84 million tons of an oil equivalent. Thereof 57% accounts for a share of natural gas, 30% on oil and oil products, 4% on water resources, 2% on nuclear fuel, 4% on the renewables (RES), 1% on coal, 2% on other types of energy resources.
In 2016 the law which provides increase in participation of renewable energy sources in electricity generation from 0.4% to 20% in 2025 and 25% — in 2030 came into force. According to it the special Fund of development of RES which got support from The World Bank in respect of provision of guarantees to investments into the corresponding projects is created. The course on liberalization of the market of oil and gas, as well as on stage-by-stage refusal of subsidizing of consumption of gas and electricity became other important change.

Oil and gas sector

Argentina is the largest producer (about 45 billion cubic meters a year) and the consumer of gas, the second one after Mexico in Latin America. Meanwhile consumption of gas has the expressed seasonal nature here. It grows in cold winter months — from May to September and falls in warmer months — from October to April. By data for March, 2019, consumption for the last 12 months averaged 122 million cubic meters per day. It is expected that in the next winter months it will increase on average to 160-170 million cubic meters a day, or to 58-62 billion cubic meters in annual calculation. In the winter the country fills shortage of gas due to import of pipeline gas from Bolivia under the contract existing till 2026 and purchases of the liquefied natural gas (LNG) acquired generally in the spot market.
As for oil, Argentina takes the sixth place in Latin America on its production which in March, 2019 exceeded 500 thousand barrels per day (more than 25 million tons in annual calculation). The same month the country for the first time in recent years sent for export 489 thousand barrels of oil and de facto became its exporter again.
Let’s remind that during the long period Argentina was net exporter of oil and gas, but lost this status in the second half of the first decade of the 2000 years and was compelled to import hydrocarbons for satisfaction of requirements of domestic market. However as a result of the achieved success in development of nonconventional reserves of hydrocarbons the country at first stopped production falling and then resumed export of oil and gas. Since October, 2018 it sent the surplus of gas appearing during the summer period of low demand to Chile, Brazil and Uruguay under the terminated contracts; volumes of export averaged about 7 million cubic meters per day.
Argentina is among the countries having the largest resources of nonconventional hydrocarbons. By estimates of Management of power information of the USA, it takes the second place in the world on nonconventional gas with technically taken stocks in 28.3 trillion CBM and the fourth place in the world on nonconventional oil which technically taken stocks make 3.7 billion tons. Thus the proved reserves of traditional oil equal 288 million tons, gas — 420 billion cubic meters. The country reached powerful results in development of nonconventional fields of hydrocarbons, takes the third place in the world on volumes of production of slate oil and gas.

Reference-1: Power industry
Argentina generally satisfies its needs for electricity. By data on March, 2019, the general rated capacity of power plants of the republic reached 36 608 MW. Thereof a share of power plants on all types of hydrocarbon fuel made 63.6% (24 554 MW), nuclear power plants – 4.54% (1755 MW), hydroelectric power station – 29.24% (11 288 MW), wind power plants – 2.08% (804.2 MW), solar power stations – 0.54% (206.7 MW)

Power strategy

Power strategy of the country provides to double gas production in the next five years and to bring it in 2023 to 260 million cubic meters per day, and in 2030 — to 400 million cubic meters. A component of the plan is the program of replacement of import of gas in 2020-2023. It assumes refusal of import of pipeline gas and liquefied natural gas and achievement of the actual self-reliance gas due to own production by the end of 2023. Full refusal of import is to happen after the termination of period of validity of the contract with Bolivia at the end of 2026.
It is planned to begin gas export with 2019 under firm contracts — at first to neighboring countries during the summer period of decline in demand in domestic market, further — all the year round with an entry into the world markets. In particular, export to Chile is to average 10 million cubic meters a day in 2019, 30 million cubic meters — in 2022. To Brazil — 3 million cubic meters a day in 2019 and 30 million cubic meters — in 2025. Besides, in 2023 it is planned to begin export supply of gas in the form of LNG to the world markets of 40 million cubic meters per day, having brought this indicator in 2025 to 120 million cubic meters a day.
The same ambitious goals are set in the field of oil production. According to the plan it should double by 2023 in comparison with the indicators of 2018 and reach 1 million barrels per day, or 50 million tons a year, and to 2030 — to be tripled to 1.5 million barrels per day or 75 million tons a year. Export supply of oil has to make 490 thousand barrels per day in 2023 and grow to 895 thousand barrels in 2030.
Despite growth of participation of RES in power balance of the country, the plan does not provide essential decrease in a role of oil and gas as primary fuel and in generation of the electric power. So, gas share in consumption of fuel will decrease from 57% to 56% only on inertial and to 52% — on power effective to scenarios, oil — from 30% to 24.5% and 26% respectively. At the same time Argentina plans to refuse completely use of coal in electricity generation and to build new thermal power plants generally on gas which will force out fuel oil and the diesel.

Key projects

Key and largest energy project for Argentina is the program on development of oil and gas resources of a nonconventional formation of hydrocarbons Waca now of Muert which most part is located in the territory of provinces Neuquen and Rio-Negro. Now on a formation 31 projects which is at various stages of development are realized in total.

Reference-2: The main projects on production of slate oil on Waca Muert are Crous-de-Lorena — Serras Blankas with output at peak of 100 thousand barrels per day, Lome-Campana — 90 thousand, Bakhada-de-Palo — 70 thousand, La-Amarga-Chika and Bandurriya-Sur — 65 thousand everyone, Bakho-del-Choke — La-Invernada — 50 thousand barrels a day.

Reference-3: The largest projects on nonconventional (slate and dense collectors) gas are Aguada-Pichana-Este with a capacity of 29 million cubic meters of meters per day at peak of production, Fortin-de-Pyedra — 20 million, Aguada-Pichana-Oeste and Aguada-de-Kastro — 18 million, Aguada-de-la-Arena — 15 million, Serro-las-Minas — 13 million, El-Orejano and La-Calera — on 8 million cubic meters of meters per day everyone.

It is expected that the peak of investments into production projects on nonconventional hydrocarbons accounts for 2024-2026 when 10 billion dollars a year is invested in slate oil, on slate gas and gas condensate — 8 billion dollars.
Besides, the gas liquefaction plant can become the largest not only for Argentina, but also all Latin America the project. The plant will have six 5 million tons of LNG lines a year everyone. The first two lines are supposed to be put into operation in 2023, on two lines — in 2024 and 2025. The volume of investment is 18 billion dollars, the maximum need for gas — 120 million cubic meters per day. Operating expenses are estimated at 0.65 dollars/MBTA, liquefaction cost – 2.5-3.6 dollars/MBTA, transportation costs in the territory of Argentina – 0.75 dollars/MBTA, on the route Argentina — the Asian markets – 1.6 dollars/MBTA. With completion of construction of plant Argentina expects to take the fifth place in the world market of LNG from 5% of a share after the USA, Qatar, Australia and Russia.
Other important projects are two new gas pipelines intended for transportation of additional volumes of gas from nonconventional fields to the centers of its consumption. The first of them — with a capacity of 60 million cubic meters per day from gas fields in the province Neuquen to the port of Buenos Aires where construction of plant on gas liquefaction is planned. The demanded investments are 800 million dollars, input term is — 2021. The second gas pipeline is Neuquen Rosario with a capacity of 35 million cubic meters per day assumes delivery of gas in the main center of consumption of gas in Argentina — the province Buenos Aires. The volume of the demanded investments into the gas pipeline makes 1.65 billion dollars, commissioning — 2022. It is supposed that both gas mains will be built at the expense of private investors’ money.


There are many large international companies in Argentina. Conditions of their work do not differ from conditions for the Argentina companies as the legislation does not do distinctions in legal status of national and foreign legal entities.
From among the American companies the leading role in Argentina is played by Chevron which is a partner of the Argentina YPF with 50% of a share in the republic’s first project on development of a field of slate oil of Lome-Campana. Now production volume on the field exceeds 2.5 million tons of oil a year. According to the available plans for the forthcoming fifth anniversary, Chevron and YPF intend to drill about 300 new wells, annually to invest 680 million dollars and to bring production to 6 million tons of oil by 2023. Chevron is also a participant of two other projects on nonconventional hydrocarbons in Argentina — El-Trapial (100% share) and Narambuyena (together with YPF). Both sites are at a geological exploration stage. In 2019 the American company plans to invest 200 million dollars and to drill 8 wells on the first of them, and also 100 million dollars and 4 wells — on the second.
ExxonMobil works at seven projects on nonconventional hydrocarbons on a formation Waca of Muert. Total amount of investments of the company makes 850 million dollars. ExxonMobil took part in the Argentina’s first tender for development of the shelf and together with Qatar Petroleum acquired the right for carrying out prospecting works on seven offshore blocks.
The main project in Argentina of one more American company Dow Chemical is a field of slate gas El-Orejano. YPF acts here as its partner with 50%. Now here 4.8 million cubic meters of gas a day are extracted. According to the available plans the maximum volume of production is to make 8 million cubic meters per day. Gas from a field is intended generally for deliveries to controlled Dow Chemical gas-chemical plant in the Argentina seaport Baiya-Blanca.
Recently in the country activity of Shell was considerably stirred up. At the beginning of May, 2019 the management of Shell had a meeting with the president of Argentina Mauricio Macri and during the meeting the plans to invest 3 billion dollars in production projects of Argentina were confirmed. Three fields of slate oil will become the main of them: Koyron-Amargo-Sur-Oyeste, Syerras-Blankas and Crous-de-Lorena. The company plans to increase production on three blocks to 70 thousand barrels per day by 2024. Shell also took part in the first offshore tender of Argentina and received two blocks on a continental shelf in development.
Also active participant of the Argentina oil and gas market is the German company Wintershall. It extracts natural gas both on the land and on the shelf of the country. Production volume on offshore fields Karina, Ariyes and Vega Galaxies, in which Wintershall works in partnership with Total and Pan American Energy (PAE), makes 20 million cubic meters per day.
On the land of Argentina Wintershall conducts production of traditional hydrocarbons on three sites: San Roque, Aguada Pichana and Bandurria. All three blocks are also of interest in respect of development of nonconventional stocks of a formation Waca of Muert.
Waca Muerta Wintershall is engaged in investigation of completely nonconventional resources of a formation in partnership with the regional Argentina company Gas y Petroleo del Neuquen (GyP) on a perspective on slate gas site Aguada Federal.
Commenting in April, 2019 on activity of Wintershall in Argentina, the CEO of the company Mario Meren declared need of revision of investment plans in connection with the changes made by the government to the program of payment of the stimulating subsidies for the gas companies «Plan Gas». He criticized the power policy pursued by the government of the president Mauricio Macri and emphasized that production of hydrocarbons in Argentina is so complicated by such factors as lack of infrastructure and high costs of production, and change of rules of the game for the participants of the market even more aggravates the situation.
As a result Wintershall decided to concentrate the activity in Argentina on oil production, besides the management of the company postponed making decision on large-scale development of the blocks Aguada-Federal and Bandurriya-Sur located on a formation Waca of Muert until the end of 2019.
Mario Meren noted importance of the account the government of Argentina of interests of investors and added that the investments planned earlier will be sent now to other regions as the authorities of Argentina were not able to provide observance of accurate rules for the oil and gas companies. In particular, Wintershall intends to refuse investments into development of the offshore block the Phoenix in the pool Austral. The cost of this project has been estimated earlier at 1 billion dollars.
The French company Total has been working at the Argentina market since 1978. Now it is a participant of six projects on gas production on traditional fields on the land and the sea coast of Tierra Del Fuego via the Total Austral subsidiary. Total extracts on these fields about 20 million cubic meters of gas per day and is one of the largest suppliers of natural gas on the Argentina market. The company exports part of the production to Chile. It is also a participant of a number of projects, important for Argentina, on nonconventional oil fields and gas.
The Malaysian company Petronas together with YPF realizes one of the largest projects of slate oil of La-Amarga-Chika on a formation Waca of Muert. At a pilot stage of the project about 550 million dollars were already invested in development of the block and 33 wells were drilled. In total within development of this field investments are planned for the total amount of 7 billion dollars and bringing volume of oil production to 75 thousand barrels a day by 2030.
BP works in Argentina through the Pan American Energy joint venture (JV) in which it possesses 60%. Other 40% owns the Bridas Company (a joint venture of one of the richest families of Argentina — Bulgeroni from the Chinese CNOOC). PARADISE is the large gas company in Argentina. The main gas field of this joint venture is Serro-Dragon on whom the company extracts 8.5 million cubic meters of gas per day.
Besides, PARADISE Aguada-Pichana and Bandurria in the pool Neuquen is the partner of YPF, Wintrshall and Total in development of gas fields San Fate. The company achieved noticeable results in development of reserves of gas of dense collectors (tight gas). It possesses Lindero Atravesado’s field in the pool Neuquen which is at the stage of pilot development.
Until recently mining works on the shelf of Argentina were conducted only in the pool Austral-Magalyaes in the extreme South of the country. YPF conducts here production of natural gas (2.4 million cubic meters per day) on 56 wells together with the Chilean national oil company ENAP. Besides, YPF together with the Total, Pan American Energy and Wintershall companies extracts gas on a field Vega Galaxy. By estimates, production on Vega Galaxy can make 10 million cubic meters of meters per day at peak.
At the end of April, 2019 for the first time for the last 15 years the tender for carrying out search works for oil and gas on the shelf took place in Argentina. On the tender 38 blocks were exposed, thereof 18 received offers from 13 participants. Nine companies have been known already in the oil and gas market of Argentina — Qatar Petroleum, Equinor, ExxonMobil, Total, YPF, Shell, Pluspetrol, Tecpetrol and Wintershall and also four new in the Argentina oil and gas branch — Mitsui, BP, ENI and Tullow became winners of the auction.

Expansion of China

According to the Argentina mass media, the total amount of the Chinese investments into the energy sector of Argentina during the period since the beginning of the 2000s to the present made 5.7 billion dollars. The Chinese-Argentina cooperation in the power sphere which was roughly developing in the period of board of spouses Kirchner had been a little slowed down recently. China invested in oil and gas projects, construction of hydro-and wind power plants. However so far it is hardly possible to call expansion of China on the Argentina fuel and energy market too successful.
In 2010 the Chinese Sinopec got for 2.5 billion dollars oil and gas assets in Argentina of the American Company Occidental Petroleum. Acceptance on itself operatorship on projects the majority from which provides carrying out mining works on fields with the falling production, showed that Sinopec was seriously mistaken in an assessment of assets of Occidental Petroleum and tendencies of development of the Argentina energy sector. According to the experts, losses of the Chinese company by the end of 2015 made about 2.5 billion dollars. Sinopec offered these assets for sale. Now any investments into projects are frozen. Assets significantly fell in price and are estimated within 750 million — 1 billion dollars.
Besides, in June, 2016 Argentina and China signed the memorandum of understanding concerning construction of two nuclear power plants «Atucha-4″ and «Atucha-5″ with financing from the Chinese banks. The project provided the beginning of construction of the first nuclear power plant in the first quarter 2017, the second — in the II quarter 2019. However the parties have not managed to agree finally yet.
The most considerable energy project in the field of RES is construction with Chinese financing of the solar power station of 300 MW «Kauchari», the largest in Latin America, in the Argentina province of Jujuy. 85% of investments from 400 million dollars are provided by Export-import Bank of China. The soft loan is issued for 15 years at the rate of 3% per annum.

Russia in Argentina

The Russian-Argentina cooperation in fuel and energy sector which was intensively developing at the time of management of Cristina Kirchner in Argentina was significantly slowed down with coming to power Mauricio Macri.
Activization of interaction began in 2012, after a meeting of presidents Cristina Kirchner and Vladimir Putin. After that the Gazprom Group received an invitation to take part in development of oil and gas resources of Argentina. Detailed negotiations began. In parallel during 2013-2016 possibility of construction by the Russian company «Inter RAO» of hydroelectric power station of «Chiuido» worth 2.6 billion dollars was considered. The VTB bank had to provide 85% of financing. And during official visit to Russia of the president Cristina Kirchner in April, 2015 a number of the documents concerning development of the Russian-Argentina interaction in that and number and in the energy sector was signed. Among them is the memorandum of understanding which defines bases of cooperation of the parties in construction in the territory of the republic of the power unit of the nuclear power plant of the Russian design with power up to 1200 MW.
However the new president of Argentina Mauricio Macri declared a need of revision of the contract for examination, whether really Russia offered the most favorable conditions of cooperation in nuclear power industry in comparison with other countries. After that the negotiations on construction of hydroelectric power station of «Chiuido» with participation of «Inter RAO» and VTB reached deadlock: the parties did not come to a consent concerning an interest rate under which the Russian bank had to provide financing of the project.
Analysts expect sharp break in the Russian-Argentina cooperation after elections of the new president of Argentina in October, 2019. Let’s remind the first round of national elections took place in the country on August 11. During it the incumbent president Mauricio Macri lost to the main opponent, the friend of the late spouse of Cristina Kirchner — to Alberto Fernández. And even if Macri remains in power, the difficult social and economic situation in Argentina makes foreign investments, including Russian, more and more attractive.

The director of representation of PAO Gazprom in the Federative Republic of Brazil Shakarbek Osmonov answers:

- How do you estimate prospects of development of power cooperation of Russia and Argentina, including possibilities of an entry into the Argentina market of Gazprom Group?

- If to speak about joint oil and gas projects, their active discussion began in 2012, after Vladimir Putin’s meeting with Christina Elisabeth Fernández de Kirchner within the summit of «the group of twenty» in Los-Kabos. Then, the same year, negotiations of the Chairman of the board of PAO Gazprom Alexey Miller with the Chief Executive Officer of YPF Miguel Galluchio took place. At the meeting prospects of the Russian-Argentina cooperation in the gas sphere were discusse, including — by the way, at the initiative of Argentina party — possibilities of joint development in the territory of Argentina of gas fields, including deposits of nonconventional gas were considered.

For detailed studying of this question at the end of 2013 visit to the republic of specialists of Gazprom took place. And in the fall of 2014 the Russian company concluded the Agreement on confidentiality which concerned granting to Gazprom by the Argentina party, according to earlier reached agreements, access to «the room of data» on oil and gas projects in the province Neuquen with YPF.
In spring 2015 PAO Gazprom and YPF signed the Memorandum of cooperation then created Joint coordinating committee for studying of opportunities of development of the directions planned in this document concerning first of all interaction of the companies in the territory of Argentina. I will remind the main of them, in particular, there were a search, an assessment and the subsequent implementation of new projects in the field of geological exploration, production and transportation of hydrocarbons; design, construction and development of projects in the field of power; construction, repair and modernization of the infrastructure connected with transportation of gas and oil; search and an assessment of projects for use of gas motor fuel.

In the fall of the same year in development of this document of the company concluded the Framework agreement on cooperation in projects of exploration and production. And in February 2016 there was signed the Memorandum of block Estasion Fernández Oro (EFO) choice as the potential project for an interaction intensification. Geological reserves of EFO gas were estimated for the beginning of 2018 at a little more than 49 billion cubic meters. The saved-up production for the beginning of 2019 made about 6.3 billion cubic meters of gas and a little more than 1 million tons of condensate.
In January 2017 the Argentina party reported about unacceptability of a number of offers of Gazprom Group. At the same time for minimization of financial consequences of design risks YPF suggested the Russian company to consider at the first stage possibility of decrease in share in the project to 20-40% with probability of its increase to 50% in case of confirmation of target scenarios of the project. Thus the Argentinean Company was not against implementation of the organization of management of activity of joint venture in these conditions on parity basis, regardless of Gazprom share in the project and solutions of key questions based on unanimous decision of participants.

At the initiative of the Argentina party in November of the same year at the Forum of the countries — exporters of gas in Bolivia Miguel Gutierrez and Andriy Fick’s a meeting took place at which the Argentina party confirmed intention to involve Gazprom Group in cooperation in development of a concession site of EFO. By then there were new data on EFO which, according to statements of the president of YPF, removed the risks of the project designated by earlier Russian company.

In 2018 a number of meetings between YPF and Gazprom International for the purpose of updating of these data and to removal of the project on a final stage of decision-making were held. And at the moment the parties are at the final stage of consideration of a question of entry of Gazprom Group into this project. However certain instability in negotiations this year was brought by prospect of change of the power in Argentina. Perhaps, stabilization of the political situation in the republic will allow resolving at last this issue and dotting all the dots.
Besides, Gazprom continues discussion with YPF of possibility of cooperation in construction in Argentina of underground gas storages and low-tonnage plants on liquefaction of natural gas, as well as prospects of deliveries to the republic of the liquefied natural gas.