Oil companies expect incentives to make millionaire investments in oil and gas in Argentina

Oil companies expect incentives to make millionaire investments in oil and gas in Argentina

27/06/2016 source “América Economía”

Many oil companies are waiting for new measures to encourage the production of gas and crude oil in Argentina. The sector is experiencing a strong energy deficit and relies increasingly on imports to stock up.

According to industry sources, the country, that lost energy self-sufficiency in 2010, will import this year a record of 90 Liquefied Natural Gas shipments (LNG), in addition to receiving natural gas from Bolivia and Chile to ensure the supply. A measure that is not enough once that in May the sector had to cut the supply to industries because winter is being cooler than the previous years.

Argentina renewed a month ago an incentive plan for new natural gas projects, benefiting from an incentive price of 7,5 million US Dollars per million of BTU, which will be in force until 31 December 2018. The country currently pays an average of 5,2 Dollars per million of BTU for liquefied natural gas imports.

But another program to stimulate production in existing wells, known as “Gas Plan” which began in 2013, expires next October and as it was still not renewed, has triggered uncertainty among the investment firms.

The “shale gas” and the “tight gas” are unconventional hydrocarbons that are in a geological formation with about 30,000 square kilometres located in the province of Neuquén, known as Vaca Muerta, which could host one of the largest reserves of these hydrocarbons on the planet.

“Many companies are demanding a definition of the natural gas market for the future to decide to invest,” said a source of a company in the sector. “It is necessary that the Government establish a certain value in the coming years so that companies can define a horizon; another option is that the Government promise in some way, by some law, not to intervene in markets, allowing the freely dispose of gas”, added the same source.

A third source of the sector coincided on the fact that the energy industry needs more predictability.

Before the implementation of the “Gas Plan”, in the beginning of 2013, the Government paid an average of 2,3 Dollars per million of BTU, a price far below international prices, which discouraged production. Although the renewal of the plan by the government a month ago is a good sign, “is not what we are waiting,” said for its part another source of another company in the sector.

Earlier this year, the Government informed the energy companies that would pay off debts on the subsidy to the production of nearly 2,000 million Dollars with sovereign bonds. “There is a lot of debt of those 7,5 million Dollars (per million BTU) that was promised to be paid with bond; however, it still didn’t become real. What we want is to be paid what we are owed first”, said the source.

According to some analysts, the investor’s interest falls currently upon unconventional gas, both “shale” and “tight gas”, due to the incentive scheme Impelled by the Government, but the payment with bonds is not a good sign for the market.