Argentine energy sector expected to be major contributor of foreign currency in 2024

After operating at a deficit for the past decade, it is estimated the sector could end next year with a US$3,5 billion trade surplus

Economy Minister and Unión por la Patria (UxP) presidential candidate Sergio Massa says that 2024 will be a better year in terms of foreign currency. In addition to the end of the drought in the agricultural sector, the energy sector, which for the last decade has operated at a deficit in Argentina, is also expected to add dollars.

According to consulting firm Aleph Energy, — associated to Ecolatina —, while the 2022 energy trade balance ended with almost US$4,4 billion in deficit, the balance is expected to end this year in near equilibrium. “Part of this is explained by cheaper international prices and lower fuel demands in the agricultural sector”, the consulting firm says.

The sector is expecting a novelty for 2024: a base scenario with an energy trade surplus of US$3,5 billion, “a result that would improve year by year, reaching US$24,4 billion in 2031 and stabilizing around US$29,2 billion a decade later.”

Estimates made by Aleph Energy engineer Daniel Dreizzen show that liquified natural gas imports will amount to US$1,78 billion in 2023. Last year, they were US$2,25 billion. Diesel imports, which amounted to US$4,65 billion in 2022, will be US$2,4 billion this year. Imports from Bolivia also fell, from US$1,7 billion to US$945 million.

Improvements for 2024 are mainly due to “larger oil and gas transports, either already completed or in progress.” Oil exports are expected to increase from US$3,4 billion to US$5 billion. Furthermore, Dreizzen clarifies that “each extra molecule Vaca Muerta produces potentially means more dollars, either for exports or foreign currency savings.” Thanks to the Néstor Kirchner gas pipeline, imports of liquified natural gas are expected to drop, from US$1,8 billion this year to US$501 million in 2024.

Factors for take-off

Ecolatina highlights that the fact that the sector will once again become a net contributor of foreign currency will help “alter the country’s growth pattern and support macroeconomic stability.” It will have a direct impact on production and employment, as well as an indirect one on the “possibility of altering payment balances, expanding exports and reducing dependence on agriculture, which means lowering dependance on climate and international prices of agricultural commodities.”

However, the consulting firm also states that there are critical factors that need to be met in order for the sector to reach its full potential.

“In macroeconomic terms, a stabilization of the economy that allows lowering the cost of financing, a normalization of financial operations (remission of profits and dividends, as well as exchange rate unification) and commercial operations (import of drilling/fracking equipment and spare parts), complemented by prices and tariffs that retribute production costs, as well as stable legal and regulatory frameworks that favor long-term planning and investments,” reads the report.

They also commented on infrastructure. “It will be essential to address the necessary infrastructure works needed to guarantee production transport and potentially export it to other markets. In the short term, completing the second section of the Néstor Kirchner Pipeline and reversing the Northern Gas Pipeline would allow for natural gas to be exported to neighboring countries such as Chile, Brazil, and Bolivia, considering the latter’s production is declining.” 

The report, however, issued a warning. “Reaching a good outcome in bilateral negotiations with Bolivia will be important if exports to markets such as Brazil are to be made, at least in the short term, since Bolivian pipelines will have to be used.”

Originally published in Ámbito


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