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(Bloomberg) — To get to Marcelo Mindlin’s workplace at his workplace in downtown Buenos Aires, visitors will have to walk past a giant metal ring — a cross-section of an oil pipeline.
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The piece of steel embodies Mindlin’s and Argentine leaders’ perspectives on the long-term of energy: Even if electrification accelerates, fossil fuels will be needed for decades.
Argentina is home to the world’s second-largest shale fuel deposit in the Vaca Muerta, or Vaca Muerta, formation in Patagonia. Mindlin, 59, who founded Pampa Energia SA in 2005 as the country recovered from a monetary and economic implosion, needs to get out as much as possible.
“We believe that herbal fuel is the fuel for transition,” Mindlin said recently in an exclusive interview in his presidential suite with surprising perspectives of the Rio de la Plata estuary. “I don’t think the world can move to green energy in 20 years. It’s a fantasy.
Pampa’s bet on fossil fuels comes as Argentina prepares for a major presidential election on Oct. 22. The front-runner, libertarian Javier Milei, denies that climate change is caused by human activity. Its two main rivals also extract oil and fuel. key to strengthening the country’s fragile industrial balance.
Pampa’s shares have rallied over the past four years as a leftist government, best known for discouraging investors, has put in place policies to prop up Vaca Muerta in a bid to triumph over a series of false dawns and introduce Argentine shale to global markets. once and for all.
New York-traded stocks have rallied to $41 since falling to around $10 after the coronavirus pandemic compounded the fallout from Argentina’s failed experiment with market-friendly policies, adding to the deregulation of energy markets, Mauricio Macri.
Mindlin is very pleased with the innovative way the pipe section near his office was welded. The automated process recently helped his construction company, Sacde, and its partners install Argentina’s first giant gas pipeline in decades in a matter of months.
Today, Pampa, which Mindlin has turned into one of Argentina’s top resource-rich energy producers, is spending big money to fill the 573-kilometer (356-mile) pipeline and bring shale fuel to cities and shopping centers across the country. Its well investments will increase 52% this year to nearly $1 billion.
This kind of expansion is tricky in Argentina, where inflation hovers around 138%. Energy corporations like Pampa are hit hard because revenues tied to a tightly controlled exchange rate struggle to keep up with emerging costs, especially the salaries that Pampa has to review each year. and every two months.
Mindlin said the next government wants to make fighting inflation its number one priority, as it is the only way to gain space for further reforms. He then insisted on exploiting the wealth of shale: “In our own regions, we can drill 2,200 wells and so far we have only done 40, that is, 2%, and the scenario is more or less the same everywhere. “
Oil companies, from Chevron Corp. to local groups such as YPF SA, say natural gas is best if it is found to meet the world’s growing energy demand temporarily and cleanly.
“We want to locate opportunities to make the energy transition orderly; we try to do it overnight,” YPF Chief Financial Officer Alejandro Lew said at a recent Bloomberg conference.
Argentina has a vested interest: it suffers from a perpetual shortage of hard currency that leaves it swinging from crisis to crisis. Becoming a net exporter of natural gas, rather than an importer, will help solve the problem.
For now, exports are modest and transit through pipelines to neighboring Chile. Brazil is a long-term goal. Meanwhile, Pampa, through its stake in the natural fuels company TGS SA, is the structure of Argentina’s first liquefaction plant for offshore shipments.
In addition to generating much of Argentina’s natural gas, Pampa transports much of it to power plants, making it one of the country’s largest electric power producers.
Today, Mindlin’s 17% stake in Pampa is worth about $360 million, based on the market price of the company’s shares traded in New York in the face of local currency distortions. There is also the Sacde and an investment in the insurance company Origenes, which specializes in retirement.
It’s an empire of national power that Mindlin has been building for about two decades, since separating from her real estate husband Eduardo Elsztain, and which she boosted in 2016 by acquiring assets from Brazil’s Petrobras.
But it’s an empire with a family atmosphere. His brother Damián is Marcelo’s spouse in all lines of business, while his son Nicolás was appointed CFO of Pampa two years ago. CEO Gustavo Mariani, 53, was a teenager when he started directing at Mindlin.
To be sure, Pampa has invested in wind farms after Argentina set a legislative target for the next decade of meeting 20% of energy demand with renewable resources by 2025. In addition to having world-class wind turbines, the country is home to the second-largest lithium deposit, key to battery manufacturing.
The rate of renewable strength was around 14% last year. But progression has slowed in recent years due to bottlenecks in financing (Argentina imposes strict restrictions on money flows) and transmission. Even if foreign lenders were to invest in new wind or solar projects, there wouldn’t be enough high-voltage power lines for them.
Pampa’s ability to produce renewable energy pales in comparison to its gas-fired power portfolio. It even recently financed the acquisition of a stake in shale oil by swapping one of its wind farms as part of an asset swap. And unlike other local drillers, Pampa is reluctant to get into lithium because it doesn’t need to spread its resources too thin.
“If I had to pass up an opportunity, I would weaken,” Mindlin said. “We have a lot to do in Vaca Muerta. “
–With those of Caroline Salas Gage and Daniel Cancel.
(Updates with more main points on the renewable energy outlook in paragraph 20. A previous edition corrected the percentage gain in the chart title. )
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