Argentina hydrocarbons watch: Mendoza project call, production incentives rules

Officials in Argentina’s Mendoza province are analyzing 14.8bn pesos (US$81.2mn) in hydrocarbons projects presented during the final round of a local investment incentives program.

Seven operators presented 18 projects, encompassing areas including well repair and workover, drilling and abandonment. 

“Currently, these projects are in the applicability evaluation phase from a technical-economic perspective, in accordance with the terms and conditions of the program,” the provincial government said in a statement. 

Combined, previous rounds of the program – whose initial goal of reactivating 200 wells has already been surpassed, by around 100 – have attracted 10bn pesos. 

Mendoza oil production is around 8,800m3/d or 268,400m3/month, according to federal energy department data. The provincial government said it aimed to reach 300,000m3/month by end-2026.

Under provincial program Mendoza Activa Hidrocarburos, qualifying companies obtain tax credits that can be used against provincial taxes and royalties.

State hydrocarbons company YPF has already committed US$17mn to explore for unconventional oil in Mendoza’s slice of the Vaca Muerta shale play.

Mendoza, where output is almost all conventional, is planning to auction 12 blocks this year.

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The federal energy department has issued further rules concerning a national program designed to spur hydrocarbons production by offering producers access to the foreign exchange market.

Argentina has capital controls to help defend the battered peso. Under the program, qualifying firms that ramp up output will be able to exchange a proportion of associated revenue to another currency. 

The latest rules, issued via resolution, encompass areas such as eligibility and documentation requirements and benefit-calculation mechanisms. They complement the central decree, No. 277 of May 2022, which outlined the regime.

Upstream firms are pressing the production accelerator, with appetites whetted by favorable prices on the international market, geopolitical shifts and investment in local midstream infrastructure. Because of domestic refining capacity restrictions, Argentina has to import some grades of gasoline and diesel, with new crude output being channeled to exports.

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