Economy Minister Martín Guzmán on Tuesday announced the creation of a new special regime for companies in the energy sector as part of a wider effort to boost the development of the Vaca Muerta shale formation.
Under the new scheme, Argentina will allow energy firms easier access to foreign currency, allowing them to bypass strict currency controls that are designed to protect Central Bank reserves. Many experts say such restrictions limit investment in the key sectors, including hydrocarbons.
The move aims to "generate certainty and incentives to encourage investment and increase production in the sector," said Guzmán, who said it would “solve the limitations and bottlenecks” facing firms and “guarantee the special equipment they require.”
"Given the need for Argentina to generate more foreign currency and for this to be achieved through more investment, we are going to create a special regime of access to foreign currency for hydrocarbon production, which will be crystallised through a decree," said the minister at a press conference, flanked by fellow officials and President Alberto Fernández.
In the case of oil, he explained that each firm that surpasses its 2021 production levels will be able to access foreign currency equivalent to 20 percent of its improved production. For natural gas, firms will be able to access 30 percent of the value of any incremental injections into Argentina’s pipeline network.
Guzmán, speaking at the Bicentennial Museum of the Casa Rosada, said the move would support the development of Argentina’s hydrocarbons sector. He claimed that production is improving, following a decline in 2021, as a result of the government’s Gas.Ar plan.
Referencing the international context and the impact of Russia’s invasion of Ukraine, the minister said that the country faces “a historic opportunity in which energy can play a transformational role.”
Argentina’s government wants to boost development at the Vaca Muerta formation in Patagonia, home to the world’s second-largest shale gas reserves and fourth-largest shale oil reserves. More than 20 companies are involved in the exploitation of the region, which is spread over 30,000 square kilometres, including Chevron, Shell, Total and Statoil, as well as state-owned energy firm YPF SA.
Since September 2019, Argentina has had exchange controls in place with a limited official rate of about 120 pesos for one dollar.
At the same time, currency can be exchanged at a rate of some 200 pesos to the dollar through debt bonds or on the informal market.
President Fernández recently announced that the country would build a massive new gas pipeline, the Gasoducto Néstor Kirchner, to boost exports and increase domestic supply. Currently at the tender stage, it could see capacity boosted by almost 40 million cubic metres per day.
"We have a great opportunity in terms of energy in Argentina. The next 15 years have great potential for development," said the president, who on a recent tour of Europe touted the country as a "stable future energy supplier."
The government estimates that oil production can increase by 70 percent and gas production by 30 percent over the next five years.
In recent months, Argentina has increased its production of hydrocarbons to reach a record 578,000 barrels per day in April – an increase of 13 percent in 12 months, said Energy Secretary Darío Martínez.
Gas production in the same month was 127 million cubic metres, an increase of 12 percent year-on-year.
That has allowed the country to reverse five years of decline in oil production, said Guzmán.