Argentine authorities said to have reached oil bill accord

9/17/2014

Argentine authorities said to have reached oil bill accord

PABLO GONZALEZ

BUENOS AIRES, Argentina (Bloomberg) -- Argentina’s oil-producing provinces and the federal government agreed to revise a 1967 energy bill to include shale, two provincial officials said.

Governors of 10 oil provinces and federal authorities will present the final draft to President Cristina Fernandez de Kirchner and the bill will be sent to Congress this week for approval, they said. Both people asked not to be named because negotiations are private.

Provincial governors and federal authorities have been negotiating for four months to replace the 1967 hydrocarbons law, including how to distribute revenue from the world’s fourth-biggest shale oil reserves and second-largest shale gas reserves in southwestern Argentina’s Vaca Muerta formation. The draft includes benefits for oil producers investing in shale and offshore projects.

The new legislation will ease political tensions stemming from unclear rules governing the country’s nascent shale boom and is expected to attract investors to areas such as Vaca Muerta, a Belgium-sized shale formation where companies such as Chevron Corp., Royal Dutch Shell Plc, Exxon Mobil Corp. are drilling wells. State-run producer YPF SA would probably benefit most from the changes, the people said.

Horacio Mizrahi, a spokesman for federal Planning Minister Julio De Vido, didn’t respond to a phone call and an email seeking comment. Chubut Governor Martin Buzzi, who heads the committee of the 10 provinces, and Neuquen Governor Jorge Sapag weren’t available to comment, as they were participating in a meeting on the energy bill, their assistants said.

Export Revenue

The new bill will allow energy companies that invest $250 million over a five-year period to sell 20% of production in international markets without paying export taxes and to keep some export revenue outside the country for shale and conventional projects. This benefit would apply to 60% of output from offshore projects, the people said. A few governors sought to reduce the period to three years, they said.

The bill will split activities between conventional, shale, and offshore to include the latter two areas, which weren’t part of the 1967 bill. Shale and offshore fields will have concessions granted for as many as 35 years. Royalties will be capped at the same level nationwide and provinces will agree to a unified federal auction system that will replace the current one that varies from province to province.

American depositary receipts for YPF SA, Argentina’s largest oil company that Fernandez expropriated from Repsol SA in 2012, gained 5.2% to $37.55 at the close in New York. The ADRs, which each represent one ordinary share, rose to the highest since July 30, when Argentina was declared in technical default.

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