Argentinian Energy Secretary Dario Martinez said June 16 that a long-awaited bill for promoting investment in the oil industry is in its final stages of drafting and consultation with industry and political leaders, adding that he expects it to speed up oil and natural gas production growth.
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"The bill will make it possible for investment to come to Argentina and this brings more production and more activity," he said in an energy seminar hosted by Diario Rio Negro newspaper.
The key aspects of the bill, he added, are to provide long-term exchange rate and tax stability, as well as incentives for production, investment and exports. These include mechanisms for companies to export increasing amounts of oil and gas under long-term contracts, plus incentives for underground gas storage and the development of the country's largely untapped offshore acreage.
Martinez said the bill, which was first announced at the end of 2019, has taken time because it is important to achieve a consensus of different political parties as well as companies, unions and governors for it to be successful over time.
"We are working on various alternatives," he said.
Martinez declined to say when it could go to Congress for review but suggested that it was a government priority.
"We want it as soon as possible," he said.
President Alberto Fernandez announced plans May 1 to submit the bill to Congress this year.
This has built up expectations in the oil industry for when it will become law, something that Martinez said shows "the willingness" of companies to invest in oil and gas because "there are big opportunities."
Much of the focus is on Vaca Muerta, a shale play so large it can supply all of Argentina's energy needs and export the surplus.
Light sweet crude from the play in northern Patagonia has been exported on occasions since late 2019, while some gas is going to Brazil, Chile and Uruguay. But if enough investment is made the play could double the country's oil production to 1 million b/d, allowing exports to surge to 500,000 b/d from less than 70,000 b/d in the next few years. Gas exports will take longer, however, given that billions of dollars must be invested in building pipelines and a liquefaction terminal.
Not much time
At the same event, Omar Gutierrez, the governor of Neuquen, the country's biggest source of oil and gas and home to much of Vaca Muerta, called on the national government to quickly submit the bill to Congress, saying this will give companies time to factor the shale play into their future investment plans.
"The oil promotion law mustn't take more than 90 days to become official because that is when companies close their budgets for the following year," he said.
Rising oil production
Gutierrez said he expects investment to total $3.8 billion this year in Neuquen, of which 70% is going into oil and 30% into gas.
The investment, he added, should take the province's oil production to 235,000 b/d by the end of the year. That would be up from 187,410 b/d in April, according to latest data from the province's Energy Ministry.
With the oil incentives law, Gutierrez said investment could reach $5 billion a year in Neuquen, which would be higher than the most recent record of $4.4 billion in 2019.
A number of companies are betting on Vaca Muerta for production growth. On June 15, Shell said it plans to drill an average 30 wells a year in the play's oil window to boost output to 42,000 b/d by 2022 from a current 15,000 b/d, helping to fill a new processing plant.
Gutierrez said that Exxon is increasing its processing capacity in Vaca Muerta by 6,000 b/d, while Argentina's state-backed YPF is adding 117,000 b/d of capacity. Mexico's Vista Oil & Gas, BP-backed Pan American Energy and London-based Phoenix Global Resources are preparing investments to boost output, he added.
A big challenge, however, will be to find markets for the additional output, the governor said, adding that a key will be to refurbish a 100,000 b/d pipeline to Chile for exporting via the Pacific.
"It's very important that we advance rapidly" in a national strategy to develop the country's oil and gas resources by establishing conditions that lure companies, Gutierrez said. "In attracting investment, Vaca Muerta competes with the rest of the basins in the world."