Savings of as much as US$2 billion could ease pressure on Central Bank foreign reserves
The slump in global oil prices will reduce the country’s energy import bill, Economy Minister Axel Kicillof said yesterday, a development that could ease pressure on the Central Bank’s strained foreign-currency reserves.
Kicillof told an audience at the Argentine Industrial Union (UIA) annual conference that he projected an energy deficit of US$7 billion to US$8 billion this year, roughly one quarter of the country’s hard currency reserves, which stand at just under US$29 billion.
“The fall in prices is going to reduce the burden on the state’s fuel purchases from abroad,” Kicillof said on the sidelines of the UIA conference.
Asked to put a figure on the reduction, Kicillof said the government was still crunching the numbers.
“There’s a lot of uncertainty internationally over how this is going to pan out,” he said.
Some predict the savings could be in the billions.
“Assuming we have a normal winter … Argentina could save about US$2 billion in 2015,” said Daniel Gerold, head of G&G Energy Consultants in Buenos Aires.
The country’s fuel export revenues would likely dip too, but not by nearly as much, Gerold said.
Such a saving would provide respite for the Central Bank that has already bolstered reserves by entering into currency swaps with China.
Some economists project Argentina’s reserves reaching US$30 billion by the year’s end, against forecasts of around US$24 billion immediately after US credit rating agencies declared the country to be in default in July, when the country was haemorrhaging dollars and the peso was in free fall.
Argentina produces 90 percent of its energy needs, government data shows, and it imports the rest.
State-run energy company YPF forecast in September it would take up to a decade and as much as US$200 billion in investment to develop Argentina’s nascent shale sector and erase its energy output deficit.
YPF CEO Miguel Galuccio earlier this week dismissed speculation that the slump in oil prices would lead to a cut back of investment in Vaca Muerta, the country’s promising shale formation that the government is counting on to become energy self-sufficient.
Ali Moshiri, Chevron’s Houston-based head of exploration and production for Latin America and Africa, agreed, saying that dropping international crude oil prices will not play a major role for the company as it determines future investment opportunities in Argentina. YPF and Chevron are partners in an unconventional oil project in Vaca Muerta.
Prices rebound
US crude closed higher yesterday at more than US$67 after data showed a surprise tumble in inventories, but a report suggesting Saudi Arabia expected still lower prices for oil sent Brent below US$70 a barrel.
The spread between Brent and US crude, a key arbitrage in oil markets, narrowed to below US$3 a barrel, its lowest in almost two months.
Oil markets have been volatile since last week’s decision by the Organization of the Petroleum Exporting Countries not to cut production in an oversupplied market. In recent days, traders have sought a price floor for crude, which has tumbled about 40 percent from June highs.
Yesterday, US crude rose after oil inventories in the United States fell by 3.7 million barrels last week.
— Herald staff with Reuters