• 35 mins Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 3 hours Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 4 hours Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 5 hours OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 6 hours London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 7 hours Rosneft Signs $400M Deal With Kurdistan
  • 9 hours Kinder Morgan Warns About Trans Mountain Delays
  • 16 hours India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 21 hours Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 1 day Russia, Saudis Team Up To Boost Fracking Tech
  • 1 day Conflicting News Spurs Doubt On Aramco IPO
  • 1 day Exxon Starts Production At New Refinery In Texas
  • 1 day Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 2 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 2 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 2 days China To Take 5% Of Rosneft’s Output In New Deal
  • 2 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 2 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 2 days VW Fails To Secure Critical Commodity For EVs
  • 2 days Enbridge Pipeline Expansion Finally Approved
  • 2 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 2 days OPEC Oil Deal Compliance Falls To 86%
  • 3 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 3 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 3 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 3 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 3 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 3 days Aramco Says No Plans To Shelve IPO
  • 6 days Trump Passes Iran Nuclear Deal Back to Congress
  • 6 days Texas Shutters More Coal-Fired Plants
  • 6 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 6 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 6 days Chevron Quits Australian Deepwater Oil Exploration
  • 7 days Europe Braces For End Of Iran Nuclear Deal
  • 7 days Renewable Energy Startup Powering Native American Protest Camp
  • 7 days Husky Energy Set To Restart Pipeline
  • 7 days Russia, Morocco Sign String Of Energy And Military Deals
  • 7 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 7 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 7 days India Needs Help To Boost Oil Production
Alt Text

The Next Big Digital Disruption In Energy

Blockchain technology is transforming the…

Alt Text

Russia And China Continue To Boost Oil Ties

The Russia-China alliance is strengthening…

Alt Text

A New Oil Crisis Is Developing In The Middle East

As Iraqi-Kurds prepare to fight…

Juan Cruz Diaz & Lisa Viscidi

Juan Cruz Diaz & Lisa Viscidi

Juan Cruz Díaz is Managing Director of Cefeidas Group an international advisory firm based in Buenos Aires, Argentina. At Cefeidas, Mr Díaz advises investors, corporations,…

More Info

Why Investors Shouldn’t Overlook Argentina’s Energy Reforms

Why Investors Shouldn’t Overlook Argentina’s Energy Reforms

With presidential elections looming next October, international investors eyeing Argentina’s potentially prolific shale gas plays are biding their time. Cristina Kirchner is now well into her last term, marking the end of a government that has heavily regulated the energy industry and imposed economic restrictions that discourage foreign investment. But while anxious for a new administration to take power, investors must realize that some of the important reforms taking place today will set the stage for conditions in the energy sector for years to come.

Argentina’s nascent shale industry represents one of the most promising frontiers for unconventional oil and gas development outside of the US. According to recent studies, the country boasts the second largest shale gas and fourth largest shale oil deposits in the world.

Multinational companies, such as Chevron, ExxonMobil and Total, as well as local players including Pan American Energy and Pluspetrol, have already started planning and operations within Argentina. But despite this level of international interest – as well as a substantial increase in activity by state-owned YPF – output is still far below the levels needed to make Argentina’s shale industry profitable or to have significant flow-on effects for the national economy.

Related: South America: The World's Next Unconventional Frontier?

A new hydrocarbons law approved by Argentina’s congress in the early hours of Thursday morning will establish a fresh regulatory framework intended to accelerate investment in the country’s shale resources. The deal – which was hammered out during intense negotiations between the governors of Argentina’s oil-producing provinces, the federal government and YPF – will build on a 1994 constitutional reform and other laws and decrees that regulate the industry and give ownership of Argentina’s natural resources to the country’s 23 provinces.

The law aims to simplify investment standards and streamline processes for the oil industry. It requires the provinces and the federal government to jointly establish a uniform model for bidding terms and conditions for new permits and concessions. Lawmakers also responded to some of the industry’s concerns by shortening exploration license periods, extending production terms and introducing a special type of concession for unconventional resources. The framework also creates fiscal incentives while limiting the taxes and royalties that provinces can levy on oil and gas ventures. Other benefits include the right to export a percentage of oil and gas production and to maintain associated export proceeds abroad.

Argentina’s opposition parties argue that a reform of this scale and importance to the economy should have been passed by the next administration. They also criticize the bill’s failure to revise environmental regulations, particularly given concerns over the safety of hydraulic fracturing. Others complain the new framework disproportionately benefits large oil and gas companies and adversely affects provincial rights. While some of these concerns will surely be taken up by the next president, the current reforms will help create incentives for investors that could fuel a long-term expansion of the oil and gas industry.

Related: Soros Signals Argentina’s Shale is Biggest Place to Be

Yet even as these reforms take root, the next government will have to address broader challenges, both at home and abroad. These include the lack of stability in the regulatory framework, restrictive economic policies, and declining commodity prices that could continue to hinder the large-scale development of energy resources. Furthermore, growing macro imbalances pose financial constraints for oil and gas companies in Argentina. Complex foreign exchange controls, trade restrictions, and heavily regulated and subsidized domestic energy prices have deterred exploratory and drilling activity -- even in highly promising areas such as Neuquén Province’s Vaca Muerta field.

Similar to many other countries with shale reserves, Argentina must also navigate the technical challenges and development costs associated with shale oil and gas. The country lacks many of the features that facilitated the rapid development of the shale industry in the United States, including private land and mineral rights ownership, technology innovation, and a favorable macroeconomic framework.

Developing shale resources is no doubt a long-term game and commercial volumes will likely flow only well after the political transition in Argentina takes place. The next administration, whichever party comes to power, will likely implement new policies favorable to shale and the industry more broadly. But this week’s reforms represent a significant first step.

By Juan Cruz Diaz and Lisa Viscidi

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Hernan on November 02 2014 said:
    Doing business in Argentina is a lot like doing business in North Korea. "Investors" are not being told about Argentine "supply law" that allows that government to determine how much a company must produce and what its allowable profit margins may be. Those elements are determined arbitrarily by some third-level government functionary. Think you might someday be able to repatriate your capital? Forget it. This is the new, Marxist Argentina, with unprecedented high risk to investors and a long and sordid history of Argentina failing to respect contracts with foreign investors. We've already seen two sovereign debt defaults here just in 2014, with over 40 percent inflation for this year. Even Soros is losing hundreds of millions every month from his foolhardy attempts in Argentina.
  • Genaro Ortiz on November 06 2014 said:
    Words and words made and said by any government statement in the Argentina of nowadays, simply reveals the high degree of sarcasm of any given government bureaucrat to investors. The development of non-conventional oil and gas requires a gigantic long term investment clear and trustful vision, that - I regret to say - Argentina's government officials have lost it and/or don't have it; and, Argentinian politicians don't know that word, trust!!!

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News