Page 5 - LatAmOil Week 29

LatAmOil COMMENTARY LatAmOil
 Either way, there appears to be enough dissatis- faction with the current policy on royalties that more debates are likely to take place before oil begins owing.
Sovereign wealth
A second policy challenge stems from argu- ments about how best to use and distribute future hydrocarbon revenues.
Guyana began laying the groundwork for answering this question in 2017, when it adopted a law that provided for the establish- ment of a national sovereign wealth fund and the administrative structures needed to support it. Its plans to set a portion of future oil revenues aside in this fashion have won some acclaim. In late 2018, the US-based National Resource Gov- ernance Institute (NRGI) described the Sover- eign Wealth Fund bill as well-designed. It also praised o cials in Georgetown for their e orts to consult with the public before proceeding.
NRGI also argued, though, that the legisla- tion did not impose su ciently explicit limits on the amounts of money that the government could deposit into or withdraw from the fund or on the fund’s ability to borrow money using future oil revenues as security. It also urged Georgetown to adopt stricter rules governing the investment of the money going into the fund.
Guyanese Finance Minister Winston Jordan shrugged o these criticisms. He said in Novem- ber 2018 that he was broadly satis ed with the Sovereign Wealth Fund law and believed the policy would allow the country to save a su - cient portion of its earnings to maintain eco- nomic stability when the oil wells ran dry. He
also said that the country ought to follow its own path, rather than be guided by outside experts. “At the end of the day, I think we, as Guyanese, musttrytofashionsomethingthatisforus,”he remarked.
More recently, though, Jordan has acknowl- edged that Georgetown still has work to do. Earlier this month, he noted that the govern- ment was committed to distributing a portion of future revenues among the citizens of Guyana so that the whole country could reap the bene ts of investment in the oil sector. He also indicated, though, that the mechanism of this distribution had not yet been de ned. He voiced scepticism of proposals for using oil revenues to fund a uni- versal basic income (UBI) programme but said that the government might be willing to trans- fer funds directly to disabled, impoverished or elderly citizens.
More debate ahead
Under these circumstances, there is likely to be more debate about the Sovereign Wealth Fund law before Guyana achieves rst oil.
is is not a bad thing, as the country ought to have a plan in place for how to handle oil revenues in place before it begins collecting the money. (Likewise, it ought to make decisions about where it wants to go with respect to roy- alty rates.)
Even so, officials in Georgetown should devote most of their e orts to the creation of bene cial new policies. If they do, they will have a better chance of resolving the two challenges detailed here while also creating a favourable investment climate. ™
Argentina’s floating flexibility
The use of marine LNG infrastructure has allowed the South American country to make the switch from importing gas to exporting it
WHAT:
Rising production at the Vaca Muerta shale elds has reduced Argentina’s need for gas imports.
WHY:
The quick deployment of a oating LNG unit has al- lowed the country to take advantage of seasonal supply gluts.
WHAT NEXT:
Argentina’s intention to halt LNG imports entirely by 2020-21 looks viable..
LNG’S ability to serve flexible supply and demand is becoming an increasingly important part of the energy mix – and nowhere can this be seen more clearly than in Argentina. The country has historically imported gas both by land (that is, by pipeline) and by sea (that is, in the form of LNG) in order to meet domestic demand.
But it is now moving in the other direction. On June 6, Argentina exported its rst cargo of LNG from the Tango LNG facility.
Hail shale
THE main factor underlying this switch is unconventional gas development in the Vaca Muerta Basin. is shale formation, which cov- ers 34,800 square km in Neuquen, Mendoz, La Pampa andRio Negro Provinces, holds around 8.722trln cubic metres of gas in technically recoverable reserves, as well as 16bn barrels of
crude oil and gas condensate.
As in the US, these vast reserves of shale gas
have been a game-changer for Argentina. ey have more than compensated for production declines at the mature conventional elds that allowed the South American country to be a net exporter of natural gas between 1990 and 2007. As a result, they have helped push Argentinian gas production up from a low of around 34.5bn cubic metres (bcm) in 2014 to 39.4 bcm in 2018.
Vaca Muerta is a long way away from reach- ing its peak. Thus far, only 4% of the basin’s acreage has come under development, and this small slice of the total saw production levels top 28.32mn cubic metres per day in Decem- ber 2018. As a result, Vaca Muerta already accounts for no less than 23% of Argentina’s gas production.
Nevertheless, the ow of gas from the shale elds is not constant.
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Week 29 24•July•2019 w w w . N E W S B A S E . c o m
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