(Argus, 10.Mar.2020) — The oil price collapse is prompting Argentina to revive state intervention to protect the domestic oil industry.
The national government is putting the brakes on imports of crude, gasoline and diesel, a move that mainly benefits state-controlled YPF, Argentina’s top oil producer and refiner.
In the new policy, crude and fuel imports will be subject to “non-automatic licenses”, giving the government as long as two months to authorize purchases from abroad. Aviation fuel, LPG, and fuel oil will be exempted from the measure.
“We are implementing non-automatic licenses for imports to prevent speculative schemes linked to market volatility from affecting local production,” production minister Matias Kulfas said today.
Kulfas, who is in charge of the energy secretariat, said the government will meet with hydrocarbon-producing provinces, labor unions and oil and gas companies to determine additional measures.
“The decline in international prices affects a large part of production,” Kulfas said, highlighting that Argentina’s Vaca Muerta shale formation “has higher costs” so “failing to do anything would probably mean that those wells will stop producing.”
In a hint of further action, the influential provincial government of shale-producing Neuquen is calling on the national government to set a minimum crude price to shield investment from the oil price collapse.
“The support price we are thinking about would be around $50/bl or a little more,” Neuquen energy minister Alejandro Monteiro said today.
Neuquen will make the request to the government tomorrow, when officials from oil-producing provinces meet with energy secretary Sergio Lanziani.
The plunge in international prices “has nothing to do with Argentina’s hydrocarbon activity and that is why we have to work on measures that reduce the impact that this might have,” Monteiro said.
The Neuquen request is reminiscent of the country’s past policy of maintaining artificially high wellhead crude prices to stimulate local production. The controls were lifted in 2017, although pump prices remain subject to informal price controls.
The recent plunge in prices could push the government to take measures that the energy sector has long been demanding in an effort to boost investment, including freeing up hydrocarbon companies to access the foreign exchange market and export their production, Neuquen governor Omar Gutierrez said.
“A crisis is a good opportunity, a good opportunity to accelerate measures,” Gutierrez said.
Several large international companies, including ExxonMobil, Chevron, Shell and Total hold significant acreage in Vaca Muerta, although much of the production there has been dominated by YPF.
Argentina’s oil production rose by 4pc year on year to 508,600 b/d in 2019, while gas production increased 5pc to 135.2mn m3/d (4.8bn cf/d), according to data from the energy secretariat.
By Daniel Politi