From
Cledis Candelaresi
Investors willing to spend a minimum of $1 billion on a plant to liquefy gas for export, they will have to build their own pipeline from Vaca Muerta to sell to the world without restrictions. It is one of the conditions of a strategic bill that Economia intends to send to Congress and whose draft has sparked strong controversy with companies in the sector.
At the end of the year, the Undersecretary of Energy, Flavia Royón, announced that Sergio Massa’s ministry will send at least the Parliament two proposals that should serve to attract important investments in the energy sector. One to design a scheme to promote hydrogen production and export. Another, to facilitate the production of liquefied natural gas (LNG).
For the hydrocarbon export boom that both the government and private companies intend to consolidate, it is necessary to liquefy the gas, which allows it to be shipped around the world. Otherwise, expectations are limited to the sale of something via tube in Chile and Brazilwhich frustrates the desire to generate massive foreign exchange income.
But unstable local macroeconomic conditions do not allow Argentina to compete with other big capital destinations, including the United States. a liquefaction plant worth several billion dollars and takes a few years to completeproblems that exacerbate the risks.
To mitigate them, the Government has drawn up a project which establishes a thirty-year promotion regime for investment projects, which, in addition to tax relief, are expressly promised regulatory and fiscal stability.
The text has started circulating in an informal test among producers, several of them with LNG initiatives at different stages of progress.
Exelerate and TGS have a small but scalable ongoing project; YPF and Petronas have re-announced in recent days an ambitious all-encompassing proposal that connects the production of gas to its liquefaction, passing through a gas pipeline that connects the two points. An initiative to which the nascent project would give great support.
But many other investment ideas are sprouting, waiting for this initiative to light up. The circuit that is generated is similar to that described with the mega-law for the promotion of hydrocarbons that Alberto Fernández announced in front of top company executives at the Bicentennial Museum and has not yet seen the light.
For some companies, promotional benefits were insufficient and state intervention too much. Something similar is happening now.
He project to encourage the construction of LNG plants sets a cap on the rate of profit that dealers will be taxed, exempts export withholding taxes if the unit of liquefied gas (million BTUs) is worth up to $15, and has a maximum export duty of 8% when exceeds $20 (today LNG is above that value and it is estimated that in the local winter it would be close to $40).
The concessionaires of the plant will be able to “freely” dispose of up to 30% of the foreign currency for the repayment of the debt and the distribution of dividends. And they will have access to the permit to export “securely” throughout the year, but only if they build their own pipeline from the field to the new plant.
transportation is a critical point in the current energy situation. Argentina has a lot of oil and gas underground, but its production must have a way to evacuate it. For this purpose, the Néstor Kirchner gas pipeline is being built, whose priority objective is to replace gas imports intended for domestic users and power plants.
An official objective that cannot be renounced is that export offers do not compete with domestic market offers. Furthermore: the state company Enarsa and the administrator Cammesa (of the state) will have purchasing priority if some concessionaire of a gas liquefaction megaproject offers internally produced products.
The lack of the pipe itself and of the gas itself would force the concessionaire of a large LNG plant to negotiate with producers and carriers and to request export permits for each foreseen operation. Two inconveniences that add uncertainty to any initiative.
Transport shortages are already sparking fierce competition to exploit what exists or what needs to be built.
One example is what happened at the end of the year when Oldeval offered new space for oil transportation. The requests that had far exceeded the additional space offered, snubbing several production companies that opposed the operation and even asked for its cancellation.
The paradoxical thing is that the “customers” of the new pipeline capacity are the shareholders themselves: PAE, YPF, Chevron, Pampa and Tecpetrol. The story was resolved with one more work than expected, which increased the space in the barrel and excluded the most favored of the first from the second distribution.
The intricate negotiation is just one example of the sensitivity of a person who promises drastically change Argentina’s economic future. In the immediate future, due to the staggering increase in oil sales which, unlike gas, does not need so many investments to be offered to the world.
Official and private forecasts agree that Argentina it will replace the current account deficit in its energy trade balance in no more than three yearsmore than 5,000 million dollars in 2022, due to a surplus that would have a minimum of 8,000 million dollars.
According to the vision of companies operating in the local market, investment in an export network they require the explicit and joint support of the country’s majority political forces. Only this endorsement, in the eyes of the bosses, would make the promise of fiscal and regulatory stability and access to the foreign exchange market credible.
The other great desire is to make the most of the still high prices of hydrocarbons in the world with the least possible state interference: neither in the assignment of export permits, nor in the price to be collected, nor in the availability of dollars to be collected.
Indeed, these aspirations are being gradually and partially honored, with rules that work like a patch. A few days ago the concessions for industry were reactivated, delivered in decree 929 created in 2013 by the then Minister of Economy, Axel Kicillof, and which partially facilitates the availability of dollars for exporting oil companies.
In official effort not to scare investors, latest version of LNG project ready for Congress allows the local and foreign jurisdiction to settle any conflicts. A nod to those who are evaluating bold energy investments in Argentina, European companies among others
Source: Clarin
