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Bucknell University

Publication Date

Fall 2013

Program Name

Argentina: Regional Integration, Development, and Social Change

Abstract

Home to the second largest reserves of petroleum in the world, Latin America will prove to play an important role in the international energy market throughout the 21st century. Today, Argentina and Brazil in particular boast extensive quantities of nonconventional natural gas and petroleum reserves in the shale beneath the Vaca Muerta oil fields and the offshore wells of the Campos and Santos basins, respectively. Through the direction of their nationally-held oil companies (NOCs), YPF and Petrobras, the States of Argentina and Brazil have sought to exert their sovereignty over the presence of their hydrocarbon reserves. Whether financed through the NOC itself or by manner of contractual obligations paid by foreign oil companies, profits stemming from the production and sale of these reserves have been an attractive source of funding for economic, social and state development. Facing the instability of international oil prices, rising energy demand must be accompanied by high production in the pursuit of self-sufficiency. Often a principal goal of the State, self-sufficiency of the energy industry in a host country often conflicts with the goals of the NOC: sustained profitability, internal growth and expansion, and return on shareholder investments. This investigation will seek to explore the distinct idiosyncrasies of the State and the NOC in the contexts of Argentina and Brazil. Background research used to develop the reference framework is based on historic fiscal petroleum models and a current statistical review of world energy reserves, both with a particular focus on Latin America. Furthermore, supporting professional commentary is realized through three personal interviews, and final analysis will attempt to answer the question: What is the potential of Argentina and Brazil in the global energy market? Given the depth of examination required to satisfy the nature of this question, this study will serve as introductory and rather will provide an approximation of the position of Argentina and Brazil in the world energy market alongside a review of the past and present strategies adopted by their respective States. A comprehensive analysis of the proposed research topic reveals a juxtaposition of State and NOC foci in both Argentina and Brazil. Nationalization of the oil industry, by nature, places oil reserves in the hands of the State and therefore applies responsibilities to enterprises in terms of State development plans. Facing the adverse effects of rising inflation, Argentina must optimize shale extraction costs and attract foreign investment and expertise in order to capitalize on the present opportunity to increase production and reduce the oil deficit through reserves in the Vaca Muerta shale fields. Brazil has enjoyed energy self-sufficiency and is currently maintaining its advantageous position as the most advanced production agent of offshore wells in the world as it tackles refining its approach to the development of the petroleum-abundant and operationally-arduous Campos and Santos Basins. The sophistication and significance of each of the investigated projects will serve as definitive examples of the State petroleum models adopted by Argentina and Brazil at the beginning of the 21st century.

Disciplines

Natural Resource Economics | Natural Resources Management and Policy | Oil, Gas, and Energy | Sustainability

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