At a glance: Key changes coming for Argentina’s hydrocarbons sector

The framework economic reform bill greenlit recently by Argentina’s congress contains multiple measures poised to impact the local oil and gas industry.

Two chief pillars are deregulation and investment-promotion, the latter area addressed via the Rigi regime.

Deregulation

In terms of deregulation, the bill – which has not yet entered the statute books and will require secondary legislation to govern its implementation – covers multiple areas.

Under a landmark shift, the requirement to give priority to satisfying the needs of the internal market ends. Instead, policy goals are maximizing profitability while “satisfying the hydrocarbons needs of the country,” local energy consultancy Paspartú says in a special report. 

Producers will be free to export and the executive branch will not intervene in terms of pricing. However, the text states that export freedom is subject to the federal energy department not objecting within a specified timeframe.

Currently, oil and gas producers must seek authorization from the federal energy department, with the objective of ensuring that domestic demand is met.

Among other changes, exports of piped gas – the bulk of which are currently sent to Chile – would be governed by secondary legislation. Given the strategic importance of piped gas and seasonal shortfalls, the fine-print may grant a degree of state control.  

For LNG, producers would be given unrestricted rights to export on a firm basis for up to 30 years, extendable by 20 more.

Argentina does not export LNG but state-controlled hydrocarbons company YPF is among those with projects. 

Rigi

Projects requiring outlay of US$200mn or more and belonging to one of the following sectors can apply to Rigi: forestry, tourism, infrastructure, mining, technology, steel, electric power, and oil and gas.

Qualifying projects will receive tax, customs and forex benefits, with legal and regulatory stability established for 30 years.

Projects have up to two years to adhere and have to deploy, within two years, at least 40% of the minimum investment agreed.

A special category, known as long-term strategic exportation, will be established for projects with price tags of over US$1bn, according to a report from corporate affairs and marketing company LLYC. 

Project owners will be gradually given greater access to the foreign currency generated, starting at 20% from year two (from year one for long-term strategic export projects), climbing to 100% from year four.

Among other changes, the requirement to pay export duties, usually called retenciones will be scrapped from year three (from year two for long-term strategic export projects).

Also, new capital goods, including spare parts and consumables, can be imported freely, without being subject to the likes of import duties. 

In terms of local content requirements, a minimum of 20% of payments to suppliers must be directed to domestic players. 

Income tax will be established at 25%, compared with rates today of up to 35%.

A key demand of the private sector in Argentina is free access to foreign currency earnings, which has been crimped since currency controls were put in place amid market turbulence in 2019.

Privatization

Among state-controlled companies deemed “subject to privatization” in the bill is energy firm Energía Argentina, which is currently carrying out the Gasoducto Norte flow-reversal project.

Energía Argentina completed the first phase of the Vaca Muerta gas production debottlenecking project. 

In related news, the federal government is looking to offload its stake in Mendoza power generation infrastructure company Impsa to a North American investor, local press reported.

The state holds around 63% of Impsa, a stake obtained in 2021 when the company was in financial distress.