Argentina aims to ease energy investments with new bill

This article was originally published in Anadolu Agency, Sep 25, 2014 

A new draft bill aimed at changing energy laws in Argentina to encourage more investors to exploit the country’s hydrocarbon reserves will instill confidence in the country, according to an economy expert on Latin America.

The bill, which is expected to be ratified in October or November, seeks to centralize regulation, shorten the exploration period granted to oil firms and extend drilling concessions.

It also reduces the minimum amount of investment from $1 billion to $250 million.

One of the major concerns investors currently have about Argentina is a perception that there is questionable commitment to the “rules of the game”.

Samuel George, project manager at Bertelsmann Foundation, told the Anadolu Agency: “If this bill is ratified, the central government will have successfully implemented a national framework outlining the terms for hydrocarbon contracts.

“The central government believes that by creating one platform and one set of terms for negotiating contracts, they can make investment in Argentina’s hydrocarbons easier for business.”

‘Questionable commitment’

Argentina introduced the draft on September 17 in an effort to decrease the autonomy of local administrations in energy investment projects and create a national framework for energy regulation that will smooth the way for investments.

The Argentinian Parliament in Buenos Aires

The regulations seek to overcome differences in costs, production and business models in regional energy projects.

George said that one of the major concerns investors currently have about Argentina is a perception that there is questionable commitment to the “rules of the game”.

The draft law may change the perception of the country to one where it is seen to be a stable and predictable environment for energy investments, as it saves potential investors from negotiating with provincial governments, he said.

George said: “This law could create a platform to establish unified rules of the game.

“Full investment, however, will come only when Argentina proves it is willing to follow those rules.”

‘Right step’

Argentina has one of the world’s greatest shale reserves with 22 trillion cubic meters of natural gas and 27 billion barrels of oil, according to the U.S. Energy Information Administration.

Samuel George said the bill was a right step towards exploiting the reserves.

He said: “Argentina’s reserves will require a huge amount of international investment to exploit.

“The Vaca Muerte play alone may require upwards of US$200 billion in investment.”

The Vaca Muerte shale formation, one of the biggest shale plays in the world, contains 8.7 trillion cubic meters of shale gas and 741 million barrels of recoverable shale oil resources, according to the U.S Energy Information Administration.