Argentina announces incentive package for energy investors

15 July 2013 22:37  [Source: ICIS news]

MEDELLIN, Colombia (ICIS)--Argentina’s government announced on Monday an export and foreign exchange incentive package for companies that invest $1bn (€770m) or more over a minimum five-year period in the country’s conventional and non-conventional hydrocarbons sector.

According to a decree published in the government’s official daily gazette, Argentina will allow companies, on completion of the five-year period, to export 20% of crude and natural gas production tax-free.

The initiative also aims to reduce the controls that have restricted how many US dollars can leave the country by allowing those companies access to 100% of foreign exchange earnings from such exports.

The announcement comes a day before Argentine state energy company Yacimientos Petroliferos Fiscales (YPF) is expected to sign off a $1.5bn deal with US oil major Chevron to develop part of the vast Vaca Muerta shale fields in western Argentina.

Argentina’s government hopes that the initiative will lure more investors to partner YPF in the development of the country’s vast shale oil and gas deposits.

The government has made clear its intentions to overturn dwindling energy production, reduce imports and become energy independent.

The country became a net importer of energy for the first time in 2011, according to the country’s Energy Secretariat.

However, potential partners have been deterred by heavy-handed regulation, severe currency controls and an inflation rate that currently stands at around 10.5%.

The fallout from Argentina’s expropriation of Repsol’s majority share in YPF in May 2012, and the protracted negotiations to agree on a compensation package for the Spanish company, has further spooked overseas investors.

However, YPF has managed to strike some deals to develop shale prospects in Argentina.

In addition to the Chevron deal, ExxonMobil plans to spend $250m to study formations in Vaca Muerta, while Dow Chemical signed a memorandum of understanding with YPF for the development of the El Orejano field.

According to reports, Norway’s Statoil and Sino-Argentine company Bridas are also in talks with YPF about possible exploration agreements.

($1 = €0.77)

By: Simon West

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