(Argus, 7.Jun.2021) — Argentina will funnel $580 million collected from a new wealth tax to projects for rebuilding natural gas production from a recent slump, a key to averting shortages and stemming imports, Energy Secretary Dario Martinez said June 7.
The secretariat is working with state-backed YPF, the country’s biggest gas producer, and IEASA, a state-owned gas importer, to determine what fields to put the funds into, Martinez said in a statement.
The projects will be announced in the next few days, he added.
“This joint investment by IEASA and YPF in gas production projects will have a great dynamic impact on activity in the producing regions, boosting production,” Martinez said.
Argentina’s gas output tumbled 21% to 114.2 million in April from a most recent peak of 144.4 million cu m/d in July 2019, according to data from the secretariat.
The decline came largely because a drop in prices to less than $2.50/MMBtu in 2020 from $3.50/MMBtu in 2019 made the business less profitable.
The government last year introduced the one-time tax on the country’s wealthiest people to help finance projects to mitigate the impact of the COVID-19 pandemic. This includes efforts to boost gas production, given that it supplies half of the country’s energy needs.
This is the latest effort by the government to increase output to meet demand, which averages 140 million cu m/d and peaks at 180 million cu m/d in the June-to-August winter months.
In December, the government created a system of auctions for long-term gas supply contracts that has boosted prices to an average of $3.50/MMBtu, encouraging companies to step up drilling and completions. YPF has said it plans to invest $600 million this year in drilling more gas wells.
There are large shale gas resources in Vaca Muerta, a play in northern Patagonia that could convert Argentina into a net-exporter from a net-importer. But companies have been holding back investments because of uncertainty about the government’s policies.
“The [energy] agenda is not clear in Argentina,” Pablo Bereciartua, president of the Argentine Center of Engineers, said last week in a live interview with EconoJournal, a local energy news agency. “We’ve had twists and turns. In 2019, we exported gas and today we are importing again.”
Gas imports shot up 30% to an average of 15.8 million cu m/d in the first four months of this year from 12.2 million cu m/d a year earlier, according to Energy Secretariat data.