Bill for the Promotion of Hydrocarbons Investments

Newsletter - September 16, 2021

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On September 15, the President together with the Minister of Economy and the Secretary of Energy of the Argentine Republic presented the Hydrocarbons Investment Promotion Bill (the “Bill”).

The Bill introduces the Regime for the Promotion of Hydrocarbons Investments, which is intended to provide predictability and stability to the hydrocarbons industry and increase the production and industrialization of hydrocarbons in the country (the “Regime”).

Creation of Programs

Within the framework of the Regime 8 (eight) programs are created, among them, the most significant are:

The “General Regime for the Promotion of Oil Exploration and Production Activities”
The “General Regime for the Promotion of Natural Gas Exploration and Production Activities”
The “Special Regime for Exploration, Production, Industrialization, Storage and/or Transportation of Hydrocarbons and Derivatives Projects.”

The main purpose of these programs are the following:

to increase foreign currency income and strengthen the reserves of the Central Bank of the Argentine Republic;
to promote strategic investments;
to incorporate national and regional added value;
to guarantee self-supply;
to promote regional development; and
to promote energy sustainability plans.

Duration of the Regime

The duration established for the Regime is 20 (twenty) years as from the effective date of the law.

Fiscal Stability

Beneficiaries of the Regime shall be granted with fiscal stability at national, provincial and municipal level; as long as the provinces and municipalities adhere to the Law for the Promotion of Hydrocarbon Investments.

Incentives for the Exploration and Production of Oil and Natural Gas

Oil

The general incentives for the exploration and production of oil and oil byproducts comprehended in the Regime are, among others, the following:

guaranteed export authorizations for 20% of its production over a baseline and up to 50% in the event that the group of oil exporters obtained an incremental aggregate production;
differential export duty rates for the volume of oil and oil byproducts exported under the export authorization guaranteed by the incremental production (“Benefited Exportable Volume”) under the Regime; and
free availability of foreign currency derived from the collection of oil exports and oil byproducts for 50% of the Benefited Exportable Volume under the Regime, which may be extended depending on the level of coverage of the local crude oil market of the beneficiary.

Natural Gas

The general incentives for the exploration and production of natural gas are intended to:

minimum contract terms of 3 (three) years;
guarantee over commercialized volumes;
firm export authorizations;
preferential export duty rates for firm exports made under the benefits of the Regime; and
free availability of 50% of the foreign currency derived from the collection of exports made under the benefits of the Regime, which may be extended depending on the level of coverage of the local natural gas market of the beneficiary.

Special Projects

A special regime is established for special projects covering investments between US$6,000,000 and US$300,000,000, depending on the type of project to be carried out, in the areas of exploration and seismic, production of conventional and non-conventional hydrocarbons, industrialization and refining.

Special conditions are also established for “large projects” of natural gas transportation, storage and industrialization infrastructure (with an investment of more than U$S1,200,000,000) and for offshore projects.

These projects must be registered and approved by the “Consejo de Inversiones Hidrocarburíferas” and obtain the Technical-Economic Approval Statement to enjoy export benefits, free availability of foreign currency and other tax and customs benefits set forth in the special regime.

Energy Sustainability

The Regime establishes the Energy Sustainability Support Program. According to this program, the investment projects that have an approved energy sustainability plan may increase up to 10% the benefits they would have obtained under the Regime.

Gender Perspective

The projects that contemplate a plan associated with the generation of employment with a gender perspective will obtain benefits related to the reduction of the employer contributions in force.

Regime for the Promotion of Regional and National Suppliers

The project also incorporates a regime for the hiring of regional and national suppliers for those who wish to enjoy the benefits of the promotional regimes.

Amendments to Hydrocarbons Law No. 17,319

The Hydrocarbons Law No. 17,319 is amended in relation to underground storage concessions, which are incorporated as Article 27 Quater to the Law. The exploitation concessionaire has priority to apply for storage concessions within the limits of its title and they will be considered independent titles with respect to the exploitation and/or transportation concessions. Underground storage concessions shall be granted for a term of 25 (twenty-five) years that may be extended for up to 10 (ten) additional years and shall not be subject to the payment of royalties.

Transition from Pre-Existing Promotional Regimes

It is expected that, as from the date the Bill would be passed into law pursuant to the Project, no new beneficiaries of the Investment Promotion Regimes for the hydrocarbons sector in force regarding exchange regulation and export regimes and incentives to production will be admitted, and that the current beneficiaries of such regimes will have to elect, within 180 days after the approval of the regulation of the law, to remain under such regimes or to get the benefits set forth in the Bill that would be passed into law pursuant to the Project. The lack of such exercise of the option will entail that the beneficiary opted for the pre-existing regimes. The Project provides additional benefits for those who opt for the Regime.

Regulation

The National Executive Branch will regulate the law within 90 (ninety) days from its publication in the Official Gazette of the Argentine Republic.[/vc_column_text][vc_empty_space][/vc_column][/vc_row][vc_row][vc_column][vc_text_separator title=”Para más información contactarse con:” i_icon_fontawesome=”fa fa-question-circle” i_color=”peacoc” add_icon=”true”][/vc_column][/vc_row][vc_row][vc_column width=”1/4″][vc_posts_slider count=”3″ interval=”3″ posttypes=”profesionales” posts_in=”7227″][/vc_column][vc_column width=”3/4″][vc_column_text]