US$80bn investments awaiting Rigi regulation in Argentina
Investments approaching US$80 billion have been announced in Argentina's energy, mining and hydrocarbon sectors, most of which are likely to benefit from the Rigi investment incentive regime that the government included in the framework law passed in July.
The regulations for the Rigi scheme have not yet been published, and once that happens, there are high expectations that more investments will be lined up.
The investments outlined for the energy and hydrocarbons industries amount to US$54.3bn, central bank deputy governor Vladimir Werning said at a recent economic conference, with the standout being an agreement by oil companies YPF and Petronas to build a US$30bn LNG plant in Rio Negro province to provide an export hub for output from the Vaca Muerta formation.
Meanwhile, six copper mining projects have been announced for a combined US$20.5bn, as well as six lithium production projects involving capex of US$3.8bn.
The benefits of a 30-year period of stability offered by the Rigi system to projects with minimum capex of US$200 million have drawn the attention of investors, but the regulations must be made clear and alignment of the national planning agenda with the provinces is required to build the necessary associated infrastructure to convince them, according to the governors of Mendoza, Jujuy, Neuquén and Chubut provinces, meeting at an event of the Council of the Americas held in Buenos Aires this month.
Although Rigi requires the provinces to adhere to the program, the fiscal, tax, customs, currency exchange facilities and export permits can only be guaranteed by the federal government.
However, optimism has been raised by the announcement of a deal between BHP and Lundin at the end of July to advance the Josemaría and Filo del Sol (FDS) copper projects, which involve the investment of US$4bn and US$2bn, respectively.
Those expectations have also been boosted by the First Quantum reaffirmation that it will pump US$3.6bn into the Taca Taca initiative, McEwen's investment of US$2.5bn in Los Azules and Glencore's announcement of US$2.78bn for Mara and US$5.6bn for El Pachón.
Meanwhile, in the lithium segment, Eramet is set to invest US$870mn in Centenario-Ratones, Gangfeng US$600mn in Mariana, Posco US$830mn in Sal de Oro and Zijin Mining US$700mn in Tres Quebradas. Arcadium Lithium has also said that it will continue to invest in Argentina, as well as several other prospects in the pipeline, weighing up combined capex of US$824mn to be split between its Sal de Vida and Fenix projects.
GOVERNORS AND RIGI
At the Council of the Americas event in Buenos Aires to discuss Argentina's economic prospects, Mendoza governor Alfredo Cornejo said that Rigi will promote growth in the province's energy and mining sectors and will allow development of the area of Vaca Muerta that lies in the province. Most of the formation is in Neuquén province.
The governor of Jujuy, Carlos Sadir, said that through Rigi, two lithium operations in the province (Salar de Olaroz and Cauchari-Olaroz) will together be able to achieve output of 80,000t/y of lithium carbonate equivalent, and underscored that there are already four or five other projects that have been announced in the jurisdiction.
He also said he was confident in the expansion of renewable energies in Jujuy, with works lined up such as the expansion of the Cauchari IV and V solar plant by Shanghai Electric Power, which will expand its current capacity by 200MW to 500MW with an investment of US$200mn.
Neuquén governor Rolando Figueroa pointed out that his province has several investments underway in the oil and gas sector, such as Vaca Muerta Sur, a US$660mn project that includes the construction of a 700km oil pipeline. He added that negotiations are underway with international organizations such as CAF, the IDB and the World Bank to obtain financing for associated infrastructure.
Meanwhile, Chubut governor Ignacio Torres called for the optimization of logistics and port operations in collaboration with Chile to promote the establishment of interoceanic corridors and to boost industrial output.
HYDROCARBONS
Other upstream hydrocarbon projects that could receive a boost from Rigi, according to a report by local consultancy Paspartú, include:
- Expansion of unconventional exploitation of the Trapial deposit, north of Vaca Muerta, by Chevron.
- Construction of a transformer station in Zorro III and a 132Kv power line in the Anticlinal Grande-Cerro Dragón area of Pan American Energy.
- Increase in gas processing at Pluspetrol's La Calera field.
- Expansion of unconventional gas production at Tecpetrol's Fortín de Piedra project.
- Construction of shale oil plant Bajada de Añelo by Shell (unconventional oil, gas condensate).
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