Argentina oil, gas to look abroad to fund imports

Argentina has asked oil and gas companies to finance their import needs abroad as the country faces a foreign exchange crunch because of surging inflation and a sagging domestic currency.

President Alberto Fernandez's government has asked some of the largest oil and gas firms operating in the country, including Axion, Raizen, Trafigura and state-owned YPF, to use international banks or parent companies instead of the domestic foreign exchange market to finance imports for the next three months. The government hopes that will take some pressure off the central bank as foreign reserves dwindle.

Argentina's inflation accelerated to an annual 109pc in April, making it the third highest in the world after Venezuela and Zimbabwe. The peso depreciated to 239 pesos to the dollar today from less than 119 pesos to the dollar a year ago.

But Argentina's oil and gas sector is quickly expanding amid development at Vaca Muerta, the second largest shale gas formation in the world.

Domestic crude output was 640,900 b/d in March, up by 12.1pc from a year earlier, according to the energy secretariat, while gas production was 128.8 MMm3/d, a 2.7pc increase.

The Fernandez government's request is part of a broader plan that includes finance minister Sergio Massa's trip to China this week.

Massa is hoping China will agree to a $5bn credit line for the Argentinian central bank and that some of the Asian country's big firms will provide funding for energy projects.

The government is also negotiating with the IMF for disbursement of $10.6bn now instead of at the end of the year, under a $44.5bn extended fund facility agreed for Argentina in March 2022.

The minister and a large group of other authorities will meet with Chinese construction and energy companies to discuss large-scale projects, including China Gezhouba Group to secure continued funding to complete construction of two dams for a 1,310MW hydroelectric complex in the southern Santa Cruz province.

Also on the list are meetings with CET-State Grid Corporation and Power China. Argentina is looking for $2bn to continue pipeline construction from Vaca Muerta. The first major pipeline should be ready for testing on 20 June.

By Lucien Chauvin