Overview
Given that Argentina is the largest natural gas producer and the fourth largest oil producer in South America, it may sound surprising that the country has become a net importer of natural gas, oil, and refined products.
Latin America's third-largest economy relies heavily on natural gas and oil, which comprise 51% and 35% of the primary energy mix respectively.
The drop in oil prices in the end of 2014 relieved consumers in the country, but presented budgetary and investment challenges. The import and refining capacities in Argentina are at their maximum, catching up with rising consumption. Oil and gas revenues in the state budget have diminished significantly: in 2014, they accounted for about 3% of the budget revenues, as opposed to over 8% in 2008.
Shale gas
Whether the recently discovered vast shale oil and gas reserves will open up new opportunities for domestic and foreign investors is yet to be seen. Argentina has the second-largest technically recoverable shale gas reserves in the world (estimated at 22.7 trillion cubic metres) and the fourth-largest technically recoverable shale oil reserves (27 billion barrels). The Vaca Muerta formation in the Neuquina Basin is the most important field for shale oil and gas exploration. According to executives from state energy company YPF, developing 15% of Vaca Muerta would be sufficient to stop the need for energy imports. Foreign companies have also shown interest in developing the shale reserves, and have committed first investments in exploration and drilling rights. They have been encouraged by recently-introduced government policies that promise more fiscal and regulatory stability in the country.
Nevertheless, analysts and observers are still cautious of high inflation rates, weak economic activity, and political uncertainty. Argentina scores low in country risk assessments and business climate ratings.
Renewables
Argentina has a legally binding target to achieve 8% share of renewable energy in the final energy consumption by 2017 (Law 26190, 2006). Even though related regulations have introduced incentive schemes for the development of renewable energy projects, the share of renewables in the energy mix to-date, excluding hydropower, barely reaches 1%. Wind power potential in Argentina is one of the highest in the world and remains largely untapped.