17 July 2013 23:49 [Source: ICIS news]
MEDELLIN, Colombia (ICIS)--Argentina’s export and foreign-exchange incentive programme for producers who invest in the country’s hydrocarbons sector is not enough to attract foreign investment, a ratings agency said on Wednesday.
The scheme, unveiled on Monday, allows companies who invest more than $1bn (€760m) over a five-year period in Argentine oil and gas projects to export 20% of their production tax-free.
The scheme also gives producers free access to foreign exchange earnings, a benefit denied to other companies that are required to repatriate such income.
Fitch Ratings considered the scheme “insufficient by itself to trigger considerable investment in the Argentine oil and gas sector, as the regulatory environment continues to be highly uncertain”.
The ratings agency also warned against political uncertainty, as the mandatory five-year qualification period for the scheme will extend beyond Argentine presidential elections that are scheduled to be held in October 2015.
Fitch’s assessment comes a day after Chevron and Argentina’s state-run oil company, YPF, signed an agreement to develop the Vaca Muerta shale fields in Argentina’s Neuquen basin – evidence of foreign investors’ interest, the ratings agency said.
According to the US Energy Information Administration (EIA), Argentina has the world’s second largest shale gas reserves, with an estimated 802 trillion cubic feet (tcf) of recoverable gas, much of which lies in the Vaca Muerta formation.
However, in order to attract the investment to fully develop this potential, a “robust regulatory environment, long-term predictability and ability to transfer dividends abroad are key factors”, Fitch said.
In related news, members of Argentina’s Mapuche indigenous community, who had been occupying YPF-owned oil wells in protest against Chevron’s involvement in Vaca Muerta, have agreed to meet executives from YPF to resolve the dispute.
Members are concerned that the controversial practice of hydraulic fracturing, or fracking, on territory belonging to the community, will endanger the wellbeing of its residents and the local environment.
“We have accepted YPF’s proposal for a meeting,” the group said in a statement. “However, we will continue to oppose Chevron’s presence on Mapuche lands.”
($1 = €0.76)
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