By Taos Turner
BUENOS AIRES--Argentina aims to make it easier and more
profitable for companies to invest in its oil and gas industry in
hopes this will boost production and reduce energy imports.
President Cristina Kirchner will meet with governors from
oil-producing provinces on June 16 to finalize the details of a new
bill offering fresh incentives for oil and gas investment,
according to people familiar with the plans.
The meeting comes after the president and provincial leaders
agreed on Monday to the basic proposals to be included in the
legislation, which will be sent to the Kirchner-controlled
Congress. Among other things, the bill would unify the royalties
and taxes that provincial and city governments levy on
producers.
It would also lower the minimum investment levels required to
send dividends abroad and qualify to export up to 20% of oil
production tax-free. Additionally, it would ease equipment import
restrictions. Cumbersome trade barriers and made-in-Argentina rules
currently impede investment and exploration, companies say.
If passed by Congress and provincial legislatures, the bill
would reduce the investment required to obtain such benefits to
$250 million from $1 billion.
The bill could also require provinces to change the way they
partner with companies to develop oil and gas deposits. In some
case, provinces have required a stake in concessions without
investing in them, says Carlos Pierro, an energy analyst and former
president of YPF, Argentina's state-run energy company. Such
partnerships unnecessarily raise costs, he said.
Mrs. Kirchner's cabinet chief, Jorge Capitanich, on Tuesday said
output is declining at almost all oil and gas companies in
Argentina, with the exception of YPF, which has increased oil and
gas production.
"Argentina needs to create a sustainable legislative framework
to promote investment," Mr. Capitanich said.
Declining production has led the government to spend billions of
dollars it doesn't have to import energy every year. This year
Argentina will post an energy deficit of more than $9 billion,
according to Neuquén Governor Jorge Sapag. Neuquén produces about
half of the oil and nearly a quarter of the gas in Argentina.
Argentina ranks second in the world behind China in potentially
recoverable shale-gas reserves, with 802 trillion cubic feet,
according to the U.S. Energy Information Administration. It ranks
fourth in shale oil with an estimated 27 billion barrels.
"It's very important to attract the greatest amount of
investment in oil and gas," Mr. Sapag said Tuesday in a local radio
interview.
More investment-friendly rules could help YPF attract partners
in Neuquén, where it is working with Chevron Corp. to develop shale
oil and gas deposits in the sprawling Vaca Muerta shale
formation.
Chevron partnered with YPF last year after Mrs. Kirchner signed
a decree promoting investment in oil and gas. The decree's legality
has since been challenged in court and a new law would put energy
industry rules on firmer legal ground.
"They're hurrying to pass a law now because the decree has a lot
of mistakes from a legal perspective," said Buenos Aires City
Legislator Alejandro Bodart. Last July, Mr. Bodart filed a
complaint alleging Mrs. Kirchner broke Argentine law by making
changes to oil and gas rules in a decree instead of through
legislation.
Last month, an appellate court ruled that an investigation
should proceed into whether Mrs. Kirchner broke the law by signing
the decree. In a 2-1 opinion, the court upheld a lower court's
ruling that an investigation should go forward, denying an appeal
by a prosecutor who found that no crime had been committed. A more
senior prosecutor appealed the decision.
Mr. Pierro welcomed the plans to attract investment, saying
Argentina needs many more companies like Chevron to invest
here.
"We have to see the details but this seems headed in the right
direction, " he said.
Write to Taos Turner at taos.turner@wsj.com
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