ARGENTINA

OIL IN ARGENTINA

Argentina’s previous Administration’s policies have resulted in 16 years of underinvestment in the oil and gas sector. The new Macri Administration has focused on making the sector attractive by developing a constructive pricing framework and the availability to extend concessions for 10 years further. The new Administration has also shifted toward market-friendly government policies including raising US$29Bn in sovereign debt, lifting foreign currency reforms, tackling union issues, and providing a clear movement towards international price parity for oil and gas.

The oil and gas pricing environment continues to improve in Argentina with the support of the Macri Administration. The government seeks to deregulate oil prices in an effort to converge to free competition international prices in 2017, and plans to eliminate end-user natural gas tariff subsidies via gradual increases in end-user tariffs until 2019, which contemplate an increase in gas prices for upstream producers. In January 2017, President Macri announced an extension of the Plan Gas program from 2017 to 2020 for companies investing in E&P projects in the Vaca Muerta, guaranteeing minimum gas prices. Gas prices have increased to over US$7/MMbtu from US$0.15/MMbtu over the past 10 years.

The oil and gas industry’s recent focus has been on developing the large Vaca Muerta shale resource. In January 2017, President Macri announced companies engaged in Vaca Muerta committed to invest approximately US$5Bn to develop the play in 2017. Combined multiyear commitments in Vaca Muerta have exceeded US$8Bn from major players – the focus on the Vaca Muerta has left the country’s large heavy oil resource largely unattended.

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