A blow to Argentinian grain exports would have sweeping consequences both at home and overseas, as the country is a major exporter on a global scale.
Ironically, Argentina is one of the most gas-rich countries in the world, but in spite of its vast natural gas reserves the government is facing the very real possibility that the natural resource will have to be rationed as the global energy crisis intensifies, driven by continued fallout from pandemic-fuelled supply chain woes and the ongoing military conflict in Ukraine.
A recent BNN Bloomberg report explains:
- Despite having shale-gas deposits to rival those in Appalachia, which made the U.S. a major exporter, Argentina's domestic gas production sector has suffered from years of underinvestment that has left it unable to meet domestic demand, never mind the needs of the export market
However, a «chronically poor business climate» and a generally cash-strapped economy has results in underdevelopment of the sector and insufficient pipeline capacity to transport gas from remote Patagonia to urban and industrial areas, where it is increasingly desperately needed.
As a result, not only has Argentina not become a major exporter of LNG, it hasn’t even been able to establish energy independence, instead relying on gas imports (mostly from the U.S. and Qatar).
This has left Argentina competing with much larger economies for precious shipments of LNG on the international market right as winter sets in in the southern hemisphere and demand for energy expands.
This week, brand new Chilean president Gabriel Boric made his 1st official trip abroad to talk about the fuel shortage with Argentine President Alberto Fernandez.
The economy minister of Argentina, Martin Guzman, and the energy minister of Chile, Claudio Huepe Minoletti, signed a joint declaration of bilateral energy cooperation in the face of the crisis.
The agreement, however, does not serve to bring more gas into Argentina, but rather re-establishes exports to Chile and outlines the rehabilitation of the Neuquen-Biobio pipeline.
While this may bring some much-needed cash into the Argentinian economy, it does nothing to help Argentina fill its LNG gap.
If its shale sector was developed to reach its full potential, Argentina could not only be energy independent, it could also be selling off excess LNG.
Achieving this would require no small measure of policy support and investment, both of which have been hard to come by in Argentinian political history.
And then there’s the question of whether all that gas wouldn’t be better left in the ground in the face of the climate crisis.
Ultimately, with the country’s tight economy and the global energy crisis continuing to cause market volatility, Argentina has few good options.
It is going to be a long, cold winter in Buenos Aires.
Author: Haley Zaremba
