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Center for Energy Studies | Journal

Shale Renders the ‘Obsolescing Bargain’ Obsolete: Political Risk and Foreign Investment in Argentina's Vaca Muerta

August 12, 2021 | Gabriel Collins, Mark P. Jones, Jim Krane, Kenneth B. Medlock III, Francisco J. Monaldi
VacaMuerta+Argentina.jpg
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Table of Contents

Author(s)

Gabriel Collins
Baker Botts Fellow in Energy & Environmental Regulatory Affairs
Mark P. Jones
Fellow in Political Science | Joseph D. Jamail Chair in Latin American Studies
Jim Krane
Wallace S. Wilson Fellow for Energy Studies
Kenneth B. Medlock III
James A. Baker, III, and Susan G. Baker Fellow in Energy and Resource Economics | Senior Director, Center for Energy Studies
Francisco J. Monaldi
Fellow in Latin American Energy Policy | Director, Latin America Energy Program

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Abstract

Argentina is a risky place for foreign investors, with frequent political swings from right to left, weak enforcement of contracts and property rights, endemic corruption, combative unions and a volatile macroeconomic environment. And yet, between 2013 and 2019 IOCs invested $13 billion in developing oil and gas concessions in Argentina. However in contrast to past investments, which were in conventional developments, these recent investments have been almost exclusively in unconventional developments in the Vaca Muerta shale play. We hypothesize tight oil and shale gas extraction is exposed to fewer expropriation risks than conventional oil and gas, and as a result, Argentina is likely to attract more investment in the Vaca Muerta formation than would otherwise be realized given its troubled history. Moreover, while we focus on Argentina, the case may have implications for the global oil market. If risk is institutionally and structurally lower in shale investments, this realization could encourage wider proliferation of shale production outside the United States.

Read the full article in Resources Policy.

https://doi.org/10.1016/j.resourpol.2021.102269
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