According to the US Energy Information Administration, Argentina has the third largest shale gas reserves in the world, behind the United States and China.(1) The Argentine provinces of Rio Negro and Neuquen have recently implemented decrees that encourage investment in the exploration and exploitation of shale gas reserves, as well as other unconventional oil and gas reserves.(2) The decrees provide for a relaxation or pausing of the exploration periods when discoveries cannot currently be exploited economically.
In 2010 the Executive Branch of Neuquen issued Decree 1703/2010, which provides that reserves of tight gas sand, shale gas and shale oil are considered to be of "high exploratory risk" under Article 10 of the Neuquen Hydrocarbons Law.(3) This results in:
- access to specific benefits programmes that may be implemented by the government in future;(3) and
- longer exploration periods - the first stage is six years instead of four, the second stage is four years instead of three and the third stage is three years instead of two. A five-year extension may also be requested, as is the case for regular exploration permits.(5)
In addition, deposits that cannot be commercially exploited can be categorised as 'under evaluation', following a request to the Neuquen Department of Energy. This pauses the exploration period and its related obligations for one year for discoveries of oil and five years for discoveries of gas. In order to avoid speculation, the decree requires that an exploration fee be paid during this period, which is five times higher than the normal exploration fee.
In 2011 the Executive Branch of Rio Negro introduced a similar regime through Decree 1541/2011. The decree provides that tight gas sand, tight oil sand, shale gas and shale oil, as well as other similar gases associated with coal, will be treated as unconventional deposits.(6) Existing and future projects that include such deposits must be submitted to the Rio Negro Ministry of Production which, after assessing the request, may declare them as high risk exploration.(7)
There are two advantages to this regime:
- Exploration terms can be extended from four years(8) up to a maximum of eight years.(9) Furthermore, a five-year extension may be requested, as is the case for regular exploration permits.
- Deposits that cannot be commercially exploited can be categorised as 'under evaluation', which enables the explorer to retain its rights in respect of the deposit without having to explore it. This applies for up to three years for an oil discovery and up to five years for a gas discovery.(10) In order to avoid speculation, the decree requires that an exploration fee be paid during this period, which is three times higher than the normal exploration fee.
The recent decrees in Neuquen and Rio Negro have created an encouraging investment environment for unconventional oil and gas exploration companies. The decrees mitigate the risks involved in unconventional oil and gas exploration and encourage exploration companies to act sooner rather than later.
For further information on this topic please contact Federico Godoy or Phillip Smith at Beretta Godoy by telephone (+54 11 4326 7386), fax (+54 11 4326 7396) or email ([email protected] or [email protected]).
(1) Energy Information Administration Country Analysis Briefs: Argentina, June 2011, page 5.
(2) Neuquen Decree 1703/2010 and Rio Negro Decree 1541/2011.
(3) Neuquen Hydrocarbons Law 2453.
(4) Ibid, Section 10.
(5) Ibid, Section 22.
(6) Rio Negro Decree 1541/2011, Section 1.
(7) Ibid, Section 2.
(8) National Hydrocarbons Law 17,319, Section 23.
(9) Rio Negro Decree 1541/2011, Section 6.
(10) Ibid, Section 7.