EU Sets Eyes on Argentina's Energy Projects

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Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--Argentina's energy prospects continue to attract international partners and interest.

This week, the European Union's (EU) High Representative of the Union for Foreign Affairs and Security Policy, Josep Borrell, met with Argentine President Alberto Fernandez to discuss commitments related to the EU-Argentina partnership. Amongst the main topics of discussion was Argentina's supply of liquified natural gas to European markets.

According to an EU statement, Borrell announced that Argentina and the EU were very close to reaching a memorandum of understanding on energy to expand cooperation on "renewables and green hydrogen, which will pave the way for LNG [liquefied natural gas] exports to Europe."

European need for LNG imports, following the EU's supply diversification efforts due to the war in Ukraine, put Argentina high on the list of prospects as an alternative energy supplier. The South American country is sitting in the world's second-largest reserve of shale natural gas, better known as the Vaca Muerta reservoir. Additionally, this formation contains the world's fourth-largest non-conventional oil resources.

So far, some 31 companies are involved in energy projects in Vaca Muerta, including majors like Shell plc (NYSE:SHEL) (London, England). Meanwhile, the South American nation has been trying to incentivize new investments and developments across its energy sector as it provides the much-needed foreign currencies for the Argentine economy. As a result, this new energy memorandum could further attract investments in the energy industry, leading to higher production and revenues.

In September, Argentina's natural gas production stood at 4.08 billion cubic meters, slightly lower than the previous month. Nevertheless, the nation's natural gas production has been on the rise over the last few years, setting the nation's output near the 4 billion cubic meters of natural gas mark.

The EU and Argentina have strengthened their relations through the EU-Argentina partnership and the Mercosur-EU discussions for a free-trade agreement. Yet, Europe's need for alternative energy sources and Argentina's energy prospects are now bringing the two parties closer.

Elsewhere, the discussion on the EU-Argentina energy memorandum coincided with news from the minister of economy, Sergio Massa, on a new deal with the Paris Club over outstanding debt. The financial organization and the Argentine government closed a deal on some $2.4 billion in outstanding payments. Based on the new formula, Argentina will be able to pay the remaining debt starting December until September 2028 with a lower interest rate.

This is key for the South American country, given Argentina's declining international reserves, which have exacerbated the nation's poor economic condition and high inflation.

Overall, the energy outlook in Argentina becomes brighter with international players setting their eyes on Vaca Muerta and other projects, which could bring new investments and higher production energy production.

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