Argentina revises hydrocarbons law to include shale, offshore gas

By CHARLIE DEVEREUX
Bloomberg

Argentine lawmakers approved a revision of the oil law to include regulations for shale and offshore oil and gas exploration as the nation seeks to boost investment in its Vaca Muerta formation.

The bill was approved by 130 votes for and 116 against with 1 abstention. The bill must now be signed by President Cristina Fernandez de Kirchner and published in the Official Gazette.

The vote follows four months of negotiations between Fernandez’s government, state-controlled oil company YPF and governors from 10 provinces about how to distribute revenue from the country’s shale oil reserves, the fourth-biggest in the world.

Argentina is seeking to boost production in a bid to become self-sufficient in energy and cut imports that are eating into the central bank’s dwindling international reserves.

Among the benefits for oil producers, the new bill will allow energy companies that invest $250 million over a three- year period to sell 20% of production in international markets without paying export taxes and to keep some export revenue outside the country for shale and conventional projects.

The benefit will apply to 60% of output from offshore projects.

The bill separates conventional, shale, and offshore to include the latter two areas, which weren’t part of the 1967 law. Shale and offshore fields will have concessions granted for 35 years in order to help companies to amortize investments.

Royalties will be capped at the same level nationwide starting at 12% plus 3% in provincial net income tax. Provinces also will agree to a unified federal auction system that will replace the current one that varies from province to province.

While YPF has partnered with Chevron and Dow Chemical to tap the shale deposits, eliminating the energy deficit is at least five years away, Fernandez said April 24.

Argentina was the largest importer of spot and short-term liquefied natural gas (LNG) in the Americas last year.

Royal Dutch Shell, ExxonMobil and Madalena Energy are among the companies drilling wells in Vaca Muerta, a Belgium-sized shale formation, in a preliminary phase that may increase investments once the bill is fully approved.

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