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Fitch: Argentina’s oil and gas incentives not enough to attract new investment

Hydrocarbon Engineering,

Argentina’s President Kirchner has signed Decree No. 929/2013, creating a new regime for companies that are registered in the Hydrocarbon Investment Promotional Regime, in efforts to attract private investment and develop Argentina’s conventional and non conventional hydrocarbon sector. However, Fitch ratings have indicated that the new regime is by itself insufficient to trigger considerable investment in the Argentine oil and gas sector.

The new regime establishes incentives for oil and gas producers that bring hard currency equivalent to US$ 1 billion into the country during the first five years of the project. From the fifth year, those participating entities will be allowed to have tax free exports representing 20% of their oil and gas production, with no obligation to reimburse export proceeds to Argentina. In the event that all of the entity’s production has to be sold in the local market to satisfy demand, the company will receive payment equivalent to the international price of oil and gas for 20% of production volume. It will also have access to the official exchange market to acquire foreign currency for such amount.

Fitch have highlighted the fact that benefits are not perceived until after a five year period may limit the attraction of the incentives. The highly uncertain regulatory environment has also been cited as a deterrent to investment.

Adapted from press release by Emma McAleavey.

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