In the midst of the dollar shortage due to the drought, the energy sector, which demanded a strong influx of foreign currency in 2022 due to the war in Ukraine, will bring relief to the Central Bank this year. In the first seven months alone, energy imports dropped US$3.5 billion compared to the same period of the previous year. The energy trade balance, the difference between exports and imports, will end 2023 in equilibrium and is expected to deliver a strong surplus in 2024, something that has not happened for more than a decade.
This is according to the monthly report of consulting firm Economía y Energía, headed by economist Nicolás Arceo. Fuel imports climbed to U$S9 billion during the January-July 2022 period after the war in Ukraine raised energy prices worldwide. This year, during the same period, imports amounted to US$5.5 billion.
The report highlights the reasons for this drop. “The decrease in worldwide energy prices, improvements in water generation and electricity imports from Brazil were critical factors in this process.” Regarding imports, the greatest drop was in diesel fuel: while it accounted for US$3.4 billion in the first seven months of 2022, for this year it was US$1.5 billion.
“The more than U$S1.9 billion contraction in diesel imports is due to a lower thermal dispatch, the use of LNG instead of diesel due to the modification of relative prices between these products, and the fall in domestic demand as a consequence of the drought that affected the agricultural sector,” said the report.
There was a slight decrease in exports. In the first seven months of 2022, energy exports amounted to US$4.5 billion, while this year they fell to almost US$ 4.4 billion. “The US$134 million reduction is a consequence of the decrease in international prices. The volume of oil exports increased by 27%, but the total value of such exports decreased by 4% due to the contraction of international prices.”
Energy trade in balance
The report estimates that imports in all of 2023 will amount to US$7 billion, almost half of the previous year. This figure is due to the fact that Enarsa has already made all tenders for the purchase of LNG tankers for this year. In total, 44 vessels were awarded, although four cargoes planned for the months of July and August were not finally acquired due to the high winter temperatures.
Regarding exports, the estimate is that they will end 2023 at almost US$6.8 billion. This would be 20% less than last year: although oil and gas sales abroad increased, there was a strong drop in international prices.
The report thus projects 2023 will end with energy trade “almost in balance,” meaning that the US$4.3 billion deficit of 2022 will be reversed. The outlook is more encouraging for the next government. “If hydrocarbon production maintains its expansive trend, the sectoral trade balance through 2024 should reach a significant surplus after more than a decade of structural deficit,” says the report.
The Energy Secretariat led by Flavia Royón celebrated the latest hydrocarbon production data. In July, oil production reached 616.8 thousand barrels per day, a 6.5% year-on-year raise. In the year-to-date, production growth amounts to 7.1%. “The first half of the year was the best since 2009,” said Royón. In the Neuquina Basin alone, production rose 13.3% year-on-year for the accumulated January-July period.
In any case, the Economía y Energía report highlights the impact the limitations in the transportation capacity for crude oil has had. “The lack of crude oil transportation capacity from the Neuquina basin limited production growth in 2022. It was expected that the reactivation of the Trans-Andean Oil Pipeline (OTASA) and the possibility of exporting crude to Chile would allow a significant growth in production. The beginning of crude oil exports to Chile in May has not yet translated into an increase in production levels; on the contrary, production has maintained a slightly downward trend since March of this year.”