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Argentinian candidate Scioli says he'll sustain high natgas prices to spur E and P

Buenos Aires (Platts)--21 Oct 2015 548 pm EDT/2148 GMT


Argentina's leading candidate to win Sunday's presidential election vowed to keep natural gas prices high as an incentive for exploration and production.

The candidate, Buenos Aries Governor Daniel Scioli, made the promise in a speech late Tuesday after meeting with President Cristina Fernandez de Kirchner and governors of the country's oil-producing provinces.

The meeting was called to discuss ways to achieve energy sovereignty, Scioli said in Buenos Aires.

If elected, Scioli said he would offer a $5/MMBtu subsidy on top of the average gas price in 2014 to producers who increase output.

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This could be in line with or more than the $7.50/MMBtu that producers are getting this year for output from new developments.

The average price for YPF, the country's biggest gas producer, was $4.29/MMBtu in 2014, according to its financial information at the time. Scioli said the subsidies would take effect January 1.

The ruling Front for Victory party, which Scioli is representing in the election, started subsidizing gas prices in 2012 after taking YPF under state control.

The goal is to rebuild production after a 20% decline since 2004 under the party's watch. The decline brought shortages and a surge in imports of gas, which meets 50% of national energy demand. The country now imports 30 million cu m/d from Bolivia and as LNG.

There is room to meet more demand by increasing local production, given that there is slack distribution and transport capacity after the decadelong decline in output.

There also are huge shale and tight resources, most of which are undeveloped. Vaca Muerta, one of the world's most promising shale plays, has attracted the attention of majors like Chevron, ExxonMobil and Shell.

As Argentina pays about $7.50/MMBtu or more for imported gas in its liquefied form, there is an incentive as well to close the gas deficit with local production, more so if global gas prices rise in the future, YPF CEO Miguel Galuccio said earlier this month.

The development of the shale and tight resources are starting to turn around the production decline. Average gas output rose 2.8% to 116.9 million cu m/d in the first half of 2015 compared with 113.7 million cu m/d in the year-earlier period, according to the Argentine Oil and Gas Institute, an industry group.

--Charles Newbery, newsdesk@platts.com
--Edited by Jason Lindquist, jason.lindquist@platts.com

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