Argentina to phase out natural gas subsidies nationwide

Tuesday, October 11, 2016

Argentina enacted a new pricing scheme on Friday for natural gas consumption by the residential, commercial and SME segments.

The plan, made official through a series of resolutions published in the official gazette by natural gas regulator Enargas, involves a nationwide phase-out of government subsidies for gas consumption between now and 2022.

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For most of the country, including capital Buenos Aires, the removal of subsidies will be complete by 2019.

At a press conference, energy and mining minister Juan José Aranguren stressed the necessity of the rate hikes in order to ensure sustainable growth of local E&P, and to incentivize rational consumption of the fuel.

The new framework follows public hearings that were held last month to address concerns from various stakeholders about the subsidy reform, which was among the first priorities of President Mauricio Macri's government after Macri assumed office in December 2015.

The ministry first raised rates in April, a measure that the supreme court nullified for the residential segment, on the grounds that authorities failed to hold public hearings before raising them.

The ministry then held the required hearings, at which Aranguren proposed a more gradual plan to lift subsidies than the one originally imposed, leading to the resolutions that were published on Friday.

Citing that only 60% of Argentines currently have access to natural gas, Aranguren said the country must expand its pipeline network.

Aranguren also reiterated previous assertions that the government currently subsidizes 81% of gas consumption, and that Argentines consequently consume 60% more natural gas per capita than neighboring countries.