July 27, 2016 - 12:25 PM EDT
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Fitch: Argentine Government Needs to Reduce Energy Market Intervention

The Argentine government must continue reducing its interventionist policies towards the energy sector if the industry is to attract investor capital and grow beyond its current state of inefficiency, according to a new Fitch Ratings report.

"In order to entice more private investment in Argentina's energy industry, the oil and gas market will need clear and credible signals that the government will either stop or significantly reduce intervention, mainly through price controls, subsidies and export bureaucracy," said Lucas Aristizabal, Senior Director. "Argentina would also need to cut the sector deficit and aim to make the industry self-sustainable."

Since the economic crisis in the early 2000s, Argentina's electricity reserve margin has shrunk five-fold - from a significant oversupply position to a moderate reserve margin in the mid-30% range.

Domestic oil production declined by 12% to 637,000 barrels per day (bpd) in 2015 from 839,000 bpd in 2005. The decline in natural gas production was steeper, with output of 1.28 trillion cubic feet (tcf) per year reported in 2015 compared with 1.61 tcf in 2005, a 20% decline. During the same time period, gas consumption increased by approximately 18% to 1.68 tcf from 1.43 tcf a decade ago.

The hydrocarbon challenges for Argentina include dismantling energy price schemes, export controls, and increasing the stability and predictability of payments from CAMMESA (Argentina's wholesale power administrator) for gas consumption.

For more information, a special report titled "What Investors Want to Know: Argentine Energy" is available on the Fitch Ratings web site at www.fitchratings.com or by clicking on the link.

Additional information is available at www.fitchratings.com

Related Research

What Investors Want to Know: Argentine Energy

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885133

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Fitch Ratings
Lucas Aristizabal
Senior Director
+1-312-368-3260
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Cinthya Ortega
Director
+1-312-606-2373
or
John Wiske
Analyst
+1-212-908-9195
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
[email protected]


Source: Business Wire (July 27, 2016 - 12:25 PM EDT)

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