Argentina passes controversial oil and gas reforms

Thursday, October 30, 2014

Argentina's lower house passed into law an energy bill designed to attract foreign investment in the local hydrocarbons sector, state media reported.

The reforms overhaul the country's current hydrocarbon law from 1967, establishing different concession terms for conventional, unconventional and offshore licenses.

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The new law prohibits the practice of setting aside blocks for state-run companies, as well as the carrying model, under which state-run companies could participate in the development phase of concessions without making a proportional investment.

The country's 10 oil and gas producing provinces maintain ownership of their respective hydrocarbon resources under the law, and will continue to administer E&P auctions.

The law establishes a national auction model and royalty scheme, under which provincial royalties are set at 12%. Provinces can increase the rate by 3pp with each license extension, with a cap at 18%.

The controversial bill passed by a margin of 130-116.

"Even though there's a new law with new incentives, there's still the fear that you can invest in the country and not be allowed to retain your profits or move your money freely," former Bolivian energy minister Álvaro Ríos told BNamericas.

Despite being home to the world's most promising shale reserves outside of North America, Argentina's hydrocarbon production has fallen steadily during the last decade.

The legislation aims to return the country to energy self-sufficiency.

The full interview with Ríos, who now co-directs the consultancy Gas Energy, will be available Monday.

BNamericas will host its 11th Southern Cone Energy Summit in Lima, Peru, on November 12-13. Click here to download the agenda.