Our Editorial
For decades, Bolivia has been a major natural gas exporter in South America. Its abundant gas reserves have been exploited since the 1970s, and under former President Evo Morales, the country increased state control over the industry, using revenues to expand its welfare state.
However, over the past decade, Bolivia’s gas exports have declined due to a heavy-handed state approach that stifled new investments in the sector. Additionally, poor government planning led to limited growth in alternative exports, exacerbating the economic slump and causing concern for its customer countries, such as Argentina and Brazil.
The energy map in South America is now showing signs of shifting. Argentina is positioning itself to fill the void left by Bolivia’s diminishing gas exports, and this move could bring significant political and economic rewards. While both countries are attracting attention and investment for their ample lithium reserves, essential for the global green energy transition, their contrasting fates in the natural gas sector underscore that fossil fuel politics remain relevant.
In a remarkably speedy move, the government in Buenos Aires inaugurated a pipeline on Sunday, connecting a massive shale gas deposit in central-western Argentina to consumers in the province of Buenos Aires. The region relies on imported liquefied natural gas for part of the year, making this new pipeline from the Vaca Muerta oil and gas field (Dead Cow) a crucial development. The government expects the pipeline to save Argentina $1.7 billion in imports this year. Argentina has been pumping oil from Vaca Muerta since 2011.
The project’s swift completion is unusual, considering Argentina is grappling with a severe economic crisis, with annual inflation exceeding 110 percent. Despite this, the pipeline, planned since 2015, was constructed in just 10 months, starting in September.
One key factor expediting the project was the appointment of a new economy minister in July, who prioritized the pipeline and gained credibility as a legitimate interlocutor within the private energy sector amid the country’s economic woes. The pipeline was a collaborative effort between the state energy company Energía Argentina and three private firms, with funding from sources such as the Latin American development bank CAF.
Sergio Massa, the finance minister behind the project, is also the ruling left-wing coalition’s presidential candidate in the upcoming October elections. While polls indicate a challenging race for Massa, his record on natural gas may work in his favor. None of the major presidential candidates oppose drilling and fracking at Vaca Muerta, despite previous environmental and Indigenous protests in Argentina.
Other front-runners in the October elections include anarcho-capitalist candidate Javier Milei, and the center-right opposition coalition’s Horacio Rodríguez Larreta and Patricia Bullrich, who will face off in an opposition primary next month.
While Massa and Larreta are more open to state involvement in the economy, Milei and Bullrich are more opposed to such intervention. Bullrich and Milei believe projects can be financed on the private market, but Argentina’s complex economic situation makes this approach challenging.
Buenos Aires plans to auction a state contract in September to build an extension of the pipeline to another province, with ambitions to export gas to Brazil and Uruguay in the future. Argentina’s gas export potential has garnered attention from German Chancellor Olaf Scholz during his bilateral visit in January. Even before exports begin, reducing gas imports will help Argentina conserve its much-needed dollars.
However, Argentina cannot rely solely on gas exports for its economic future as the global energy transition progresses. Bolivia serves as a cautionary tale of the consequences when a country fails to plan for a post-fossil fuel export future. While Argentina has a 2030 energy transition strategy focusing on transforming its electric grid, its plans for transforming exports are not yet in place.
Given the current economic uncertainty, the government’s immediate focus is improving its trade balance and national accounts by exporting as much as possible, particularly oil, given the current international prices.