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Argentina

Last Verified on Friday 28th June 2019

    • Argentina

      In Argentina, oil and gas activities are governed by both federal and provincial legislation. The national policies in respect of exploration, development, production, transportation and marketing of hydrocarbons shall be determined by the national executive branch. This means that although the provinces own the hydrocarbons, have the power to grant permits or concessions and have regulatory powers as regards the way in which the federal hydrocarbons regime is applied in their territories, the power to establish the national hydrocarbons policy and to pass material legislation remains with the federal government and Congress (as provided by the National Constitution and several federal regulations, such as the federal Hydrocarbons Law No. 17,319 (the Hydrocarbons Law), Law No. 26,197 and Law No. 26,741).

      The Hydrocarbons Law, amended, among others, by Laws 26,197 and 27,007, contains the basic material legislation in relation to the exploration, development and production of hydrocarbons.

      This law provides that the hydrocarbons fields located in the Argentine territory belong to the public domain of the state or the provinces where the fields are located and that fields located beyond 12 nautical miles from the shoreline and until the external limit of the continental shelf belong to the Federal State (in line with article 124 of the National Constitution) and sets forth certain basic principles applicable to the sector: (i) the Federal State shall establish the general policy in relation to the exploration, exploitation, industrialisation, transport and commercialisation of hydrocarbons; (ii) the holders of permits and concessions shall own the hydrocarbons extracted by them and shall be able to freely market, transport and industrialise them, subject to such regulatory provisions issued by the Federal Executive Branch; and (iii) during periods in which the production is insufficient to cover the domestic needs, the entire availability of locally produced hydrocarbons shall be used to supply the domestic demand. The law also provides for an exploration and production licences scheme.

      The Hydrocarbons Law is supplemented by several executive orders and resolutions, such as Law No. 24,145 (federalisation of hydrocarbons), Law No. 26,659 (restrictions in connection with the exploration and production of petroleum in the continental shelf) and Law No. 26,741 (establishes the achievement of petroleum self-sufficiency as a matter of national strategic interest and expropriates the controlling shares of YPF SA). 

      The Hydrocarbons Law coexists with hydrocarbon laws and regulations passed by certain oil and gas-producing provinces, such as the Province of Neuquén Hydrocarbons Law No. 2453, Province of Mendoza Hydrocarbons Law No. 7526, Province of Chubut Hydrocarbons Law XVII No. 102, or Province of La Pampa Hydrocarbons Law No. 2675, which, in general, are substantially aligned with the provisions of the Hydrocarbons Law.

      Last verified on Friday 28th June 2019

    • Argentina

      Oil and gas activities are not carried out by the state or by a state-owned energy.

      The national state and the oil-producing provinces own 51 per cent of the shares of YPF SA, which is a key player in the Argentine market (a per cent market share in crude oil production, 32 per cent market share in natural gas production and a 55 per cent market share in fuels).  The remaining 49 per cent of YPF’s shares are listed in the stock exchange and owned by private investors. YPF S.A. is a stock company governed the General Companies Law No. 19,550 and competes in the market with several Argentine and foreign companies.

      The national state also owns 100 per cent of the shares of Integración Energética Argentina SA (IEASA), a company mainly devoted to trade in certain gas import and export transactions. IEASA (formerly named ENARSA) is in the process of divesting the participating interests held by it in a few exploration and production licenses.  

      Last verified on Friday 28th June 2019

    • Argentina

      Yes. Exploration and exploitation activities can only be carried out by companies holding a participating interest in an exploration permit or an exploitation concession. Certain exploration activities can also be carried out holding a superficial survey permit.

      Also, to hold an interest in an exploration permit or in an exploitation concession a company must be registered in the Upstream Companies Registrars held by the federal government and/or by the relevant province, either as an operator or as a non-operator.     

      Last verified on Friday 28th June 2019

    • Argentina

      At a national level, the Energy Secretariat of State, which is one of the secretariats of the Ministry of Economy, is the main governmental body involved in energy regulation. The undersecretariat specifically devoted to oil and gas is the Undersecretariat of Hydrocarbons and Fuels.

      The Ente Nacional Regulador del Gas (ENARGAS) is an autarchic entity with regulatory functions concerning gas transportation and distribution.

      Each oil and gas-producing province has its own oil and gas regulators. Provincial regulators are governed by the federal Hydrocarbons Law and by provincial legislation and regulations.

      Last verified on Friday 28th June 2019

    • Argentina

      Yes. As mentioned in question 1, hydrocarbons are owned by the provinces where the resources are located and by the Nation if located beyond 12 nautical miles from the shore. The extractor shall own the hydrocarbons produced once they pass the wellbore.

      Last verified on Friday 28th June 2019

    • Argentina

      Private parties can obtain exploration and production rights through superficial inspection permits, exploration permits, exploitation concessions and association agreements with state-owned companies.

      Superficial inspection permits

      Under a surface inspection permit, the permit holder is granted the right to conduct a surface survey on a certain area, including carrying out geologic and geophysical studies, and employing other methods, such as the drafting of plans or the performance of topographic and geodesic surveys (Hydrocarbons Law, articles 14 and 15) .

      Recently the Ministry of Energy has passed Resolution No. 197/18 with a new set of regulations applicable to surface inspection permits on offshore areas (beyond 20 nautical miles from the coastline). This Resolution provides for a much longer term (eight years) than that applicable to other areas (12 months plus 12 months extension), and gives the permit holder Commercial Exploitation Rights, whereby the permit holder has the exclusive right to disclose (subject to a few exceptions) and commercialise the data obtained from the inspection activities, on a non-discriminatory basis, until two years after the expiration of the permit

      Exploration permits 

      The holder of an Exploration Permit has the exclusive right to perform exploratory activities within the permit area and to obtain an exploitation concession if the holder discovers oil or gas in commercially exploitable quantities and conditions (commercial discovery) during the term of its permit (Hydrocarbons Law, articles 16 to 26).

      Exploitation concessions

      Exploitation concessions grant the exclusive right to exploit the existing hydrocarbon fields located in the concession area. (Hydrocarbons Law, articles 27 to 38) The exploitation of a field involves the development of its potential. By the same token, the exploitation concession implies for the concessionaire the ability to build and operate treatment plants as well as other facilities needed for the operations, including having the right to request a transportation concession for the transportation of the production out of the concession area.

      The hydrocarbons shall belong to the concessionaire in accordance with its participating interest in the concession and the concessionaire shall be able to dispose of its share of the production freely, subject to the general limitations contained in the Hydrocarbons Law and its supplementary regulations. 

      Association agreements with province-owned companies

      Typically, in these agreements the province-owned company is the owner of the exploration and production rights and makes such rights available to the joint venture with the private parties.

      Usually the province-owned company holds a 10 per cent participating interest. The private parties assume all the exploratory risk on an exclusive basis. The hydrocarbons shall belong to each party in accordance with its participating interest in the contract. The private party (or one of the private parties if there is more than one) shall be the operator.

      Last verified on Friday 28th June 2019

    • Argentina

      Superficial inspection permits are granted by the relevant governmental authority upon a request made by a company willing to conduct the surface inspection.

      Exploration permits are granted through public bidding rounds. The criteria to award the blocks are based on the work units’ commitment made by the bidder and, in some bids, on the entry fee offered by the bidder. The public tender will be awarded to the bidder proposing the highest offer, in accordance with a formula that considers the aspects mentioned above. 

      Exploitation concessions can be obtained (i) by the holder of an exploration permit, upon the occurrence of a commercial discovery, over all or a portion of the exploration area; (ii) through a public bidding round in connection with 'proved' blocks (blocks where exploration activities are deemed unnecessary); or (iii) in the case of unconventional exploitation concessions, by the holder of an exploitation concession that, based on the unconventional potential of the block, asks for a subdivision of the concession area and for the grant of an unconventional concession on the subdivided area with unconventional potential.

      Association agreements with state-owned companies are granted through public bidding rounds.

      Last verified on Friday 28th June 2019

    • Argentina

      No, there are not. If a foreign company participating in a bidding process is awarded a block, it will have to set up a subsidiary or register a branch in the country and the relevant permit, concession or participating interest in a joint venture agreement will be held by such subsidiary or branch.

      Last verified on Friday 28th June 2019

    • Argentina

      There are no general rules imposing minimum capital or technical requirements specifically in connection with international bidding processes. As mentioned in question 3, all companies holding exploration and production licences must register in the relevant oil and gas companies registrars and, to so, it is necessary to evidence sufficient financial capability (2 million Argentine pesos for onshore licences; 20 million pesos for offshore licences) and also, in the case of operators, technical capability (which requirement may be met by providing evidence of a technical assistance agreement or other scheme under which the company will receive technical support from another company with sufficient technical background).

      Certain specific financial and technical capability requirements were set forth in order to qualify as bidder in the international bidding round for offshore blocks that took place earlier this year. As regards financial capability, such requirements consisted in evidencing certain minimum capital investments during the previous three years or certain minimum net equity. On the technical side, it was required that bidders provide evidence of having conducted certain minimum operations or having produced certain minimum quantities of offshore hydrocarbons during the three previous years. Companies listed in The Energy Intelligence Top 100 or in the Top 50: NOC & IOC rankings were deemed to comply with both technical and financial requirements, without the need to provide any other documents or evidence.

      Last verified on Friday 28th June 2019

    • Argentina

      The are no restrictions specifically relating to foreign participation. Law 26,559, passed in 2011, prohibited the holding of any exploration and production licence by companies carrying out any activity in the Malvinas (Falklands) area.

      Last verified on Friday 28th June 2019

    • Argentina

      The holders of exploration permits or exploitation concessions have an exclusive right to conduct exploration or development and production operations in the permit or concession area during the term of the permit or concession, and any extensions thereof. 

      The holder of an exploration permit that makes a commercial discovery has an exclusive right to obtain an exploitation concession on the portion of the block with development potential.

      Last verified on Friday 28th June 2019

    • Argentina

      The holder of an exploration permit or an exploitation concession owns the hydrocarbons produced as a result of the exploration or production activities conducted in the block and has a right to freely dispose of them, subject to applicable law (for example, restrictions on the ability to export hydrocarbons may apply if domestic demand is not being sufficiently supplied). 

      Such licensees may book the hydrocarbons reserves discovered and subsequently produced in connection with their licences.

      Last verified on Friday 28th June 2019

    • Argentina

      Yes, it can. Any transfer of a participating interest in a licence requires authorisation from the relevant (national or provincial) executive branch, in accordance with article 72 of the Hydrocarbons Law. To obtain the government’s authorisation the transferee shall provide evidence of it having the financial and technical capacity required to be a holder of an exploration permit or exploitation concession.

      Provincial hydrocarbon laws contain provisions in line with the ones described above.

      The change of control of a company holding a licence does not require governmental authorisation.

      Last verified on Friday 28th June 2019

    • Argentina

      A holder of an E&P licence importing assets used in the development and production of hydrocarbons from the relevant block will retain title to such assets. However, upon the relinquishment of the block (due to expiry of the term, to voluntary relinquishment or to any other cause), the holder of the licence shall return the permit or concession area to the granting state, including the production facilities that are not removable equipment and that are not subject to abandonment obligations.  

      Last verified on Friday 28th June 2019

    • Argentina

      Bidding specifications usually provide for the bidders’ right to include a signing bonus in their bids. Such signing bonuses are optional for bidders and may be offered in addition to the minimum work commitments set forth in the relevant bidding specifications.

      Royalty on the production of hydrocarbons must be paid every month to the relevant province or to the national government (articles 59 through 65 of the Hydrocarbons Law and by Decree No. 1,671/1969).

      The Hydrocarbons Law provides for a 12 per cent royalty on the net price obtained from the sale of hydrocarbons produced under exploitation concessions and a 15 per cent royalty on the net sales of hydrocarbons produced under exploration permits.

      Royalty can be reduced by up to 50 per cent in tertiary production (enhanced oil recovery and improved oil recovery), extra heavy oil and offshore projects that, owing to their particular productivity issues and location, present especially unfavourable technical and economic characteristics. 

      During the extension periods of concessions, additional royalty of up to 3 per cent can be added, with an 18 per cent total cap. 

      The Hydrocarbons Law establishes that the holders of exploration permits and concessions must pay a fixed yearly fee (payable in advance in January), which is calculated by each square kilometre of the permit or concession area.

      Law No. 27,007 allows for an extension bonus to be charged when a concession extension is granted. The maximum bonus shall be equal to the figure resulting from multiplying the proved reserves remaining at the end of the term of the concession by 2 per cent of the average price in the relevant basin for the two-year period prior to the granting of the extension. 

      Last verified on Friday 28th June 2019

    • Argentina

      The holders of exploration and production licences do not have a compulsory right to acquire the property in which the operations will be conducted, but they do have a right to access such property and use it to the extent needed to carry out the exploration and production activities. Licence holders have a right to compulsorily obtain, through administrative proceedings, rights of way to the extent needed to conduct operations under the relevant permit or concession (articles 66 and 67 of the Hydrocarbons Law).

      Last verified on Friday 28th June 2019

    • Argentina

      Natural gas exploration and production activities are regulated together with oil exploration and production in the Hydrocarbons Law and are subject to substantially the same basic principles and regulations. Exploration permits and exploitation concessions enable licence holders to explore for and produce any liquid and gaseous hydrocarbons within the licence area. Royalty and other government charges payable in connection with oil do not differ from those paid in connection with natural gas.

      Last verified on Friday 28th June 2019

    • Argentina

      The Hydrocarbons Law (article 71) provides that those performing works regulated by such law shall prefer to hire nationals and, particularly, residents of the region where the works shall be performed, and that the proportion of nationals employed by each concessionaire or permit holder shall not be less than 75 per cent. In practice, exceptions to the above-mentioned rule are accepted in connection with specialised workers that are not available in Argentina or in the region where operations are conducted.

      Similar provisions can be found in provincial laws and regulations, as well as in the terms and conditions applicable to bidding rounds organised by the provinces.

      Also, there are certain provincial regulations establishing an obligation to favour the hiring of services from local suppliers.

      Last verified on Friday 28th June 2019

    • Argentina

      There are no limitations on vertical integration in the oil and gas industry. As an exception to such rule, Law 24,076 provides that natural gas producers cannot hold, either directly or through an affiliate, a controlling interest in gas distribution companies or in gas transportation companies. This last limitation refers to “pure” gas transporters, this is, companies devoted to transporting gas for third parties, but not to holders of exploitation concessions that can obtain transportation concessions to transport the production from their concession blocks, in accordance with article 28 of the Hydrocarbons Law.

      Last verified on Friday 28th June 2019

    • Argentina

      Oil and gas activities can be carried out through incorporated entities like stock companies, limited liability companies and branches of foreign companies, or by joint ventures formed by two or more companies. However, in the case of joint ventures the exploration and production rights are owned by each coventurer in accordance with its participating interest, and not by the consortium. Typically, consortia are structured as a temporary union of enterprises, a type of joint venture agreement provided for in the Civil and Commercial Code. 

      Unless otherwise provided for in the joint venture agreement, the parties thereto are not jointly and severally liable. Having said this, the fact is that, in practice, several liabilities derived from the holding of exploration and production licences work as joint several obligations towards third parties, such as the obligation to carry out the development of the block on a continuous basis (article 31 of the Hydrocarbons Law) or those liabilities derived from environmental damage. Usually, bidding specifications provide that the companies comprising a joint venture shall be jointly and severally liable towards the granting authority with respect to the obligations derived from the bid.

      Last verified on Friday 28th June 2019

    • Argentina

      Oil and gas reserves cannot be pledged or encumbered. However, the Hydrocarbons Law allows for participating interests in exploration and production licences to be assigned as security interest to guarantee repayment of debt (article 73).   

      Last verified on Friday 28th June 2019

    • Argentina

      The Hydrocarbons Law provides that, upon default on the secured obligation, the oil and gas rights assigned as security as described in question 23 shall pass to the secured creditor by operation of law. However, the possibility of facing certain obstacles when trying to foreclose on the security interest by just notifying the authority that a default has occurred cannot be discarded, especially when the amount of the debt is lower than the market value of the exploration and production rights. This is the reason why assignments of licence rights as security interest usually contain other foreclosure mechanisms, such as privately or publicly held auctions.  

      Last verified on Friday 28th June 2019

    • Argentina

      Licence holders own and have the free availability of their share of the hydrocarbons produced from the relevant area, subject to the general limitations established in the applicable regulations, basically to secure adequate supply of the domestic market. There are no quotas or limits applicable to oil and gas production.

      In line with this general limitation, the production of crude oil to be exported must be offered to the domestic market first.

      Government authorisation is required for any gas exports (Law 24,076 and Resolution 104/18).

      An export duty of 4 pesos per US dollar (currently 1 peso equals 1 US dollar) applies to oil and gas exports. 

      There are gas export pipelines to Chile, Uruguay and Brazil. There are two main domestic gas pipelines (TGN and TGS) and a project to lay a third main domestic pipeline (TGC) has been launched. Considering the shale gas potential of Vaca Muerta and the way in which unconventional gas production is increasing, Argentina will have to find a way to export LNG to overseas markets either through a liquefaction facility to be built in the country or, as an alternative, less favoured by the government, through a facility in Chile. 

      Crude oil is exported by ship and there is an export pipeline to Chile that has not been used for more than 10 years now but could resume operations in the next few years, provided the production of shale oil from Vaca Muerta continues to increase in accordance to the producers’ forecasts.

      Last verified on Friday 28th June 2019

    • Argentina

      Oil prices are determined by the market, taking Brent as a reference and applying certain discount thereon.

      As regards gas prices, there is a mix of regulated and market prices. There are a number of projects that qualified for the subsidies scheme for new unconventional gas developments established by Ministry of Energy Resolution No. 46/17, as amended by Resolutions No. 419/17 and 12/18 under which the producers were guaranteed certain minimum prices through 31 December 2021. Natural gas not included in the incentive programme mentioned above have been gradually increasing pursuant to a scheme established by Ministry of Energy Resolutions 212E/2016 that began in 2016 and will end in 2019 when domestic prices should converge with import parity prices. The government intends that by the end of this year all gas prices (except for gas produced from projects that have already qualified for a subsidised price programme) be subject to market prices. In line with this, Ministry of Energy Resolution No. 46/18, issued in 2018, provides that gas for power generation shall be acquired through tender processes to be conducted by CAMMESA (the company that administers the wholesale electricity market).   

      Last verified on Friday 28th June 2019

    • Argentina

      In addition to general regulations containing minimum environmental protection standards, such as Law No. 25,675 (the General Environmental Law) and Law No. 24,501 (the Hazardous Waste Law), there are certain general regulations and minimum standards specifically applicable to hydrocarbon activities issued, like (i) Resolution SE N0. 105/92 (policies and procedures for the protection of the environment, which includes provisions on prior environmental studies, annual monitoring and detailed technical guidelines to be followed in the exploration and exploitation of hydrocarbons); (ii) Resolution SE 25/04 (annual environmental monitoring reports); and (ii) Resolutions SE No. 342/93 and SE No. 24/04 (contingency plans and information on environmental incidents). 

      The provinces are empowered to supplement the federal regulations with local regulations, provided they do not overstep the established principle of federal law pre-eminence. In this regard, provincial regulations have been passed in connection with several environmental matters, such as a gaseous emissions control regime, subterranean water exploitation regime, groundwater exploitation regime and pressurised devices control regime.

      Last verified on Friday 28th June 2019

    • Argentina

      The Environment General Law No. 25,675, which contains the basic principles and minimum environmental requirements is in line with the commitments assumed by Argentina under international conventions and follows the guidelines of Program 21 approved by the UN Conference on Environment and Development held in Rio de Janeiro in 1992.

      Last verified on Friday 28th June 2019

    • Argentina

      Companies must obtain specific environmental licences before commencing any seismic acquisition or drilling a well. Additionally, the operator will have to (i) obtain an authorisation for the use of water in the project, which shall include the origin of the water and the conditions under which it shall be used, and (ii) register with the National Hazardous Waste Generators Registry and the issuance of the Annual Environmental Certificate (Law No. 24,051, Decree No. 831/93 and other regulations).

      Last verified on Friday 28th June 2019

    • Argentina

      There are no dispute resolutions specific to the oil and gas industry, except for article 86 of the Hydrocarbons Law, which provides that the terms and conditions applicable to exploration permits and exploitation concessions may provide, at the Executive Branch’s option, that certain specific issues (termination or annulment of a licence and specific technical issues) be resolved by an arbitration tribunal.    

      State immunity principles (such as certain rules on state-owned property and assets that cannot be subject to attachment or other precautionary measures) apply generally to any dispute against the state, including disputes relating to oil and gas.  

      Last verified on Friday 28th June 2019

    • Argentina

      Anti-corruption and money laundering rules apply to any activity in Argentina, including the oil and gas industry. There are no regulations contemplating rules specifically applicable to the oil and gas industry. 

      If it was proved that bribery or other corrupt act was committed in connection with the granting of a permit or concession, that could lead to the annulment of the grant.

      Last verified on Friday 28th June 2019

    • Argentina

      Law 27,007, which amended the Hydrocarbons Law in 2014, included several regulations with a focus on unconventional resources. Among others, the law created specific unconventional hydrocarbons concessions, which main features include, (i) a 35-year term (10 years more than conventional hydrocarbons concessions); (ii) the concession term includes a pilot plan of up to five years; and (iii) holders of conventional exploitation concessions over blocks with unconventional potential may request to be granted an unconventional hydrocarbons concession on all or part of the block of the conventional concession. The law also provided for longer exploration periods for permits with a focus on unconventional resources.   

      There are no federal regulations providing for special environmental licences or permits required for such activities. The Province of Neuquén, where most of the Vaca Muerta formations runs, issued Decree 1483/12 (which amended Decree 2656, which established a set of rules and procedures applicable to unconventional operations. These rules provide that the environmental impact study to be submitted as a condition to obtain an environmental licence must include information on the treatment to be given to the well flowback and the components of the fluids to be used in the well completion, as well as a copy of the approval of the project by the provincial hydrocarbons’ authority and of the authorisation for the use of water granted by the relevant provincial authority. Underground water suitable for human consumption or for watering cannot be used for fracking.   

      Last verified on Friday 28th June 2019

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