As detailed, it is a key measure to increase the scale of production and use the new transportation capacity that will be generated by the Néstor Kirchner Pipeline and private infrastructure works.
Official sources indicated that the initiative aims to resolve limitations and bottlenecks in the sector:
- making it easier for companies to access special equipment for incremental production
- guaranteeing new exchange regulations to allow an increase in Foreign Direct Investment in the sector
- promoting greater national added value in hydrocarbon production, and promoting federal growth in sectoral investment
The decree, which is expected to be published this Wednesday or Thursday in the Official Gazette, determines the creation of the Foreign Exchange Access Regime for Incremental Oil Production (RADPIP); a Foreign Exchange Access Regime for the Incremental Production of Natural Gas (RADPIGN); and a Regime for the Promotion of Employment, Work and the Development of Regional and National Suppliers of the Hydrocarbon Industry (RPEPNIH)
What are the benefits of the measure?
The officials explained that it will allow the key upstream investments for the development of the sector to be unlocked, it will enable the production of natural gas required to supply the Néstor Kirchner Gas Pipeline once the work is finished and it will promote the incremental production of oil to supply the internal market, the substitution of imports and the generation of exportable balances, thus strengthening the resilience of the balance of payments and the growth capacity of the Argentine economy
“The hydrocarbon sovereignty promoted by this decree will also allow the consistent improvement of public accounts through the reduction of energy subsidies,” they pointed out.
How will the measure be implemented?
In the standard, incremental production (injection) of oil (natural gas) is defined as the difference between the effective production of the last 12 months and the Baseline defined as the volume obtained by each company in 2021.
Then, the Beneficiary Incremental Production Volume (VPIB) and Beneficiary Incremental Injection Volume (VIIB) are established at 20% of the incremental production of crude oil and 30% of the incremental production of natural gas obtained by each beneficiary.
In addition, additional percentages will be obtained for the coverage of the domestic market, the reversal of the technical decline, the incremental production in low productivity wells, the contracting of local special service companies and the investment
What are the incentives?
The beneficiaries will have the right to access the Free Exchange Market, for an amount equivalent to their VPIB and/or VIIB, as appropriate, valued at the export price net of the corresponding duties and premiums. Access to foreign currency may be used to pay capital and interest on commercial or financial liabilities abroad, including liabilities with non-resident related companies, and/or profits and dividends, and/or repatriation of direct investments by non-residents.
This right may be totally or partially transferred to direct providers of the beneficiary for the same purposes available to the operator.
In this framework, the Government announced the projections for 2026 in the hydrocarbons sector. With the Néstor Kirchner Gas Pipeline (promoted by Decree 76/2022), the different infrastructure works included in the National Government’s Transportation Plan and this foreign exchange regulation, a set of key requirements are met to obtain, from now to 2026, the following results for the sector:
- 71.2% increase in oil production
- 30% in gas production per day
- up to 18,000 million dollars per year from the largest exports
- Up to 40% reduction in electricity subsidies thanks to the Transport.Ar Plan.
Source: Ambito
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