Insight
Argentina gas prices – Part II: Market distortions, Plan Gas 4 and alternative pricing mechanisms
*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
Report summary
Despite the promising gas resources in Argentina, it is difficult to justify investment in new production projects. Government intervention limits the influence of supply and demand fundamentals in setting prices. To deal with a declining production due to price controls, the government is considering reverting to the old recipe: a gas price subsidy program for producers (Plan Gas 4). We see concerns with Plan Gas 4 due to payment risks, lack of long-term foreseeability to sustain new E&P investments, unfair competition, among other factors. Moreover, in this report we assess a number of pricing and contracting mechanisms and policy tools that Argentina could apply that will bring more efficiency to the market and at the same time alleviate the gas expenses in low-income households.
Table of contents
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Price distortions
- State control of gas and LNG imports means import parity pricing is not reflected
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Price caps
- Price subsidies to producers
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Structural factors
- Summer prices driven by short-run marginal costs
- Argentine gas peso inflation
- End-user payment capacity
- Market share of gas production
- Plan Gas 4 trade-offs
- Alternative pricing and contracting mechanisms
Tables and charts
This report includes the following images and tables:
- CAMMESA price caps versus spot prices for Neuquén and Tierra del Fuego and LNG import parity
- Pricing and contracting mechanisms
- Curtailment of contestable demand by State gas and LNG imports
- Gas prices for local distribution companies versus exchange rates
- Gas prices for end-users in residential and industrial sectors in Latin America (based on Q4-2019 tariff and exchange rate, taxes included)
- Average household gas expense versus household incomes by deciles (based on Q4 2019 data, taxes included)
- Domestic production by company equity in Argentina, Brazil, Colombia and Mexico (base 2019)
What's included
This report contains:
