When it comes to Argentina, your mind may muster images of tango rather than Contango. Without a doubt, the country's energy markets are far less elegant than its national dance -- so much so that one of the major operators is thinking about bowing out.
Amid an uncertain regulatory environment, natural gas investment in Argentina has badly lagged the country's industrial rebound. Price controls have been in place since the country's economic swoon, and been maintained at such a low level that a lot of coal and oil users have switched to the cheaper fuel. Amazingly, shortages have ensued. This is affecting not only Argentinean energy consumers, but neighboring Chile as well.
Gasoline prices have also been kept artificially low over the past few years by the government of President Nestor Kirchner. Rather than providing marketers like ExxonMobil
Exxon, which operates under the Esso moniker, is reportedly thinking about calling it quits. It wouldn't be the first foreign player to do so. Last year, Pioneer Natural Resources
While the latter company has averaged about $1 on its natural gas price realizations in Argentina, it says that the country "is starting to work." But even Apache's market-priced contracts don't look all that appealing today, and I'm going to need more convincing that the Argentinean energy sector is really a good place to put shareholder money.
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