Page 4 - GLNG Week 33

GLNG COMMENTARY GLNG
Events in Argentina raise doubts about Vaca Muerta’s prospects
Recent developments may force a downward revision in production forecasts for the shale basin
PERFORMANCE
WHAT:
Enthusiasm about unconventional oil and gas projects has generated optimism about Argentina’s economy.
WHY:
This positive outlook appears less realistic in light of President Macri’s grim election prospects, a new fuel price cap
and questions about gas production growth rates.
WHAT NEXT:
Investors’ appetite for new exploration and development in Vaca Muerta is likely to diminish.
THE oil and gas sector has given observers of Argentina’s economy reasons for optimism in recent years. New projects in the Vaca Muerta shale basin have pushed production levels up, reducing the country’s dependence on imported fuels and lending support to export-oriented schemes such as Tango LNG. As a result, inter- national oil companies (IOCs) and other poten- tial investors have been showing greater interest.
is is a welcome development, especially in light of the current government’s struggle to re-orient the economy towards the market and away from the populist track followed by its immediate predecessor. But these shows of investor enthusiasm may be losing momentum.
The presidency
If so, the change may be related to an apparent shi in Argentina’s political winds.
Since his election in 2015, President Mauri- cio Macri has been generally friendly to business and keen on market-oriented initiatives. He has been able to boast of some successes, despite uctuations in the value of the peso and conten- tious negotiations with the International Mon- etary Fund (IMF) on a debt bailout. As recently as mid-July, there were signs that Argentina’s economy was improving and moving out of recession.
Within the last few weeks, though, Macri’s government has lost momentum. In ation rates have jumped upwards, while the peso has lost value against the US dollar, and Argentinians signalled their displeasure in the primary elec- tions held on August 11. ey gave 49.7% of their votes to the main opposition party’s candidature, headed by presidential candidate Alberto Fer- nandez and his running mate Cristina Fernan- dez de Kirchner, while the president’s ticket drew only 33.5% of the vote.
If Fernandez’s Justicialist Party can maintain support at this level, it will win the presidential election on October 27. (Under Argentinian law, candidates can win in the rst round of voting with a plurality, so long as they garner at least 45% of all valid votes cast.)
And if he wins, he is likely to roll back at least some of Macri’s market-oriented policies. is would probably cut into enthusiasm for new investment projects, though it might not have much impact on companies that have already signed and begun to implement contracts with the national oil company (NOC) YPF.
The policies
Current investors may face trouble on another front, though. Speci cally, one of Macri’s most recent e orts to bring the economy to heel has
Argentine President Mauricio Macri’s government has been losing momentum.
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w w w . N E W S B A S E . c o m Week 33 22•August•2019