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Argentina reduces foreign exchange restrictions for the oil sector

2022-05-24T18:17:36.730Z


Companies that increase their production of crude oil and gas will be able to skip part of the trap to access dollars that has governed the economy since the end of 2018


A worker on the platform of a well in Vaca Muerta, in the Argentine province of Neuquén, in January 2020.AGUSTIN MARCARIAN (Reuters)

Argentina looks for dollars underground.

The Government of Alberto Fernández has seen a window of opportunity in the energy sector and this Tuesday has presented an incentive plan that facilitates the work of the oil companies.

Companies ask for predictability and, above all, access to dollars.

The program, embodied in a presidential decree, will reward companies that increase their oil and gas production with greater access to the Central Bank's foreign currency.

That money can be used to cancel debts of contractors abroad and to repatriate dividends.

Access to a greater amount of dollars was an old demand of the sector, which denounced bottlenecks in the payment chain and financing problems.

“The world demands gas, the transition energy between fossil fuels and clean energies.

Argentina is a huge source of gas, with immense export potential”, said Alberto Fernández during the presentation of the benefits plan, at the Casa Rosada.

The challenge is enormous: Argentina has reserves, but today its production is not even enough to satisfy its internal demand and it must import.

Access to dollars is today a problem for anyone who intends to invest in Argentina.

The Central Bank delivers them to importers of any kind, limits the repatriation of dividends to companies and keeps the tap of the currency closed for small savers.

In the street it is called “exchange stocks”, an invention of the last government of Cristina Fernández de Kirchner that Mauricio Macri eliminated in December 2015 and then reestablished in 2018, when the reserves of the Central Bank bled to death due to capital flight.

The stocks are a drag on intensive investments, such as those necessary in the energy sector.

The Argentinean eye is on the development of Vaca Muerta, a 30,000 square kilometer basin that has the world's second largest shale gas reserve and the fourth largest unconventional oil reserve.

But for that potential to surface, you need a lot of money.

"Given the need for Argentina to generate more foreign currency and for this to be more investment, we are going to create a special regime of special access to foreign currency for the production of hydrocarbons," announced the Minister of Economy, Martín Guzmán.

Companies will have access to extra dollars for up to 20% of the export value of the increase in crude oil production and 30% of gas, always with respect to 2021. There will be prizes for those companies that also increase coverage of the domestic market, reactivate wells closed or inactive and invest in marginal sectors.

“They will say that we are giving the oilmen dollars when dollars are needed,” Fernández defended himself, anticipating criticism not from the opposition, but from Kirchnerism, his wayward partner in the government coalition he leads.

“That's true,” he said, “but first you're going to have to bring dollars so you can have a little bit of those dollars.

What we are asking is that they invest more, that they bring in more dollars, and on that incremental they have a part”.

The incentive aims, in a first stage, for gas production to cover internal demand.

Between January and April, Argentina paid 825 million dollars for nine ships with Liquefied Natural Gas (NGL), a balance that skyrocketed this year due to the war in Ukraine.

"The 30% increase in imports is due to energy, but we have the solution in our hands," said the president of the Central Bank, Miguel Pesce, sitting next to the president.

The first decision of the Government was to start, after years of delay, a gas pipeline that would allow the production of Vaca Muerta, in Patagonia, to be taken to urban centers and export ports.

The second, the special exchange regime announced this Tuesday.

The official aspiration is that by 2026 oil production will have risen by 71.2% and gas by 30%.

The final account will give extraordinary income for 18,000 million dollars in exports and a 40% reduction in the subsidies that gas distributors receive today so as not to pass on the rise in international prices to households.

The starting point is not as bad as it might seem.

The Secretary of Energy, Darío Martínez, celebrated record production volumes.

“In April, the positive number for March was beaten: 578,000 barrels per day of crude oil production and 127,000 million cubic meters of gas, 12% more than in the same month last year.

This indicates that this is the right path,” he said.

During the second week of May, President Fernández kept these figures in a suitcase and offered himself as an alternative to Russian gas during a tour he made through Spain, France and Germany.

“We have everything that the world demands today in terms of energy.

I need Argentina to notice the possibility we have, it is unique, and we cannot miss it, ”he said on Tuesday.

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Source: elparis

All news articles on 2022-05-24

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