Oil and gas production in Argentina has fallen to 1981 levels, the lowest in 25 years, despite a $14 million government subsidy for the first five months of this year.
From last year to May 2017, the country has produced 2,311,736 m3 (cubic meters) of oil and just under 3.8 billion m3 of gas, which shows a drop of 6 percent and 1.8 percent respectively. When analyzing the first five months of 2017, only 1,478,057 m3 of oil and over 18.3 billion m3 of gas were produced, an 8.1 percent and 0.8 percent drop in comparison to the same period last year.
According to Infobae, oil decline in 2016 was attributed to a continued decrease in international prices since 2014, which at present is not surpassing US $50 a barrel. To remain competitive and maintain profitability, the government had to provide subsidies, and companies cut down on their workforce.
This trend of decline has been continuing since 1998, and the current level of production is 40 percent below the record high. Last year, Bianca Fernet wrote an article in The Bubble explaining the government’s subsidization of crude oil exports. After the international price of crude oil dropped from $100 to $30 in 2016, oil and gas companies pressured President Macri to subsidize US $125 million to save 5,000 jobs for six months. As international prices are still too low, the subsidies are only a temporary measure that cannot fix the long-term decline.
In the case of gas, according to the current director of YPF Emilio Apud, even though gas extraction has grown due to yields in Vaca Muerta in Argentina’s Neuquén province, “companies that had costs above a barrel of Argentine oil chose to stop deposits.” He also stated that labor strikes affected production.
“The subsidies for the price of a barrel of Argentine oil are still not giving results. This requires a new exploratory policy with immediate investments to recover the matter’s neglect of 25 years and reverse the trend,” said president of the Argentine Energy Institute Jorge Lapeña to El Cronista.
Experts are worried about the state of Argentine gas and oil production. According to director of energy consulting firm G& G Daniel Gerold, Argentina may have to import what it cannot profitably produce if production continues to fall.