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With Argentina deemed the new shale sweet spot, and industry hopes of replicating the success of the U.S. experience, the country is rapidly gaining increased attention from the shale industry. Such attention is certainly justified.

The U.S. Energy Information Administration has estimated Argentina’s technically recoverable shale reserves at 27 billion barrels of shale oil and 802 trillion cubic feet of shale gas, thus placing the country with the second highest shale gas reserves and fourth largest shale oil reserves globally. However this is only the beginning. The country already has an extensive pipeline network from their conventional gas production which can be optimized for use with shale. Argentina’s geology has also been deemed an ideal thickness for commercial production, with water stress for the region characterized as limited. Furthermore, the country’s Neuquén province has been Argentina’s most productive area for conventional gas production, with its infrastructure already suited to the development of shale. Argentina’s government is also undoubtedly pro-shale. With Argentina currently relying on expensive imports of gas, shale provides great promise for improving energy security and the government is actively encouraging foreign investment within the shale industry. In light of such optimum conditions Argentina is on course to become the next shale hub.

The challenge that remains in Argentina is stakeholder engagement, with the reputation of shale proving a substantial hurdle to overcome. Stakeholder and community perceptions of shale have long served as a stumbling block to the industry, with concerns such as health & safety, noise & dust pollution, environmental damage and local logistics frequently resurfacing in objections to the industry worldwide. These concerns are all prevalent in Argentina. However, in Argentina the situation is complicated by a number of additional concerns.

Shale has the potential to radically transform Argentina’s economy; something which the country desperately needs in the wake of its economic problems. With Argentina plagued by recession and inflation over the course of the last decade the shale industry has the potential to radically transform the country. However, this also brings with it greater challenges. Overloading of urban systems and public infrastructure coupled with extractive inflation for local communities due to the emerging shale industry are both key concerns emerging across Argentina.

Pablo Lumerman, Argentinian politologist and community-company dialogue facilitator who chairs an international network of practitioners supported by ACCESS Facility a global non-profit organization that supports rights-compatible, interest-based problem solving to prevent and resolve conflicts between companies and communities, has noted that whilst the shale industry ‘has a great capability for creating financial, regulatory and technical conditions for working under the surface it has a lot of problems working on top of the surface acknowledging the communities’ needs and respecting rights’. Lumerman has called for ‘a sustainable model of development’, in which ‘governments, communities and companies work together to compensate asymmetries and create shared value’.

Another key area for concern can be found around the environmental accumulative impact of shale development over non extractive economic activities, plus the access to, control of, and ownership of land, particularly in relation to local and indigenous community land claims. This issue in particular has served to create a climate of mistrust across much of the local society and the urban centers in Argentina. Lumerman has noted that ‘slowly there is a growing awareness that the challenges ahead call for new schemes of regulations and laws. Society as a whole is no longer signing blank checks; but instead it wants to be a part, oversee what is happening and what will happen with the land where their future generations will live on’. The same is also true of environmental issues, with many across Argentina raising concerns about existing extraction methods and their impact upon water and soil resources for those living near the site.

There is an increasing need for stakeholder engagement throughout all three stages of the shale process (exploration, appraisal and production), to involve local communities in the decision making process and to reassure people that shale can be done safely. Lumerman underlined the limits of the current model of stakeholder engagement, calling for greater intra sectorial coordination between companies, transparency and communication with local communities. Currently, efforts are focused upon ‘trying to establish its relationship with the community through economic compensation efforts, communication campaigns or corporate social responsibility development programs that have little relation with the local development needs that communities are demanding for’. Adopting a proactive rather than a reactive approach to community engagement will be crucial to the success of the industry in Argentina.

Whilst praising the economic impact the shale industry has had so far in Argentina, noting that ‘investments in the shale development in Neuquén have generated over 5000 new jobs’, Lumerman has warned that ‘when you listen to communities and local government there is quite a lot of frustration’ and that giving the large scale of the expected investment, there is a risk of high level of overt conflict if this issues are not well transformed. Probably the biggest challenge is the capacity to change the tendencies and habits. There are 100 years of oil in Argentina. Some things have improved, but there is still a lot to do in order to improve the social and environmental performance of the industries on the overall economy and development process. Hopefully, the shale industry will learn from its experience across Europe, and particularly in the UK, with regard to the increasing importance of stakeholder and community engagement. Stakeholder engagement across Argentina needs to evolve to incorporate a two-way process of communication and feedback, open-dialogue with the public, approaches tailored toward specific stakeholder groups, transparency, sustainable solutions and a willingness of operators to adapt projects in light of discussion with stakeholders.

If the shale industry can successfully engage with stakeholders and community members across Argentina the industry there is certainly the one to watch over the course of the coming year. More on the subject of stakeholder engagement and the Argentine shale industry in general will be discussed by Lumerman and senior shale representatives at the Argentina Shale Gas and Oil Summit, to be held on May 18-19 in Buenos Aires.

The article was provided by the Argentina Shale Gas & Oil Summit 2015.