The Battle For Control of the Vaca Muerta is Formally Underway: Neuquén 2023
The field is now set for the April 16, 2023 gubernatorial election in the Argentine province of Neuquén, home to the Vaca Muerta shale play. Neuquén voters will choose between three viable candidates. One candidate would be near-certain to maintain the provincial status quo to which companies operating in the Vaca Muerta have become accustomed under the provincial leaders who have held the reins of power throughout the entirety of the shale revolution. Victory by either of the other two viable candidates could significantly alter this status quo, and which therefore has the potential to generate considerable uncertainty regarding investments and operations in the Vaca Muerta. This is an election that should be followed very closely by companies with investments or operations, or potential plans for investments or operations, in Argentina’s Vaca Muerta.
Under Argentina’s federal constitution, provincial governors exercise substantial influence on the activities of the oil and gas industry within the boundaries of their province. The Neuquén governor is elected in a single round via a plurality vote while the 35-member provincial legislature is elected at the same time from a single province-wide district using proportional representation. Neuquén permits fusion candidacies under which more than one party or alliance can nominate the same gubernatorial candidate, with all votes for that candidate from the multiple nominations summed together for the purpose of determining the winner. On April 16 many, though not all, of the Neuquén municipalities, will also be holding mayoral elections, with far and away the most impactful election being held in the city of Neuquén where approximately one-half of the province’s voters reside.
While the Vaca Muerta shale play extends across portions of four Argentine provinces (La Pampa, Mendoza, Neuquén, Río Negro), it is centered in Neuquén. This has allowed the province to achieve its status as Argentina’s top producer of both natural gas (62% of Argentine production) and of petroleum (49% of Argentine production), with both proportions steadily increasing as investment continues to flow into the Vaca Muerta and away from conventional assets in other Patagonian provinces such as Chubut and Santa Cruz.
Six candidates are running for governor and more than two dozen parties/alliances are competing in the concurrent provincial legislative elections, with all simultaneously supporting one of the six gubernatorial candidates.
The Movimiento Popular Neuquino (MPN) has won every gubernatorial election held in the province of Neuquén over the past 60 years, and since the end of the 1976-83 military dictatorship has ruled continuously via 10 straight gubernatorial victories. With current two-term governor Omar Gutiérrez (2015-23) prevented by constitutional term limits from running for re-election, the two leading figures within the MPN, Gutiérrez and former governor Jorge Sapag (2007-15), selected current lieutenant governor Marcos Koopmann to be the MPN standard bearer. Koopman is the candidate of 10 distinct party/alliance provincial legislative lists (of legislative candidates), including the MPN’s official list which is headed by Daniela Rucci (daughter of Marcelo Rucci, Secretary General of the Oil Workers Union of Río Negro, Neuquén and La Pampa), a list headed by Martín Pereyra (the son of Guillermo Pereyra, who served as the Secretary General of the Oil Workers Union for more than 30 years), and a Unión de los Neuquinos (UNE) list which in 2019 supported the Peronist candidate Ramón Rioseco. Koopmann’s candidacy will also be boosted by the reverse coattails of popular city of Neuquén mayor Mariano Gaido (MPN) who is running for re-election.
The strongest challenger to Koopmann is MPN dissident and national deputy Rolando “Rolo” Figueroa who served as Gutierréz’s lieutenant governor during his first term (2015-19) and has been a national deputy since 2021 after defeating Gutiérrez and Sapag’s handpicked candidate in the 2021 MPN primary election. Figueroa opted to not compete against Koopmann in a MPN gubernatorial primary election due in large part to Koopmann being backed by Gutiérrez and Sapag as well as by Rucci and Pereyra. In addition to being the standard bearer of a party of his own creation (Comunidad y Desarrollo Ciudadano), Figueroa is the candidate of eight other lists, including two lists of parties belonging to the national Juntos por el Cambio (JxC) coalition (which governed Argentina from 2015 to 2019 and represents the principal opposition to the Peronist Frente de Todos national government of President Alberto Fernández today), Propuesta Federal (PRO) of former president Mauricio Macri and Nuevo Compromiso Neuquino.
The next most competitive candidate is Ramón Rioseco of the Frente de Todos Neuquino alliance, who was the Peronist gubernatorial candidate in both 2019 and 2015, when he finished second (14% and 9% behind Gutiérrez respectively). Rioseco appears as the candidate of five distinct parties/alliances.
National deputy Pablo Cervi is the candidate of a rump JxC alliance based primarily on the Unión Cívica Radical (UCR) and the Coalición Cívica (CC) along with some PRO members who did not agree with the party’s decision to back Figueroa. Carlos Eguía (Cumplir), who in the past formed part of the JxC, is running as the candidate of Libertarian presidential candidate Javier Milei, and Patricia Jure is the candidate of the far left Frente de Izquierda-Unidad. Unlike Koopmann, Figueroa and Rioseco, Cervi, Eguía and Jure are the candidates of only a single list, which should help their respective parties/alliances win more seats in the provincial legislature, but underscores the reality that they are not viable candidates in the gubernatorial contest.
The development of the Vaca Muerta shale play in Neuquén has taken place entirely under the leadership of Jorge Sapag and Omar Gutiérrez between 2007 and today. Koopmann is without question the candidate of continuity, and if he is victorious international and Argentine oil and gas companies operating in the Vaca Muerta should expect a maintenance of the status quo of the past 16 years in regard to their interaction with and regulation by the Neuquén provincial government.
A Figueroa victory would at least in the short term significantly alter the status quo to which companies with investments or operations in the Vaca Muerta have become accustomed over the past 16 years. And, at the minimum, a Figueroa victory would result in a relatively widespread change in the specific provincial officials these companies have been working with in recent years, as Figueroa would be expected to bring in his own team while Koopmann would generally retain most of the individuals who have served under Gutiérrez.
Finally, while unlikely, it is not out of the realm of possibility that if Koopmann and Figueroa evenly split the traditional MPN vote, that Rioseco could achieve a narrow victory as long as he retained the lion’s share of the traditional Peronist vote in the province which has oscillated between 25% and 30% in recent provincial elections. And, a Rioseco victory would, even more than a Figueroa victory, have the potential to dramatically alter the status quo for oil and natural gas operations in the Vaca Muerta.
This post originally appeared in the Forbes blog on Feb. 20, 2023.