Companies are free to use 20% of export earnings
The relaxation of capital controls is intended for new investments in excess of US $ 100 million.
Exports will grow as production recovers
Buenos Aires –
On April 7, Argentina launched a program to stimulate oil production and export, which allows companies with new investments worth more than $ 100 million to freely use 20% of their export earnings.
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The proceeds from the 15-year advertising program must be immediately used to pay off external debts and dividends, according to a government decree published in the Official Bulletin. Otherwise, the money must be deposited in banks in Argentina or abroad until it is used for this purpose, the government said.
“We want to protect those who trust Argentina, invest in Argentina and make money in Argentina, and then have to pay back their obligations abroad,” Argentine President Alberto Fernandez said at the end of April 6.
Capital Control Complaints
Oil companies are lobbying for relaxation of capital controls in the country, saying they are limiting their ability to borrow to finance production-boosting projects, including the Vaca Muerta shale field. Controls also discourage foreign companies from investing because there is no certainty about when they will be able to make any profit, for example, to finance projects in other parts of the world or pay out to shareholders.
Argentina has long used capital controls to keep money in the country to stabilize the exchange rate and inflation. But while former President Mauricio Macri did away with them early in his 2015-19 presidential term, he reinstated them in August 2019 as the country plunged deeper into the financial crisis that still haunts his successor. In response, oil and natural gas production declined as companies cut back on field work. The coronavirus pandemic exacerbated last year’s recession, and the recovery has indeed accelerated this year as global oil prices recover.
Indeed, the Vaca Muerta fracture volume rose to a record 733 stages in March, the Argentine arm of the Houston service company NCS Multistage said on April 5.
Chevron sees great potential
In December, Eric Dunning, Chevron’s managing director for Latin America, said that if Argentina can provide access to foreign exchange markets and the ability to repatriate cash to pay off loans and dividends, as well as a stable, predictable and transparent regulatory and tax environment, market pricing and automatic and transparent rules for the export of oil, then oil production could skyrocket.
“With the right investment climate, we believe that Vaca Muerta could double Argentina’s crude oil production in a few years and deliver half a million barrels a day of crude oil exports,” Dunning said during an oil and gas roundtable on December 3. … Institute of America.
Argentina’s oil production fell to 445,614 bpd in May 2020 from 520,000 bpd in March 2020 as the pandemic reduced domestic demand, where most of the production is sold. A quarantine lift from March to November revived demand and reduced inventories, bringing production to 492,040 bpd in February, according to the latest figures from the Energy Secretariat.
On March 25, Daniel Dreiszen, the former national secretary of energy planning, predicted that production would likely reach 520,000 barrels per day by the end of 2021, creating a surplus to boost exports. The country consumes between 450,000 and 500,000 barrels per day, all of which are supplied locally, which means any additional production can be sent overseas.
Medanito’s light crude oil exports, including Vaca Muerta crude, rose more than sixfold to 9,300 bpd in 2020 from 1,340 bpd in 2019, aided by isolation that weakened local demand, according to the Energy Secretariat. data. This boosted total crude oil exports by 18.5% to 67,877 bpd from 57,277 bpd in the same period, the data showed.