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Latin America has a long history of resource nationalism, especially when it comes to oil, and since the end of World War II, this has had a significant deterrent effect on the large foreign powers seeking to invest in the region’s vast hydrocarbon outlook. The greatest geopolitical threat and emerging instability in Latin America. Argentina is a country that, less than a decade ago, made headlines for all the reasons after nationalizing its incorporated oil company. The Latin American country is regarded as an out-of-the-peer state among money markets. investors after having breached their external debt nine times. The nationalization of YPF in 2012 sent shock waves to the ranks of already nervous offshore power companies, which were looking for the vast hydrocarbon prospect in the hands of Argentine shale Vaca Muerta.
A rapidly crumbling economy, declining fiscal resources, and crushing sovereign debt combined with hyperinflation and a rapidly devaluing currency make it important for the central government to exploit Argentina’s significant oil wealth. Buenos Aires sees the Dead Cow, which is compared to the prolific shale Eagle Ford While Vaca Muerta, according to the US EIA. The U. S. comprises 16 billion barrels of technically recoverable shale oil and is the world’s largest herbal shale fuel tank, this possibly wouldn’t be the Panacea the central government believes it is. A key challenge is that to fully exploit Vaca Muerta requires abundant capital, generation and wisdom that can only come from offshore power companies. Many continue to see Argentina and its erratic policies with wonderful mistrust, especially since the return of a Peronist president.
Since the October 2019 general election, in which Peronist candidate Alberto Fernández defeated outgoing pro-enterprise president Mauricio Macri, fears have arisen that oil nationalism will resurface in Argentina. This, with the appointment of former President Cristina de Kirchner, the architect of the nationalization of YPF in 2012, as vice president has sounded the alarm among oil corporations and foreign investors Related: the richest men in the world continue to bet billions on YPF power, privately owned but former national oil company, privatized in 1993 through then-President Carlos Menem , the Spanish power company incorporated Repsol in spite of everything obtaining a primary stake of 57% in 1999.
After two decades of net energy exporters, a combination of declining oil production and expansion in energy consumption made Argentina a net energy importer in 2011. As a result, the crisis-prone Latin American country recorded its first deficit in the energy industry since 1987. it has put great pressure on the already fragile economy and further weakened the already fragile fiscal position of the central government, resulting in a fall in GDP expansion, which expanded to 4. 8% in 2011, nearly part of the 9% recorded a year earlier. Economic deterioration combined with a slowdown in oil production and a steady increase in energy imports, coupled with Imports of Herbal Fuels from Bolivia, led Kirchner to renationalize YPF as a solution. YPF’s majority stake in Repsol.
The justification for this resolution is simple, as the Argentine government considered that Repsol had not provided enough capital to YPF to enable it to restart oil field exploration and progression activities with the aim of expanding Argentina’s oil reserves and energy production. exploiting the vast oil reserves of the Vaca Muerta formation, which buenos Aires says would solve its economic problems.
The threat of a resurgence of oil nationalism in Argentina is further amplified through the consequences of the COVID-19 pandemic. Some economists expect a record economic downturn for Argentina, and expect GDP to fall to 12 according to the penny in 2020, consistent with 11. 8 consistent with the 2002 cent contraction.
Investments in Argentina’s electricity sector are drying up: falling oil costs in March 2020 forced oil corporations to cut their capital expenditures and close unprofitable wells. Oil production fell dramatically to an average of 469,374 barrels consistent with July 2020, 7% less than the equivalent consistent with the year 2019 Natural fuel production also declined significantly, wasting 12% year-over-year at just under 798,000 barrels of oil equivalent.
Source: EIS data from the Argentine and US governmentsBut it’s not the first time
Knowledge of 2020 is the average from January 1st to July 31st, 2020.
While drilling activity is used as an indirect measure of activity in argentina’s oil field, it is concerned that the number of operational rigs has declined dramatically since 2015.
Source: Baker Hughes and EIA from the U. S.
As you can see even before the COVID-19 pandemic, the number of platforms was drastically reduced to 49 through the end of February or 26% less than the previous year and less than part of the 106 trading platforms for that month in 2015.
Even President Fernandez’s guarantees, as well as his management applying a reference value of $45 in line with Brent’s barrel, can take years for Argentina’s oil industry to recover. Buenos Aires has done little to allay fears that, as Argentina’s economic crisis deepens, the government will not take similar steps to secure the supply of oil and herbs.
By Mathew Smith
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