We come in peace. That could have been the message from Axel Kicillof, Argentina’s deputy economy minister and head of a government commission in charge of approving investment plans, to oil executives gathered for the industry’s annual lunch in Buenos Aires.
The casual Marxist former economics professor in his trademark open-necked shirt told the gathering of suit-clad executives:
We have neither the vocation nor the capacity to replace the energy industry.
Indeed, although a decree increasing state regulation of the sector was billed (by a press of which the government is permanently mistrustful) as a bad thing, the commission he heads has done industry-friendly things, like boosting the price of compressed natural gas for vehicles, according to Kicillof. As he added:
I think all these measures are sensible measures that are not against (the industry).
With foreign currency regulations in force, foreign companies are finding it hard to repatriate profits and the government is bent on companies ploughing back profits to create jobs and boost production. Kicillof duly repeated the government’s desire that oil companies could earn a good profit, without saying what constituted “good”. He added:
We are here to work with you so that the sector can be big and great and the envy of all the continent.
There’s no arguing with such a sentiment, especially when Argentina is seeking to develop what are estimated to be the world’s third-biggest gas reserves. Ernesto López Anadon, president of the Argentine Oil and Gas Institute, which groups companies in the sector, said his institution estimated that:
In the next 10 years, we will need investment of around $70bn if we want to develop unconventional resources significantly.
But some executives at the dinner said it was time for the government to reveal more about the operating parameters. The head of one company, which is big in the sector and already exploring unconventional reserves, said:
The government’s first priority to develop unconventional resources should be to spell out how long the operating concessions will be for.
The government and the industry are talking – a good sign, the executive noted. As Argentina strives to regain its lost energy independence, the onus will be on both sides to deliver.
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