The industrialization of gas and oil as the axis of national development. The exploitation of shale can be a strong boost for Argentine development

Much has been written about the enormous potential of our country’s oil and gas resources. Argentina has the fourth largest shale oil reserve in the world and the second global shale gas reserve. It also has immense extensions of high exploratory potential in the sea -coasts outside of Patagonia-, and mature basins suitable for the introduction of modern secondary and tertiary recovery techniques.

However, in the country we do not always focus on the importance of the industrialization of the sector’s value chain. This approach needs to be accentuated so as not to fall into the trap generated by the primarization of oil and gas production. The industrialization of the hydrocarbon sector generates a virtuous circle, where the growth of one segment of the chain pulls the other and contributes to generating thousands of new jobs and millions of dollars in foreign exchange through genuine investments.

Many times we are presented with a false crossroads: incentivize oil and gas production to export, or produce for the domestic market. These two options are not exclusive, but rather are enhanced. The growth of production is a necessary condition to boost the industrialization process of our hydrocarbons. We must encourage the production of oil and gas so that different industrialization projects – such as the production of fuels, petrochemical products and other derivatives – can have sufficient scale to be competitive at the domestic and global level. The higher production we achieve will translate into more competitiveness and higher exports for Argentina.

The false dilemma of forcing ourselves to choose between one route or the other is easily seen when analyzing experiences from other countries in which only production for export was prioritized. The result was an industry exclusively focused on the primarization of production that, little by little, was undermining the productive chains. Deprived of investment to maintain their competitiveness, they were decapitalized until their extinction or obsolescence.

Mexico is a very interesting case in the region to illustrate the above. 15 years ago the country produced more than 3.3 million barrels of oil per day, the processing of which covered 87% of the demand for fuel. The other 13% imported it, mainly from the United States. Crude exports, meanwhile, were around 1.8 million barrels a day.

Today, the picture is very different. Mexico produces 1.7 million barrels per day of oil and, after years without sustained investment in the refining park, only 39% of fuel demand is refined in the country. The remaining 61% is covered by imports. Recognizing this problem, the policies launched since the current administration by President López Obrador have focused on prioritizing investment in the downstream to process domestic crude and abandon the current dependence on imported products.

Other countries, on the other hand, have been pursuing a virtuous policy of industrialization of the oil and gas value chain for decades. The “shale revolution” in the United States resulted in the rebirth of its hydrocarbon industry. In 2019, as a result of this process, that country became the largest oil producer in the world and, for the first time, became a net oil exporter.

From the increase in hydrocarbon products, industries that had emigrated abroad were reactivated. Since 2010, 210 projects have been completed in the petrochemical sector with an associated investment of $ 89 billion. Another 43 projects are under construction and, added to an additional 90 in the planning stage, would bring the total invested in the sector to 203 billion dollars. In this sense, the American Chemistry Council estimates that these projects will have created by 2025 more than 757,000 jobs directly, indirectly or induced.

In Argentina we have already embarked on that path. In 2019, 92% of the oil we produced was processed in our country. The local hydrocarbon industry is not merely extractive, but is an integral part of the country’s industrial fabric and contributes to generating genuine employment through long-term strategic investments.

The province of Buenos Aires today has 71% of the total oil refining capacity of the entire country. It is in this province where almost all the fuel that feeds the private, industrial and agricultural automobile fleet is produced. In Bahía Blanca, to cite just one example, the petrochemical complex produces basic chemicals for industry and exports LPG (liquefied petroleum gas) and other products derived from oil and gas.

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