Argentina weighs oil law update

Argentina regime: Officials weighing changes to streamline process with investors

Argentine federal officials and governors of oil-producing provinces met in Buenos Aires on Tuesday, kicking off discussion on changes to country's oil framework to encourage shale development and integrate efforts between national and provincial governments.

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.

Argentina President Cristina Fernandez de Kirchner met with the Federal Organization of Hydrocarbon Producing States (OFEPHI_ in the wake of tensions between local oil officials and state-led YPF on lease offerings.

Cabinet chief Jorge Capitanich struck a conciliatory tone Wednesday morning in a daily press briefing, saying the government has proposed an agreement between the provinces and nation aimed at developing a uniform regime for taxes and tenders such as bid offerings.

Energy self-sufficiency is "a strategic objective of the government and the effort should not be from the nation, it has to be a concurrent effort between the country and the provinces," Capitanich said according to a transcript.

Incentives for developing unconventional and mature fields should also be clearly set out in a regulatory framework, the federal official continued.

Jorge Sapag, governor of shale-rich Neuquen, on Wednesday sought to allay worries that the federal government would trample on provincial rights or the law that established them. Instead the negotiations will target changes to the national hydrocarbons regime to pave the way for better collaboration.

"What we have to see is how to fill the gaps in the 1967 hydrocarbons law that does not have precise norms for this level of investment in unconventional resources," Sapag said.

Both Neuquen and Mendoza, 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 YPF chief Miguel 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.

Bloomberg quoted cabinet chief Capitanich as saying the government was weighing a proposal that would allow investors of $250 million over five years to sell 20% of output externally.

Those investors would also be off the hook for export taxes and would be able to maintain some of that revenue outside the country, the news wire reported.

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