Argentina's YPF pushes federal control

Argentina leasing: YPF chief Miguel Galuccio in push for more federal control

A push by Argentina state oil company YPF to exert more control over provincial shale leasing could be headed to the nation's congress, with a bill reportedly in discussion to change the legal framework.

The La Politica online news source reported on Friday that Argentina president Cristina Fernandez de Kirchner is poised to advance a proposal written in collaboration with YPF chief executive Miguel Galuccio to ramp up the federal government's sway in the management of the nation's resources.

A regime decentralised in 2006 gives provincial authorities wide autonomy on leasing and royalties, which has given new power and prowess to potentially shale-rich states such as Neuquen and Mendoza whose governments see huge economic development opportunities.

La Politica continued that officials from the 10 members of the Federal Organization of Hydrocarbon Producing States (OFPEHI) are to meet with Kirchner administration officials on Monday to discuss the matter.

Officials from neither province nor from YPF immediately responded to detailed requests for comment from Upstream on Friday afternoon but Martin Buzzi, president of the organisation, made his thoughts clear in an interview on Friday with Radio Chubut cited by La Politica.

"Of course we are going to defend tooth and nail what we have achieved, our hydrocarbons sovereignty of resource management."

Both states, in collaboration with their respective provincial oil companies, launched international bid rounds for potential acreage since the first of the year.

In the wake of those proceedings YPF has been increasingly irked to find itself in competition for oil investors with these provincial actors, which work under a carry arrangement.

Accordingly they are not obliged to put up the steep investment commitments YPF has shouldered or conform to its national parametres for energy investment.

The tensions came to a head in late May when Galuccio criticised the province-centred regime at an event on 22 May in Chubut, another oil-producing state, calling it a "regressive" system.

Galuccio made public his belief that the carry system limits private investment and leaves companies too cautious, leading to concerns about underinvestment, he said according to a report from the business newspaper Cronista.

In Neuquen province, whose Gas y Petroleo de Neuquen (GyP) local oil company has a 10% stake in projects, governor Jorge Sapag also responded to the criticism.

"It is not a parasitic scheme," he said in an interview with La Politica.

"It means that the private company spends 100% of the investment during the exploratory pilot phase and when it begins to earn money, the provincial oil company returns this money with its production.

"It is to say, the carry has a financial cost for the investor, but it is not an absolute cost."

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