Fitch: Argentine Government Needs to Reduce Energy Market Intervention
"In order to entice more private investment in Argentina's energy industry, the oil and gas market will need clear and credible signals that the government will either stop or significantly reduce intervention, mainly through price controls, subsidies and export bureaucracy," said Lucas Aristizabal, Senior Director. "Argentina would also need to cut the sector deficit and aim to make the industry self-sustainable."
Since the economic crisis in the early 2000s, Argentina's electricity reserve margin has shrunk five-fold - from a significant oversupply position to a moderate reserve margin in the mid-30% range.
Domestic oil production declined by 12% to 637,000 barrels per day (bpd) in 2015 from 839,000 bpd in 2005. The decline in natural gas production was steeper, with output of 1.28 trillion cubic feet (tcf) per year reported in 2015 compared with 1.61 tcf in 2005, a 20% decline. During the same time period, gas consumption increased by approximately 18% to 1.68 tcf from 1.43 tcf a decade ago.
The hydrocarbon challenges for Argentina include dismantling energy price schemes, export controls, and increasing the stability and predictability of payments from CAMMESA (Argentina's wholesale power administrator) for gas consumption.
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