Can Argentina leverage this potentially major energy opportunity?

Western democracies will look elsewhere for oil and gas and, in parallel, likely accelerate drives to reduce reliance on hydrocarbons following Russia’s invasion of Ukraine.

While energy trade continues, buyers – chiefly EU nations – are eyeing the exit door. 

The chances of reconciliation in the medium-term appear slim. Once they are eventually out, the door will slam closed.

Notwithstanding the death and devastation in Ukraine, the situation creates potential opportunities for Latin America’s oil and gas producers, among them cash-strapped Argentina, which sits on huge unconventional oil and gas resources.

The big question is whether Argentina can create the right conditions to attract the investment needed to ramp up production and, for example, build LNG export infrastructure. And with its wealth of wind and solar resources, the country is also well-placed to become a low-cost producer of green hydrogen and associated products such as green fertilizers – a huge potential market.

Stability is key. Investors mulling spending billions of dollars would want clear and steady rules of the game, a robust institutional framework and a lifting, or at least a major easing, of capital controls. A key requisite hurdle is revamping its debt with the IMF and reducing macroeconomic imbalances. Even in the best-case scenario, investment would take a good several years to start flowing. Many parts of the demand-production-infrastructure jigsaw puzzle would need slotting into place.

A major acceleration in investment would help reduce poverty and, if done correctly and with the right environmental protections, lay the foundations for long-term sustainable growth. If Argentina can build out a green hydrogen industry in parallel, energy revenue would keep flowing even when global demand for oil and gas eventually flags as the energy transition advances.

Oil majors have already said they are either abandoning Russia or halting further investment there. While some firms will take a financial hit by such moves, they will still surely be looking at alternative investment destinations.

The situation is complex, with myriad domestic and international political and economic factors at play. Argentina's government, for example, was late to join the global condemnation of the invasion - which European leaders will have taken note of. But playing to Argentina's favor is that, elsewhere in the region, Brazilian President Jair Bolsonaro – despite his foreign minister saying the opposite – said the country was taking a neutral stance, a decision that may potentially have much deeper future investment repercussions. 

But overall, on the surface of things, it does indeed appear a potential opportunity for Argentina.