“We need to show companies and convince them that we have competitive advantages,” Neuquén Governor Omar Gutiérrez said in his opening keynote address at the Institute of the America’s “Energy & the Economy in Argentina” Roundtable on March 30 in Buenos Aires. “If the conditions are not in place, then the resources will remain under the ground.”

Governor Gutiérrez’s remarks are not merely empty rhetoric. Argentina has the potential to become an energy supplier to South America, perhaps even further afield. The country boasts not only some of the world’s largest unconventional oil and natural gas resources, but vast renewable energy sources.

The question, however, is whether the government can create the economic, institutional and legal stability so that it can become economically viable for companies to develop the riches over the long term no matter a political shift in the future.

These issues were at the center of vigorous debate and discussion at the Institute of the Americas’ Roundtable in Argentina both in the formal sessions and sidebar conversations among the almost one hundred attendees from across industry, government and civil society.

Argentina Energy Roundtable panelist discuss the future of energy in the country

There is new hope this can happen with President Mauricio Macri. His conservative administration has taken steps to rebuild investor confidence since coming to power in December 2015. It has ended a 15-year sovereign debt default and scrapped the capital, currency and price controls of his 2003-15 populist predecessors that had sparked a flight of investor dollars and a plunge in energy production that brought shortages and a surge in imports.

The resources are getting developed. Output from Vaca Muerta and a few tight plays is starting to offset the declines in conventional production that cost the country its energy independence of the late 1990s and early 2000s.

Vaca Muerta is on track for more production growth. As part of the landmark deal, BP-controlled Pan American Energy (PAE), Chevron, Dow Chemical, Shell, Total and YPF vowed to invest a combined $5 billion this year and more than double that in subsequent years to develop the play.

Daniel Montamat, executive director of Montamat & Asociados, an energy-consulting firm in Buenos Aires, estimates that the energy industry needs $20 billion a year in investments to rebuild supplies after a decade of shortages – and to keep pace with demand.

Will this come? As long as companies see that the government making progress in improving economic, institutional and legal stability and doing long-term planning, then companies will do their part, he said.

“Once the process gets on track, we are going to be surprised by the investment that will come,” he said.

A challenge for making Vaca Muerta economically viable for production is to bring down drilling and completion costs. YPF has halved its costs to $8 million per well from $16 million when it started in 2013. Most other companies are still above $10 million.

Argentina has another Vaca Muerta in its renewable energy potential, much of which remains undeveloped. While Brazil, Chile, Uruguay and other countries in the region reeled in huge investments to harness their renewable energy capacity over the past decade, Argentina did very little under the 2003-15 populist regimes.

This could be a blessing in disguise for Argentina.

“We don’t have to try new technology” but instead use what has been “proven to work,” said Sebastián Kind, the national undersecretary of renewable energies. “We can learn from the miscalculations and errors” made in other markets.

To attract investors, the Macri administration is increasing power prices and offering opportunities to build solar and wind parks.

Investors appear to be keen. In two tenders so far, Argentina snared commitments for building 2.4 GW of renewable generation capacity. More tenders are planned with the aim of reaching a target of getting 20% of power consumption from renewable sources by 2025, or about 10 GW.

A challenge is to get enough financing for projects a country with a history of economic and political instability and the threat of policy shifts when elections come round every two years, for president and then lawmakers.

Even so, there is a market for more capacity. Argentina’s power demand is expected to increase 3% to 4% per year to 175-180 GW in 2025 from a current 130-135 GW, according to Kind.

The key to satisfying this demand is diversification, said Kind.

“We need to use all of our resources. It is not just Vaca Muerta or wind or solar, or the rivers. It is also nuclear,” he said. “Argentina is a mix. It is not just the cheapest source of energy.”

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