Argentina Offers Its Oil Industry A Favorable Forex Rate Ahead Of Elections

Argentina’s government has offered its oil industry a preferential foreign exchange rate a month ahead of the next presidential elections in a bid to get it on its side.

Called the CCL rate, it would give Argentine oil companies the opportunity to exchange 25% of the value of their oil and gas at 763 pesos per U.S. dollar, Reuters reports. The official rate for the local currency to the greenback is around 350 pesos per dollar.

"We made the decision to recognize 25% of what (energy companies) export and bring to Argentina to invest using the CCL value so that they increase investment levels over the next 60 days in the oil and gas sector," Economy Minister Serio Massa said at an event in the Vaca Muerta shale play.

In August, Argentine oil companies said the elections, whatever their outcome, would not have any significant impact on their business. The vote is taking place on October 22.

Crude oil production from Argentina’s massive Vaca Muerta shale play could take off, topping 1 million bpd by the end of this decade, Rystad Energy said in May. But that was predicated on takeaway capacity and drilling rig availability not limiting its growth.

If production is unimpeded by those factors, oil production could grow from just under 300,000 bpd to more than 1 million in the second half of 2030, Rystad suggested. If that panned out, it would help the Neuquen region in Argentina become a net oil exporter and contribute as much as $20 billion in total revenue by 2030.

Well productivity in the Vaca Muerta shale play has already surpassed its U.S. shale peers. If the forecast 1 million bpd in output becomes reality it would go a long way towards helping Argentina’s ailing economy, with the inflation rate at 124%.

By Charles Kennedy for Oilprice.com

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