Decree 1057/2024: Regulation of the Bases Law. Amendments to the Hydrocarbons and Gas Laws.
On November 28, 2024, Decree No. 1057/2024 was published in the Official Gazette, regulating various aspects of the Ley Bases related to the reform of the Hydrocarbons Law and the Natural Gas Law in three annexes. Annex I regulates the export of hydrocarbons, concessions and reconversions, and transportation and storage authorizations. Annex II covers LNG exports, and Annex III addresses certain environmental issues.
Annex I – Regulation of the Hydrocarbons Law (Law No. 17.319)
Principles and Objectives
In Chapter I, the principles which inspired the reform of the Hydrocarbons Law related to the free market and free export are mentioned, together with the security of supply. The need to align domestic prices with international prices is also mentioned, with explicit reference to the import and export parities. Additionally, efficiency in resource allocation and the execution of long-term contracts are promoted, fostering competitiveness and integration into global trade.
The regulation establishes that to obtain permits, concessions and authorizations interested parties must establish its address in Argentina and demonstrate to the Applicable Authority its: (i) effective compliance with economic-financial solvency requirements, (ii) minimum net worth standards, and (iii) adequate technical capacity.
Export of Hydrocarbons and Objection Procedure
As a general principle, the free export of hydrocarbons is established for producers, processors, refiners, marketers, storers, and fractionators of hydrocarbons, and it is guaranteed that the right to export cannot be interrupted once the requirements are met.
Chapter II establishes the export procedure, maintaining the Registry for Exports as provided by Art. 1 of Decree No. 645/2002 and Resolution No. 241/2017 and its amendments, and introduces the objection procedure provided by the amended Art. 6 of the Hydrocarbons Law. It is provided that this procedure shall be complemented by a resolution from the Secretariat of Energy that will replace Resolutions No. 241/2017, 360/2021 and 175/2023, which shall implement the objection procedure within the framework of the decree.
The Process of Obtaining the Free Export Certificate
- Submission: Exporters must submit: (i) the export notification; (ii) the technical and commercial information describing the details of the operation and accrediting the productive capacity and commercial commitments assumed; and (iii) the documentation of reserves and/or resources, when it comes to exports longer than one year.
- Objections: Once the export request is submitted (which can be monthly, annual, or multi-annual), the Secretariat of Energy must present its objections within 30 administrative business days. These objections may be based on the lack of availability of hydrocarbons (affecting security of supply) and/or the existence of unforeseen and significant variations in domestic market prices. The criteria to object based on significant price variations will be limited temporarily until such a situation has ended. The reasons for objection by the Secretariat of Energy must be based on duly substantiated technical-economic studies based on the security of supply.
- Free Export Certificate: After the 30-day period without objections, exporters will have 5 business days to request their Free Export Certificate. Once the certificate is issued, the export will remain in effect for the entire period (although the Secretariat of Energy reserves the right to object later, based on force majeure or unforeseen events that compromise security of supply).
Additional Considerations
Replacement: In case of objection to export volumes due to domestic market needs, exporters may replace these volumes by acquiring or importing equivalent hydrocarbons or waiving the right to export during the affected period. The Secretariat of Energy must approve the replacement alternative based on technical-economic studies and may require guarantees to ensure security of supply.
Assignment: The total or partial assignment of non-objected export rights and Free Export Certificates is permitted, subject to verification and approval by the Secretariat of Energy.
Energy Emergency: The Secretariat of Energy also reserves broad powers to intervene during the energy emergency period, which extends until July 2025, to ensure an orderly transition towards the objectives set by the Law.
Scope: Regarding the scope of natural gas exports, the non-objection by the Secretariat of Energy will not imply authorization for the construction of gas pipelines, new connections, and/or installations. Export agreements involving those constructions will require the intervention of the National Gas Regulatory Entity.
Hydrocarbon Exploitation Concessions
Chapter III focuses on the main rights and obligations related to the reconversion of concession areas and the form of hydrocarbons exploitation. It establishes that the reconversion of a conventional concession area into a non-conventional concession can be requested for a part or the entire area, without the need for subdivision. Additionally, the grantor will be able to determine various forms of exploitation, in which case the grantor will establish the necessary subdivisions without affecting acquired rights. It also specifies that concessions granted before the enactment of Law No. 27.742 will include their eventual extensions according to the applicable regulatory framework as of the enactment of the Ley Bases.
Transport Authorizations and Processing and Storage Permits
Chapter IV details the terms of concessions granted before the entry into force of Law 27.742 and the authorizations granted thereafter.
It also establishes the obligation of open access for vacant capacity and the availability to third parties of unused transportation capacity by their holders, except for transport authorizations that integrate refining complexes and their related storage facilities, or those affected by natural gas liquefaction plants or authorizations for underground storage in fields. Likewise, the provisions of the first paragraph of Art. 43 of Law No. 17.319 on the open access regime for hydrocarbon storage will apply.
Transport authorizations do not require public bidding for their granting nor constitute a public service. The Secretariat of Energy will determine the facilities that will be included within such authorization. However, whenever processing or storage permits have been requested, transport authorizations will not include related processing or storage facilities.
Awards
Chapter VI establishes the minimum requirements that must be considered in the model terms and conditions prepared by the Secretariat of Energy and the application authorities of the provinces and the Autonomous City of Buenos Aires, which include technical and economic capacities, conditions for the abandonment of facilities, and corporate social responsibility, among others.
Annex II – Regulation of the Natural Gas Law (Law No. 24.076)
Export and Import of Liquefied Natural Gas (“LNG”)
The producers, processors, refiners, marketers, storers, and fractionators of hydrocarbons are also authorized to participate in the international LNG market, provided they comply with the requirements established by current regulations. The Secretariat of Energy will regulate the applicable procedure for LNG export, evaluating all stages of the project and the impact on existing and future infrastructure.
The provisions of the first paragraph of Art. 43 of Law No. 17.319 on the open access regime will not apply to transportation facilities dedicated exclusively to LNG export.
To issue the Declaration of Gas Resource Availability, a study will be conducted following the considerations of Art. 3. This study will be updated at least every 5 years or when a new LNG export request could require it.
The Process of Obtaining the Free LNG Export Authorization
- Export Notification: Those interested in exporting LNG must demonstrate: (i) their projected availability supported by investment plans and hydrocarbon production projections; (ii) their technical and economic solvency; (iii) the maximum quantities of LNG to be exported, in annual, monthly, and daily terms; (iv) the technical consistency of the project; and (v) if they have requested adherence to the RIGI.
- Clarifications and Additional Information: The Secretariat of Energy may request clarifications and additional information from the interested party, suspending its issuance period. On the other hand, the interested party may, within 30 administrative business days of the submission, make complementary submissions that it deems conducive to a better evaluation.
- Objections: Once the Export Notification is submitted, the Secretariat of Energy must present its objections within 120 administrative business days. These objections may be based on the lack of availability of natural gas, the lack of accreditation of capacity, the lack of accuracy or veracity of the information, and/or anti-competitive practices.
- Free LNG Export Authorization: After the 120-day period without objections, the Free LNG Export Authorization will be issued, indicating the term and volumes to export. This authorization guarantees that LNG exports cannot be reviewed again and will remain in effect for a period of 30 years from the start-up of the liquefaction plant.
Obligations of the LNG Exporter
LNG exporters have several obligations, including:
- Maintenance of Resource Availability: Periodically demonstrating the availability of resources projected in the Export Notification.
- Information Duties: Informing any substantial modification to the projected and provided information in the Export Notification.
Termination, Revocation, and Assignment
- Termination: The Free LNG Export Authorization will automatically terminate upon the expiration of the export authorization, with the Secretariat of Energy being able to grant extensions in cases where a justified cause is demonstrated.
- Revocation: The Free LNG Export Authorization can be revoked, after 10 administrative business days of formal notice to the holder, for non-compliance with the obligations established in this Annex or in the terms of the Authorization itself.
- Assignment: The total or partial assignment of the rights to carry out a non-objected LNG export and the issued Free LNG Export Authorization is allowed, subject to verification and approval by the Secretariat of Energy.
Transportation and Distribution
- Extension: Art. 6 of the Regulation of Law No. 24.076, approved as Annex I of Decree No. 1738/1992, is amended, extending the extension period from 10 years to 20 years. This extension must be requested 54 months before expiration.
Annex III – Uniform Environmental Legislation
It is established that the Secretariat of Energy will identify the applicable regulations and environmental aspects to be considered and will establish a procedure to coordinate joint work and information systems with the provinces and the Autonomous City of Buenos Aires, in order to develop a uniform and harmonious environmental legislation project. This regulatory framework will govern processes such as the granting of environmental licenses, the abandonment of wells and facilities, and environmental liabilities, among others, thus ensuring responsible and sustainable environmental management in the hydrocarbon sector.
The official text of Decree No. 1057/2024 can be found at the following link.
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