The largest Argentinean shale gas play is the Neuquén Basin, which is located on the eastern side of the Andes in Argentina1 and central Chile and covers an area of over 120,000km2.

Shale plays in Argentina

In December 2010, Repsol-YPF, then privately owned, discovered 4.5 TCF of shale gas in the Loma de la Lata field of Neuquén.

The Vaca Muerta area, also located in the Neuquén Basin, is quickly gaining international attention as a robust unconventional target. Operators believe that Vaca Muerta could be one of the largest shale basins outside the US. Also in Neuquén is the Los Molles formation, which has significant shale potential. Its resources have been estimated at 167 TCF of gas.

Another important region for shale gas plays is the Golfo San Jorge Basin, which is located in central Patagonia and covers a surface area of approximately 170,000km2. This intracratonic basin is predominantly extensional, lying roughly in an east-west direction, from the Andean belt to the Atlantic Ocean.

One of the main formations located in the Golfo San Jorge is Aguada Bandera, a shale formation shared by the provinces of Santa Cruz and Chubut. The Aguada Bandera Basin has a confirmed potential of 51 TCF of natural gas. Also in the Golfo San Jorge Basin, well D-129 has 35 TCF.

A less explored basin is the Paraná-Chaco Basin, where gas resources have been estimated at 164 TCF.

Finally, the Austral-Magallanes Basin, located at the south of Argentina and Chile, is believed to have potential for the presence of oil or gas reservoirs. This has yet to be confirmed through further exploration.

Ownership of land and mineral rights

On October 30, 2014, the Argentine Congress enacted a series of amendments to the regime applicable to hydrocarbons. Law No. 27,007 was published in the Argentine Official Gazette on October 31, 2014 (the Amendments to the Hydrocarbons Law). It modified Law No. 17,319 (the Hydrocarbons Law), which is the national legal regime.

Under the Hydrocarbons Law, oil and gas fields belong to the national government. Such ownership is separate from surface ownership.

In 2007, the National Congress passed Law No. 26,197 (the Short Law) to settle the specific constitutional question of the provinces’ titles to hydrocarbons. The Short Law partially amended the Hydrocarbons Law and provides that ownership of the oil and gas fields and the power to grant exploration permits and exploitation concessions is vested in the provinces or the national government, depending on the location of the field.

Under the Hydrocarbons Law, once hydrocarbons have been extracted, they belong to the company that extracted them. Companies may therefore transport, market and industrialise the hydrocarbons, and market their byproducts, in accordance with the regulations established by the Executive Branch.

Hydrocarbons regulation

During 2014, the national government and the Federal Organization of Hydrocarbon-Producing Provinces (OFEPHI) negotiated several additional amendments of the Hydrocarbons Law in order to create a more suitable legal framework for the exploitation of unconventional resources, such as shale gas.

As a consequence, the current national legal regime of hydrocarbons is based on the Hydrocarbons Law, its recently enacted amendments, and the Short Law.

In general terms, the Amendments to the Hydrocarbons Law considerably changed the panorama with respect to unconventional projects. They introduced specific provisions applicable to such projects where previously there was no distinction in regulation between the exploitation of conventional and non-conventional hydrocarbons. Thus, the exploitation of shale gas and shale oil are no longer carried out under the generally applicable hydrocarbons regime.

Shale gas and other unconventional hydrocarbons are expressly mentioned in new Article 27 bis of the Hydrocarbons Law. This new provision defines and distinguishes different unconventional forms of extracting hydrocarbons and establishes an especially applicable framework for such plays.

The Hydrocarbons Law lays down national criteria on exploration, exploitation, industrialisation, transportation and marketing activities. It also regulates the assignment of rights, as well as the control and sanctions to be enforced by the authorities. It is the principal national regulation covering the main aspects of the hydrocarbon regime.

Principal players and controlling bodies

The State’s main players and controlling bodies are outlined below.

National Secretariat of Energy

The Secretariat of Energy is the enforcement authority for the hydrocarbon regime. All national matters related to exploitation, production and refining activities fall within its scope of authority.

Commission for Strategic Planning and Coordination of the National Hydrocarbons Investments Plan

The Commission was created by Decree No. 1,277/2012. Its goals are to ensure and promote the investments required for the maintenance, increase and recovery of reserves that guarantee the short-and long-term sustainability of the hydrocarbon industry. It also concerns itself with reserves that guarantee self-sufficiency in hydrocarbons and those aimed at the exploration and exploitation of conventional and non-conventional resources.

Ente Nacional Regulador del Gas (ENARGAS)

ENARGAS, a regulatory entity created by Law No. 24,076 (the Gas Law), is in charge of supervising and regulating the transportation and distribution of natural gas. Both activities are considered public services.

In addition, the national government currently owns ENARSA and YPF SA.

Energía Argentina Sociedad Anónima (ENARSA)

The government formed ENARSA in 2004 through Law No. 25,943. ENARSA holds title to all the offshore permits granted when it was created (approximately 72 blocks).

ENARSA was also appointed by the government of Argentina to deal with the liquefied natural gas (LNG) programme. ENARSA constructed and operates two new regasification plants, which have been used for the importation of LNG.


In May 2012, the Argentinean Congress enacted Law No. 26,741, which emphasised, among other matters, the public policy interest in the expropriation of 51 per cent of YPF SA and Repsol-YPF Gas SA.

The expropriated shares in the two companies were allocated as follows:

  • 51 per cent to the government of Argentina
  • 49 per cent among members of OFEPHI.

On March 26, 2014, the Argentine Senate approved an agreement between Repsol and the Executive Branch, which recognised Repsol’s right to receive US$5 billion in compensation for the expropriation of its 51 per cent stake in YPF.

Rights, licences and approvals

There are two types of granting instruments, namely: exploration permits and exploitation concessions, which are granted pursuant to the provisions of the Hydrocarbons Law.

In addition, some provinces retain title to areas and enter into service agreements with different companies covering the exploration and exploitation of hydrocarbons in those areas. In the last few years, provincial oil companies have associated with other oil companies to carry out exploration and exploitation activities in areas under provincial jurisdiction. In most cases, an association with the provincial oil company was a requirement set by the province in order to award a permit or concession.

Exploration permits and exploitation concessions are usually granted by a Decree via the National Executive Branch or the Provincial Executive Branch, depending on the location of the area.

Exploration permits

Characteristics of exploration permits:

  • Permits grant the exclusive right to search for oil and gas in the area covered by them.
  • Permit holders must inform the authority if any oil or gas is found within 30 days of the discovery. Once the permit holder determines that the area contains commercially exploitable quantities of hydrocarbons (i.e. a ‘commercial discovery’), in most cases it has 30 days to apply for the exploitation concession.
  • The holder of a permit has an exclusive right to apply for an exploitation concession.

The Amendments to the Hydrocarbons Law eliminated previously existing restrictions that did not allow private companies to hold more than five exploration permits.

One of the most important amendments made to the Hydrocarbons Law was the creation of specific permits for unconventional exploration. In this sense, unconventional projects may have terms of up to 13 years in accordance with the Amendments.

Exploitation concessions

Characteristics of exploitation concessions:

  • Exploitation concessions grant the rights to exploit the existing oil and gas discoveries located in the areas of the concession.
  • Concessions grant the rights to build and operate treatment plants and/or refineries and all other facilities needed to develop operations.
  • Exploitation concessionaires may apply for a transportation concession for the hydrocarbons obtained during exploitation.
  • Depending on the jurisdiction, an exploitation concession usually remains in effect for 25 years. The enforcement authority may extend that term for up to ten years, provided the concessionaire has complied with the obligations imposed during the initial term.

An important addition in the Amendments to the Hydrocarbons Law was a novel type of concession with a longer term. The Unconventional Exploitation Concession lasts 35 years of which five years may be allocated to a ‘Pilot Project’ in order to determine the commerciality of the field.

Additionally, the Amendments to the Hydrocarbons Law give concessionaires the right to request new extensions even if they have already obtained an extension before October 2014 (when the Amendments to the Hydrocarbons Law were passed).

The Amendments to the Hydrocarbons Law also eliminate restrictions on holding more than five exploitation concessions or concessions.

Establishment of a local entity

In order to hold rights, licences and approvals to participate in the Argentinean hydrocarbons sector, it is not necessary to establish a local entity. Foreign investors may register a branch of their own entity in Argentina in order to conduct business within the hydrocarbon sector.

An Argentine branch of a foreign legal entity does not have independent legal existence from the head office. The head office may or may not assign capital to the branch. A duly appointed representative handles local operations for the branch.

However, if a foreign investor decides to organise an Argentine entity, it may use one of the following corporate entities.

Corporation (SA)

The business form of an SA is the most usual way to do business in Argentina. It is a stock company, which requires prior authorisation from the General Inspector of Corporations (GIC). It allows the shareholders to limit their liability to the par value of the shares they have agreed to subscribe. An SA may be considered the equivalent of a US corporation.

Limited liability company (SRL)

An SRL is a limited liability company, which also requires registration with the GIC. The business form of an SRL allows its members to limit their liability to the par value of the membership interests they have agreed to subscribe (except for their responsibility to third parties for actual payment by the other members of the amounts they agreed to subscribe).


Oil and gas companies must specifically register with the national and provincial enforcement authorities. At national level, registration is with the Registro de Empresas de Exploración y Explotación de Hidrocarburos (Registry of Oil and Gas Exploration and Exploitation Companies) and the Registro Nacional de Inversiones Hidrocarburíferas (National Registry of Hydrocarbon Investments). Provincial registries and their applicable regulations vary by province.

The Argentine Energy Secretary issued Resolution No. 194/2013 on April 19, 2013, prohibiting companies from registering with the Registry of Oil and Gas Exploration and Exploitation Companies if they act, directly or indirectly, as contractors, or are direct or indirect shareholders, or if they maintain a beneficial ownership relationship with:

  • companies that carry out without authorisation, exploration, exploitation or transport activities relating to hydrocarbons in the Argentine Continental Platform, or
  • companies that provide services related to hydrocarbon activities to the previously mentioned companies.

Resolution 194/2013 also establishes that companies with exploration permits and exploitation or transport concessions (including their controlling parent companies or controlled subsidiaries or companies with which they maintain a beneficial ownership relationship), are not allowed to:

  • participate in unauthorised hydrocarbon exploration, exploitation or transport activities in the Argentine Continental Platform, or in companies that provide services related to hydrocarbons
  • provide commercial, logistics or technical support to companies that offer the services referred to in the preceding point
  • enter into agreements, transactions, commercial acts, or economic, financial, logistics, technical, consulting or appraisal operations with third parties, for the development of unauthorised exploration, exploitation or transport activities in the Argentinean Continental Platform. Contravention of this prohibition exposes the permit holder or concessionaire to the risk of revocation of their granting instrument.

State participation

Under the Short Law, provinces may exercise the authority and powers of an original owner. However, in accordance with the Amendments to the Hydrocarbons Law, provinces may not in future reserve blocks for any provincial Stateowned company.

Provinces continue to exercise powers over oil activities and take charge of the administration of hydrocarbon resources, which includes receiving the corresponding exploration fees and royalties for the production of hydrocarbons.

Some provinces have entered into service agreements with different companies covering the exploration and exploitation of hydrocarbons in areas located within their jurisdiction. To date, no production-sharing contracts have been used in Argentina, as they have not been contemplated in the bidding proceedings.

Taxes, duties, royalties and incentives

Tariffs and duties

Tariffs are applied to the transportation of natural gas and oil through pipelines. Gas pipeline transportation falls within the jurisdiction of ENARGAS.

Export duties on hydrocarbons

After the crisis of 2001, the Argentine National Executive Branch restricted exports, establishing export duties on liquid (crude oil, LPG, derivatives) and gaseous (natural gas) hydrocarbons, using regulatory powers under the Customs Code and Laws Nos. 22,415, 25,561 and 26,217 on Public Emergency.

Currently, a rate for export duties is fixed based on the international crude oil price. The rate uses a formula that applies when the price per barrel of the West Texas Intermediate (WTI) exceeds the reference value of US$80, establishing a cut-off value of US$70/bbl. With respect to imports and exports of natural gas, as in the case of the system for crude oil and derivatives, restrictions have been increasing over the years. This matter is currently governed by Resolution No. 534/2006, as amended by Resolution No. 127/2008, both issued by the Ministry of Economy, establishing a rate equal to 100 per cent.

Fees and royalties

The exploration permit holder must pay an annual fee to the government of the province where the area is located. This is paid in arrears for each square kilometre or fraction thereof, pursuant to established scale and area categories. The Executive Branch is empowered to increase the fee at its discretion.

The following royalty rates apply to the extraction of hydrocarbons:

  • 12 per cent of the ‘value’ of hydrocarbons under an exploitation concession. This rate may be reduced to 5 per cent
  • 15 per cent of the ‘value’ of hydrocarbons extracted under an exploration permit.

In January 2008, the Under Secretariat of Fuels issued Provision 1/2008, which established an artificial value of hydrocarbons for the purposes of calculating royalties. It takes a cut-off value set out in Resolution No. 394/07, issued by the Minister of the Economy, as the minimum value for royalty calculation purposes. This value is US$42/bbl, to which an ‘upward’ quality adjustment must be applied.

However, under the Amendments to the Hydrocarbons Law, provinces may only charge the current 12 per cent royalty rate on actual sale prices (netted back to the wellhead).

Finally, as of November 2014, concessionaires may obtain a 25 per cent reduction in the royalty rate applicable to unconventional hydrocarbons during the ten years after the end of the Pilot Project, if they request an Unconventional Exploitation Concession within three years.


Key national taxes:

  • Income tax: 35 per cent on the net taxable income
  • VAT: 21 per cent applied on domestic sales of oil and gas, which is added to the producer’s sales invoices and passed on to the payer.
  • Key provincial taxes:
  • Turnover tax: 1–3 per cent. For oil and gas it is usually 2 per cent
  • Stamp tax: 1–2 per cent (depending on the provincial jurisdiction).


Since the crisis of 2001, the Argentine government has fixed the price of gaseous hydrocarbons, which in 2008 were set at US$0.50 per million BTU (MMBTU). This created a strong disincentive for the drilling and production of domestic gas. It transformed Argentina, which has the highest production and consumption of gas of any South American country, from a net exporter into a net importer of gas.

The first attempt to create incentives took place in 2008, through Resolution 24/2008. This resolution established the Programme of Incentives for Natural Gas Production or ‘Gas Plus.’ Gas Plus increased the price of gas, from US$0.50/MMBTU to US$5/MMBTU, obtained as a result of investments in unexploited areas, new areas, areas without production since 2004 or tight gas areas.

Most recently, the Commission issued Resolution 1/2013 unveiling the Programme to Stimulate Surplus Injection of Natural Gas. This programme ensures (through payments to the beneficiaries) a minimum price of US$7.50/ MMBTU to companies registered in the National Registry of Hydrocarbon Investments and which inject gas into the domestic market in excess of their base injection levels. For these purposes, companies must prepare and adhere to a Project to Increase Total Natural Gas Injection.

Resolution 1/2013 establishes:

  • minimum price of US$7.50/MMBTU for any incremental sales to the domestic market
  • a minimum price guarantee of US$2.30/MMBTU in respect to base injection levels (which are subject to incremental quarterly adjustments, from 2013 to 2017)
  • that if the producer does not supply volumes in excess of the adjusted base injection levels, it shall be subject to penalties associated to the equivalent cost of supply of LNG, minus US$7.50/MMBTU, multiplied by the amount of the shortfall.

Foreign currency and Central Bank requirements

The foreign currency exchange rate has been increasing since the 2001 crisis. The current official exchange rate is approximately AR$8.5 per US$1.

The acquisition of foreign currency is currently restricted to a limited number of situations. These policies have led to the development of an unofficial exchange rate within the country. Individuals and companies are required to obtain authorisation from the federal tax agency before purchasing foreign currency.

In December 2011, the National Congress approved an antiterrorism law under which the buying or selling of foreign currency outside the official market may be considered an act of terrorism. Prison sentences of as long as eight years can be imposed for ‘conduct that affects the economic and financial order’.

Environmental protection

In accordance with the National Constitution, powers to protect the environment are vested in the provinces and only by delegation in the national government. However, the national government may enact federal laws providing for minimum standards that must be fulfilled throughout the country.

As a result, local laws enacted by the provinces and that apply within their respective jurisdictions coexist with federal laws that apply in the whole country.

The main environment-related federal statutes and regulations are:

  • the General Environmental Law, No. 25,675 (GEL)
  • the Hazardous Waste Law, No. 24,051 (HWL)
  • Law No. 25,612, which establishes minimum environmental protection standards concerning the overall management of industrial waste and of waste generated by services activities
  • Law No. 25,675 on minimum environmental protection standards for the adequate and sustainable management of the environment, the preservation and protection of biological diversity, and the implementation of sustainable development. It is commonly known as the Environmental Framework Law (EFL).

In March 2014, the province of Neuquén enacted environmental regulation for unconventional operations, which are specifically applicable to unconventional reservoirs of shale gas.

Environmental impact assessments, audits and safety standards

The GEL provides that any work or activity that may degrade the environment or significantly impair the quality of life of the population will be subject to a prior environmental impact assessment procedure. Activity or work may start only upon completion of the assessment and its approval by the relevant authorities.

In addition, there are other federal rules that provide for mandatory environmental impact studies for specific activities, such as exploration, exploitation, transportation of hydrocarbons, and hazardous waste treatment and disposal. The newly enacted regulations for unconventional operations in the province of Neuquén require the filing of an environmental report to qualify for an environmental licence granted by the Environment and Sustainable Development Secretariat of the province.

Different laws and regulations establish that companies that store hydrocarbons must have an external auditing service for the control of safety standards. In addition, they must carry out an annual audit for the control of safety standards, including impenetrability tests and planning or making repairs to storage systems.

Environmental liability

In general, strict liability applies to environmental damage. Under the EFL, if two or more persons are involved in causing collective environmental damage or if the extent of the damage caused by each cannot be accurately established, all of them shall be jointly and severally liable, without prejudice, if applicable, to the right of contribution among the parties involved. The acting court may determine the degree of liability of each for this purpose.

In addition, the EFL establishes that in cases of collective environmental damage, the damaging party shall be liable for the restoration of the environment to its prior condition, or, if this is technically not feasible, it shall be liable for damages.

The EFL also provides that any individual or legal entity performing activities hazardous to the environment shall take out insurance guaranteeing that any possible damage to the environment shall be repaired. Moreover, if the damage was caused by corporations, liability shall extend to their authorities and professionals, based on their respective involvement.

With respect to criminal liability, the HWL also contains provisions that have been considered to apply throughout Argentina, regardless of the place where the waste has been produced.

Under the HWL, persons whose use of hazardous waste poisons, pollutes or contaminates the soil, water, atmosphere or the environment in general, in a manner dangerous to human health, are subject to imprisonment. When the punishable act is the result of negligence, inexperience or failure to observe rules and regulations, imprisonment of between one month and two years will be applicable. If the use of hazardous waste causes the death of a person, the penalty will be between ten and 25 years’ imprisonment. It is worth noting that if a punishable act occurs as a result of the decision of a corporation, the penalty will be imposed on its directors, managers, syndics, members of the supervisory committee, administrators, attorneys or representatives that were involved in the punishable act, without prejudice to any other criminal liabilities that may apply.

Domestic supply and exportation of hydrocarbons

Companies wishing to export hydrocarbons from Argentina must generally file a request with the National Executive for all types of exports, proving that local demand has been satisfied.

Specifically with regard to gas exports, authorisation will always be required by the Executive Branch by means of an export permit. The national government has issued additional regulations to give priority to domestic demand.

See our description above of export duties on liquid (crude oil, LPG, derivatives) and gaseous (natural gas) hydrocarbons.

Enforcement regime in judicial and arbitral alternatives

Argentinean laws expressly allow for the enforcement of judgments and awards rendered in foreign or international jurisdictions. However, local courts are particularly careful in analysing whether a particular judgment or award conforms with Argentina’s internal public policy. On any occasion where they are found to be inconsistent, courts will most likely reject their enforcement. Such legal control of awards and foreign judgments is more common whenever the interests of State entities would be affected by the enforcement of the award or judgment in question.

However, in commercial disputes governed by private law, Argentinean jurisprudence is considered favourable to the enforcement of foreign decisions and awards.

Changes to regulatory regime

A significant change in regulation has been the special treatment granted to non-conventional operations provided for in the Amendments to the Hydrocarbons Law.

Additionally, in recent years, the Argentine government has put a lot of effort into changing some of the policies put in place in the 1990s during the ‘Menem era’, during which the State oil company, YPF, was privatised and sold in large part to Spain’s Repsol. For several years after this, State participation in the energy sector was effectively nonexistent. More recently, however, the Argentine government has become increasingly involved in the sector.

It has been suggested that the government is trying to take YPF to the position that Pemex, PDVSA or Petrobras hold in their respective countries. Consequently, changes to the regulatory regime to enable the State to intervene more in the energy sector should not be ruled out.

Nonetheless, please see our comments on hydrocarbon regulation above and bear in mind that the province in which an area is located has the power to enact most of the laws and regulations applicable to shale gas investors. Therefore, changes to the regulatory regime may take place at the provincial level.


In May 2011, Repsol-YPF, which was then privately owned, announced the discovery of a deposit that could produce up to 4.5 TCF. Some have called this discovery the third largest of its kind in the world. The deposit is located in the province of Neuquén and its development, according to several press reports, would cost up to US$40 billion.

In May 2012, the Argentine Congress authorised the nationalisation of Repsol-YPF, and the Argentine government took 51 per cent of the company’s stock which was the property of Repsol. Since then, Argentina has sought to find a partner to develop the shale gas deposits in Neuquén. Although there have been reported talks, and in some cases MOUs, with Chevron, Dow Chemicals and Bridas, none of those agreements has been successful.

In March 2013, it was reported that four companies have exploration rights over more than 6.8 million acres of the 7.4 million acres in the Vaca Muerta formation. Those companies are YPF (4 million acres), Apache (1.8 million acres), ExxonMobil (1.2 million acres) and Americas Petrogas (close to 1 million acres). The recently created provincial company, Gas y Petróleo de Neuquén (G&P), holds more than 3 million acres and has entered into 62 joint venture agreements for the exploration and production of shale oil and gas.

In June 2013, the US Energy Information Administration of the Department of Energy reported that the Vaca Muerta formation in the Neuquén Basin has 308 TCF of technically recoverable reserves of natural gas and 1,202 TCF of risked gas in place.* Vaca Muerta’s appeal is high, but development is still at an early stage.

The business climate

Some analysts have indicated that a deteriorating business climate in Argentina has impacted on development in Vaca Muerta. This is mainly the result of high government intervention in the economy, restrictions to capital and profit repatriation and increasing domestic inflation, which impacts on the costs of projects.

However, companies such as Chevron, Madalena Ventures, EOG Resources, Royal Dutch Shell, Azabache, Petrobras, Pan American Energy, BP, Bridas, Antrim and Energy Wintershall have also seen great opportunity in Neuquén and are currently present in the area.

Other shale gas deposits in the Neuquén area, such as the Loma de la Lata deposits, represent opportunities for foreign investment in Argentina.

During April 2014, the province of Neuquén, represented by G&P, held a roadshow in Houston to tender oil and gas areas in the province. The areas were: El Churqui –Pampa Trill; Parva Negra Oeste; Loma Ancha; Santo Tomás; Portezuelo Minas; Los Álamos –Señal Rocosa; China Muerta –Cañadón de las Horquetas – Loma de Las Piedras; and Collón Cura II.


Unrisked reserves are those that have already been developed by drilling and production and therefore have a very reasonable certainty of being produced. On the other hand, risked reserves are either probable or possible reserves, depending on the amount of uncertainty involved.