Snapshot: Reactions to Argentina’s hydrocarbons promotion bill

Argentina’s government recently published its hydrocarbons promotion bill, ending months of speculation.

A key objective of the draft legislation is boosting hydrocarbons exports and, in turn, the flow of much-needed foreign currency into the cash-strapped country.

Reaction to the draft legislation is starting to emerge. A central concern of provinces that chiefly produce conventionals is that investment and activity may center on ramping up production for export at shale play Vaca Muerta.

The bill contains 115 articles, spanning the oil and gas sectors. Along with crude exports and forex rules, areas addressed include gas development, participation of local providers and incentives for major infrastructure projects. Under one exploration-promotion measure, incentives can be obtained by carrying out projects that involve outlay from US$6mn. Tax incentives for concession-sharing are also considered.

Neuquén

Sitting on the biggest chunk of the Vaca Muerta formation, Neuquén is Argentina’s top oil-producing province, pumping out 31,034m3/d in July, according to federal energy department data. No. 2 jurisdiction Chubut produced 21,898m3/d. 

In a statement, Neuquén governor Omar Gutiérrez said he supported legislative efforts to promote the sector but that provincial autonomy in the spheres of taxation, royalties, property rights and administration of resources must be respected. The bill creates a hydrocarbons investment council, comprising federal officials. The council would manage a promotion regime for exploration, production, industrialization, storage and/or transport projects. 

Vaca Muerta is viewed as Argentina’s hydrocarbons golden goose on account of its oil and gas growth potential.

Unconventionals heavyweight Neuqúen is also Argentina’s biggest gas-producing province, reporting 78.2Mm3/d for July, compared with 14.4Mm3/d produced offshore (Argentine state) and 9.55Mm3/d produced by Santa Cruz province, ranked 3.

Mendoza

The province, which reported 9,011m3/d of oil in July and 2.07Mm3/d gas, chiefly produces conventional hydrocarbons for the domestic market.

Mendoza economy and energy minister Enrique Vaquié said the bill sounded the alarm bells.

“Something that the national government made very clear concerns me: and that is that the main goal is obtaining dollars,” Vaquié was quoted as saying by local media outlet Los Andes. “That is bad for us, because we’re a province that is not dedicated to exporting oil or gas. We’re therefore going to be relegated.”

Chubut

Gustavo Menna, an opposition lower house lawmaker representing Chubut province, said the bill “jeopardizes activity and investment in the San Jorge gulf basin,” local media outlet El Chubut reported.

Conventionals-focused Chubut produced 8.05Mm3/d gas in July.

Tierra del Fuego

Tierra del Fuego provincial governor Gustavo Melella said in a statement that “we have to examine the bill, study it in depth.”

Tierra del Fuego produced 995m3/d of oil in July. The conventionals jurisdiction is the No. 4 gas player, producing 8.90Mm3/d.

Shell Argentina

Shell Argentina CEO Sean Rooney was quoted as saying by state news agency Télam: “Argentina’s natural resources are a strength and must be taken advantage of better; this initiative will generate opportunities to attract investment.”

Total Austral

On the bill, Carlos Seijo of Total Austral was quoted as saying by Télam that “it’s a job that has taken more than two years and which generates confidence and predictability for the industry to invest in the medium and long term.”

YPF

The state news agency quoted YPF chairman Pablo González as saying the legislative initiative would have a “very strong” impact and that the state-controlled oil company had been involved in the drafting process. YPF told reporters that the company’s investment next year could hit US$3.5bn. Its capex goal for 2021 is US$2.7bn.