Changes to Argentina’s fiscal regime and the reforms implemented under the administration of President Mauricio Macri have improved the investment climate for the upstream hydrocarbon sector.

However, despite having suspended controls on domestic crude oil prices in September 2018, the government has been forced to reintroduce an export tax as a result of Argentina’s current currency crisis.

Argentina oil and gas 2018

Under Macri, Argentina’s hydrocarbons fiscal framework has improved its attractiveness for prospective investors, but the economic recession may introduce new policy risks. The government initially adopted an investor-friendly approach, pursuing major reforms including the removal of currency controls.

Incentives were temporarily introduced for new gas production to promote the development of the Vaca Muerta shale play, export duties were initially removed, and in September 2018 the government suspended controls on domestic crude oil prices.

Regulatory issues may slow progress to open up the natural gas market, with significant implications for producers’ marketing options, particularly in the growing Vaca Muerta.

The government is pursuing liberalisation of natural gas prices for final consumers. The ability of the government to complete the liberalisation amid strong opposition will have significant implications for producers’ income streams, particularly given that recent investment has been driven by the gas production subsidies, which will be phased out by 2021.

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Another major focus for growing the country’s hydrocarbon sector is the opening of offshore areas to exploration. In November 2018, Argentina opened Argentina Offshore Round 1 through which 36 blocks are on offer across three different basins: Argentina North Basin, Malvinas West Basin, and Austral Basin.

Argentina oil and gas 2019

The offshore is a very large underexplored area (200,000 km² are on offer in Round 1), with very limited activity over the course of the last 20 years. However, the exploration successes in the neighbouring Falkland Islands (Islas Malvinas) and wider industry interest along the Atlantic Margin have prompted the push to open offshore acreage. Beyond the first round, Argentina is also planning to launch a second bidding round concerning the Southern Argentina Basin. The round had been slated to open in the second quarter of 2019, but it now appears likely to be postponed.

Argentina, flowchart