Buenos Aires Times | Government relaxes FX rules for companies to boost Vaca Muerta development

Economy Minister Martín Guzmán on Tuesday announced the creation of a new special regime for companies in the energy sector as part of a wider effort to boost the development of the Vaca Muerta shale formation. 

The move, announced via decree, aims to “generate certainty and incentives to encourage investment and increased production in the sector in Argentina,” said the minister, who said it would “solve the limitations and bottlenecks” facing firms.

“Given the need for Argentina to generate more foreign currency and for this to be achieved through more investment, we are going to create a special regime of access to foreign currency for hydrocarbon production, which will be crystallised through a decree,” said Guzmán.

Under the new scheme, Argentina will allow energy firms easier access to foreign currency, allowing them to bypass strict currency controls that are designed to protect Central Bank reserves. Many experts say such restrictions limit investment in the key sectors, including hydrocarbons.

According to Guzmán, the aim is to “resolve bottlenecks in the sector, so that companies can access the foreign currency they need and thus have the elements that are also needed to produce more foreign currency.”

In the case of oil, he explained that each firm that surpasses its 2021 production levels will be able to access foreign currency equivalent to 20 percent of its improved production. For natural gas, firms will be able to access 30 percent of the value of any incremental injections into Argentina’s pipeline network.

Guzmán, speaking at the Bicentennial Museum of the Casa Rosada, said the move would support the development of Argentina’s hydrocarbons sector. He claimed that production is improving, following a decline in 2021, as a result of the government’s Gas.Ar plan.

Referencing the international context and the impact of Russia’s invasion of Ukraine, the minister said that the country faces “a historic opportunity in which energy can play a transformational role.”

Argentina’s government wants to boost development at the Vaca Muerta formation in Patagonia, home to the world’s second-largest shale gas reserves and fourth-largest shale oil reserves. 

President Alberto Fernández recently announced that the country would build a massive new gas pipeline, the Gasoducto Néstor Kirchner, to boost exports and increase domestic supply.

– TIMES/TÉLAM/NA