The energy markets are fixated on the Persian Gulf and OPEC's "cap" negotiations... and whether Iraq will end up scuttling them.
Now, these negotiations are crucial to future oil prices, but they're not the biggest story in energy right now.
The truth is, there are some incredibly important events underway that almost no one is paying attention to.
It's practically happening in America's own backyard...
Argentina's Natgas Boom Will Be Slow Going
A few years back, Argentina was set to become the next hotspot in the global shale sector. There had been a discovery of huge deposits that spurred rumors of a natural gas boom.
As with most developing countries, especially in South America, the Argentinian power generating network has been falling further and further behind the rise in local demand. Those big deposits held the promise of more than adequate coverage of domestic needs, with enough left over for substantial exports.
This bonanza was found in the so-called Vaca Muerta formation, believed to be one of the world's largest shale gas deposits. All things considered, Vaca Muerta has at least 27 billion barrels of recoverable oil, and more than 800 trillion cubic feet of natural gas, according to current estimates.
A consortium involving Argentina's state oil and gas company YPF SA (NYSE ADR: YPF) and international oil supermajor Exxon Mobil Corp. (NYSE: XOM) is developing the huge field in t
he northwestern part of the country.
But after having already committed $250 million over the summer, Exxon Mobil has now acknowledged that the final development budget could end up well north of $10 billion over the next two to three decades.
Part of the reason for the high costs and long time frame is the enormous size of Argentina's deposits. According to the last U.S. Energy Information Administration (EIA) global survey, Argentina has the second-largest shale gas reserves, and the fourth-largest shale oil reserves, in the world.
With reserves that huge, you'd think that Argentina would be pushed into an energy leadership role in the region.
That's likely to happen, but it won't be as fast as return-hungry energy investors were hoping.
Argentina can be a tough place to do business.
For one thing, the country's wider financial difficulties have intervened to frustrate development plans. The Argentinian peso has had a very volatile 2016, there have been banking irregularities and interruptions, inflation has been spiking, and last but not least, a long-standing tradition of outright public sector fraud seems to have resumed.
Argentina is short on transparency, too, especially when it comes to exploiting natural resources. Laws and regulations are rarely uniformly applied, and usually have a pronounced, ongoing need for "interpretation." This often has to happen on an ad hoc basis, with little likelihood of a similar result the next time around.
This perfect storm adds up to ballooning project budgets, lengthy delays, and general, across the board inefficiency.
Nevertheless, Argentina's pressing need for more energy isn't waiting for its bureaucracy to shape up or its financial problems to go away. It's getting hungrier by the day.
And that has forced some creative solutions...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
This Smart Move Is an Example for Every Country
Faced with concerns about the country's ability to meet its electricity demand, the government has moved to diversify Argentina's energy sources. That means an increasing reliance on renewables to meet a larger portion of the nation's energy balance.
Renewables - primarily solar and wind power - are now targeted to account for 8% of domestic electricity in 2017, up from just 1.8% this year.
What's more, a few weeks ago, Buenos Aires awarded 17 renewable energy contracts to a range of international and domestic companies. All in all, that's $1.8 billion toward transforming the country's electricity grid - a modest sum, but one that will go a long way in Argentina.
This development is significant for everyone because here we have another government recognizing that a larger variety of energy sources in genuine balance is the goal. This is just the latest government around the world recognizing that coordinating various energy sources is the most effective approach moving forward. That it's Argentina, a place with such a pronounced bounty of oil and gas, is extra impressive.
But just as important is what the Argentinian government hasn't done...
A popular belief around the world, at least until recently, has been that there will be some single "silver bullet" that will somehow wean economies off crude oil - as if replacing one dominant energy source with another is any sort of a solution.
My position has long been to promote a variety of energy sources that together create an increasingly interchangeable balance. That includes renewables, which are on the rise, as well as natural gas, which has been the preferred replacement for coal in electricity generation for a while now.
But coal will remain a staple energy source for decades, especially in Asia where it will be the primary source of power for generations to come.
In other words, the balance is not, and can never be, a zero-sum game.
Which is why Argentina's power program is so important...
"Power Variety" Benefits Two Kinds of Companies
Argentina's government received 123 project bids a month ago, finally awarding those 17 winning projects I mentioned just two weeks ago. Of the total, 12 are wind, four are solar, and one is biogas. Additional entries from biomass and hydro power did not make the final cut.
Officials said that the average winning price was $59.40 per megawatt hour, with solar coming in a shade higher at $59.70. These are slightly higher than the equivalents in North America, or even across the border in Chile (where another "energetic" solar push is underway).
But eventual costs will be coming down as the network is built out. Initially, the goal is first and foremost reliable supply.
As Argentina's push for grid reliability and variety continues to be successful, other governments will take note. Meaning more of an emphasis on the sources of power in the global energy balance...
And great prospects for big, global players involved in both renewable power generation and grid modernization.
This "Oil Bomb" Could Blindside Some Investors... and Make Others Rich. A Saudi-led coalition of producers has unleashed a weapon of sorts on the U.S. oil market. The first shock waves are expected to hit hard, too. Some could be left penniless, but folks who can see what's about happen now have the chance to add six figures to their account. In fact, $109,845 is a conservative estimate of the profits now at stake. Full analysis found here.
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About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.