After repeated announcements, finally this Monday Promotion bills for Liquefied Natural Gas (LNG) and green hydrogen entered Congress. They seek to establish rules for the next 30 years so that Argentina can develop its resources in a world that accelerates the energy transition. The fine print includes in both cases withholdings and access to foreign currency for a percentage of exports. Although it is lower than the requirements requested by the companies, it is higher than what was established in the first official drafts.
Thus, official sources hope that, once they are approved, million-dollar investments can be made, in a context where the Minister of Economy, Sergio Massa, arrives in China and a large part of the agenda will be focused on energy. However, from the Government they had assured that the income of the projects would possibly also include that of the lithium industrializationa key mineral also for the energy transition, but that did not happen, despite the fact that Vice President Cristina Kirchner publicly claimed to have a “strategic vision.”
This Monday he entered the Chamber of Deputies the bill with the legal regime for the promotion of LNG production and its associated activities, such as storage, marketing, transportation and infrastructure installation. There are at least three projects by companies with investments that could exceed US$10,000 million, but without a regulatory framework they will not advance, they told Ámbito.
In 38 itemsthe project to which Ámbito agreed establishes that Argentina has the opportunity to become an exporter of liquefied natural gas, in a world that requires LNG as an “intermediate fuel for the energy transition”, and given that it has resources estimated at 800 trillion cubic feet of gas, with estimated supply for more than 300 years.
Those interested may present their investment projects during the next five years, from the publication of the standard, and the benefits will extend during the 30 years after starting liquefaction. The basic requirement to access will be that the project has a Investment commitment of at least US$1,000 millionand a minimum production capacity of one million tons of LNG per year.
In addition to detailing the benefits in tax matters, there are three points that companies will look very closely: access to foreign currency, withholdings and export permits. Regarding exchange advantages, the project will allow companies access dollars for a free amount of up to 50% of the foreign currency obtained from exports, to allocate to the payment of principal and interest, and to the payment of profits and dividends. In the first drafts, this amount reached 20%, through which the YPF-Petronas mega project remained virtually down. High YPF sources assured that with 50%, the Malaysian state oil company would be willing to move forward.
Regarding export duties, the bill establishes mobile withholdings. As the text says, “rates according to the international price of LNG”. It will be 0% if the price is less than US$15 per million BTU, and 8% if it is higher than US$20, as is the case in the hydrocarbons sector in all cases.
Another central point is that of firm export permits: the bill authorizes exports 365 days a year for 30 years. But, it makes it clear that it may be required 180 days in advance that for the winter months (June, July and August) companies can offer 10% of the LNG produced in said period to the domestic market.
The project includes a point that they had been demanding from Casa Rosada, through the Secretariat for Strategic Affairs: that the Investments reach a minimum of 15% national content, which rises to 50% as the years go by.
Although the green hydrogen bill had been sent to Congress two weeks ago, due to an error it returned to the Ministry of Economy and entered Deputies again this Monday. It is also a promotional regime for low-emission hydrogen, an energy that will seek to change the global energy matrix to reduce greenhouse gases. Argentina could be an important player “given the quality of its natural resources.”
The project of 50 itemshas fiscal stability for 30 years and access to dollars for up to 50% of exportsalthough it clarifies that Economy “It may increase the amount of free application in proportion to the incremental exports.” Regarding export duties, it establishes that they will be 0% during the first ten years of green or pink hydrogen, and will increase depending on whether it is green, pink or blue hydrogen, and depending on the term. The maximum is 4.5% for blue hydrogen after 20 years of exports.
Where there is expected to be controversy, according to sources from the private sector, It is in the order of national content. The bill establishes that to apply to the benefits, integration of the national content for hydrogen plants is required for at least 35% during the first five years, and then reaches 50%.