Argentina-United States Energy Cooperation Agreement Covers Smart Grids, Energy Efficiency and Renewable Energy

Jun 5, 2014

Argentine Federal Planning, Public Investment and Services Minister Julio de Vido and US Deputy Secretary of Energy Daniel Poneman signed a bilateral agreement on May 21, 2014 to strengthen and deepen exchanges and cooperation in the areas of smart grids, energy efficiency and renewable energy, in addition to non-conventional hydrocarbons and nuclear energy.  Minister de Vido noted in remarks to the press that the bilateral energy agreement (“Agreement”) will serve as an institutional framework for arrangements into which US and Argentine energy sector companies enter moving forward.  Nexant discusses the Agreement and the context in which the parties signed it.

The Agreement’s text has yet to become publically available, and both parties have only shared general details of the Agreement’s provisions in their respective press releases.  The US Embassy in Buenos Aires emphasizes that the Agreement aims to increase US-Argentina exchanges at the technical level, with a view to share best practices and perspectives on energy technology development and use.  The Argentine Ministry of Planning, Public Investment and Services, in turn, highlights the investment opportunities in the Argentine energy sector for US companies, framing such opportunities within the context of future cooperation stemming from the Agreement.

The Agreement comes amidst otherwise chilly US-Argentina relations largely due to ideological disagreements, US investor claims concerning Argentina’s sovereign debt obligations, and a pending US-Argentina trade spat before the World Trade Organization (WTO); however, due to underinvestment in the domestic energy sector, Argentina is experiencing severe energy supply shortages, thus resulting in occasional rolling black-outs and in the possibility that the government could cease to subsidize end-user fuel prices and power rates.  In this regard, the Argentine government has embarked on a charm offensive to woo foreign investors, particularly US nuclear and shale oil and gas companies, but also investors in solar and wind energy and smart grid projects, in order to curb the Argentine energy crisis in the medium- to long-term.

The Agreement does demonstrate positive will on both sides to move past contentious, unrelated bilateral issues.  Nonetheless, the press reports note that the yet unreleased Agreement is not binding and is largely aspirational.