The Business of Oil and Gas

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Opportunity in an Unlikely Place

At the turn of the last century Argentina had one of the top 10 economies in the world, number 5 to be exact. But a toxic combination of bad economic policies, made worse by incompetence and a particularly virulent form of populism led to economic disaster. As late as 2014 Argentina was involved in a lawsuit in US Federal court over its eighth default on bonds and the President, Cristina Kirchner could not travel in government planes, risking seizure of the aircraft. Bond holders even tried to seize Argentine naval vessels in an African port, and nearly succeeded.

Fast forward to the present

b2ap3_thumbnail_Mauricio_Macri_banda_y_baston.jpgA new president elected under the banner of economic reform and things are suddenly different. An agreement with American Energy Partners and YPF, the state oil company, to develop Argentina’s shale resource was recently signed. Soon thereafter, the new President Mauricio Macri, lifted prices on retail power prices, apparently without much objection.

These separate events set the stage for some interesting opportunities in the energy sector. Connecting the dots between new potential shale production and market base power prices suggests that opportunities for developers of gas fired power plants, pipelines and distribution systems may well emerge.

Revitalizing a once thriving economy could be the outcome, generating opportunity in other sectors. There is an argument for both a demand pull and supply push impetus for economic expansion in the Southern Cone. Chile’s copper industry could integrate further downstream with abundant and low cost power, refining metal from lower value concentrate. The significant power transmission infrastructure developed for Brazil’s massive hydro projects opens a pathway to that country’s growing industrial sector.

This is not certain development, nor will it happen soon. But the stage seems set for some interesting times in Latin America

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