Jonathan Gilbert and Lucia Kassai, Bloomberg News
EnergiesNet.com 01 29 2024
Javier Milei’s plans to free Argentina’s oil markets are getting pared back as the new president negotiates sweeping reforms to deregulate the country’s economy with an opposition-controlled congress.
At issue is the Argentine government’s ability to stop drillers from exporting cargoes of crude if it’s concerned about shortages at domestic refineries. This right of first refusal has long existed in Argentina, and international oil companies including Chevron Corp. and Shell Plc had lobbied against it. But the latest version of Milei’s signature deregulation legislation backtracks on a move to strip away the practice and still allows it.
In Big Oil’s favor, the tweaked bill — which lawmakers are scheduled to vote on soon — maintains language that would prohibit the government from reducing local crude prices to keep fuel cheap. That measure may be enough to keep domestic refineries well-supplied, said Nicolas Gadano, an Argentine consultant and professor who specializes in economics and energy.
“The government has backpedaled a bit on the libertarian spirit” of the proposed oil rules, Gadano said. “But the problems with right to first refusal only arise when you create a gap between domestic and export prices.”
The Energy Secretariat didn’t immediately reply to a request for comment.
Still, the right to first refusal may hobble producers’ plans to ramp up drilling in Argentina’s heralded Vaca Muerta shale patch. That’s because the possibility that an export cargo will get blocked is a hurdle to negotiating contracts with overseas buyers.
Milei has let Argentina’s refiners hike gasoline prices, which allows them to pay more for crude and lessens producers’ incentive to sell oil abroad. That is already helping keep a balance between exports and domestic sales, according to a trader familiar with the matter.
Milei has been making multiple concessions to push through the legislation, including suspending a move to privatize YPF SA, Argentina’s biggest oil and gas driller and fuel retailer, which is spearheading development of the Vaca Muerta.
Exports of light Medanito crude produced in Vaca Muerta surged by 39% last year to more than 100,000 barrels, accounting for 72% of all Argentine oil shipments.
bloomberg.com 01 26 2024