Introduction

The Ministry of Energy and Mining recently issued Resolution 197/2018, which details the requirements and procedures for obtaining reconnaissance permits and the commercial use of data obtained during reconnaissance activities on the Argentine Continental Shelf.

The Argentine offshore area, which extends southward from Uruguay to Tierra de Fuego near Antarctica, is one of the longest in the world. With regard to hydrocarbon projects, there are two major developments off the coast of Argentina, both of which are located in the Austral Basin:

  • The Vega Pleyade gas field began production in 2016 and has a capacity of 10 million cubic metres of gas per day.(1)
  • The Magallanes Incremental Project aims to produce 4 million cubic metres of gas per day and increase crude oil production by 25%.(2)

In February 2017 the Ministry of Energy and Mining conducted a study and issued a reconnaissance permit to Spectrum ASA to perform a survey of the northern Argentine Continental Shelf.(3) The permit was for a maximum of 24 months to perform multi-client two-dimensional seismic surveys on the northern basins of the Argentine offshore areas. According to Spectrum's press releases, the results were encouraging enough to claim that the area has significant potential.(4)

To exploit the potential hydrocarbon deposits, the Minister of Energy and Mining announced future tenders for the offshore programme. The ministry is looking to tender reconnaissance permits for more than 450,000 square kilometres of unexplored parts of the Argentine Continental Shelf.(5)

Due to these developments, and given the untapped potential of the Argentine offshore area, the Ministry of Energy and Mining issued Resolution 197/2018 on 16 May 2018 in which it set out the required rules and procedures for obtaining reconnaissance permits.

The resolution seeks to clarify the requirements and procedures for undertaking reconnaissance and surface exploration activities. It also regulates the commercialisation of information gathered from offshore reconnaissance activities.

The government plans to develop surface reconnaissance activities, particularly in the offshore territorial area, subject to a legal framework that promotes competition among different companies and allows the commercialisation of the information gathered by each licensee.

Scope

The resolution aims to regulate the uses and commercial terms of information arising from surface reconnaissance activity permits in the Argentine offshore territory.

Section 18 of the resolution prohibits any well or seabed perforation activities, except those required to gather samples for piston-corer or seabed studies.

For clarification purposes, the resolution defines certain relevant terms and conditions (ie, the right of commercial use, surface area explorations, the scope of the permit and the difference between branches and subsidiaries of foreign companies).

Qualified applicants

Under the resolution, any individual or legal entity can apply for a surface reconnaissance permit.(6) To qualify under the law, the applicant must prove that is has at least five years' experience in surface reconnaissance activities.

The resolution also allows companies to apply for a permit as members of a joint venture with a more experienced company in the field in order to meet the above requirement.

The Ministry of Energy and Mining may authorise several licensees to perform surface reconnaissance activities in the same area. Permits therefore are non-exclusive and there are no barriers to enter areas that have already been granted to other licensees. However, before authorising a permit in the same area of the continental shelf, the ministry will issue a notice to the existing permit holder.

If a permit is issued for two or more licensees in the same area, they must establish coordination mechanisms to define their working hours in the shared areas prior to starting any surface reconnaissance activities. This is to prevent the permit application from being adversely affected.

Obtaining a permit

The Ministry of Energy and Mining's Hydrocarbon Resources Office grants surface reconnaissance permits.

Applicants must submit an affidavit with supporting documents to prove a minimum of five years' experience, together with:

  • annual financial statements;
  • their tax code; and
  • a certificate of corporate status in Argentina or their respective country.

The application must include a general presentation of the project consisting of an executive summary, objectives and scope. The application must also include a work plan and affidavit evidencing the technical, operational and personnel capabilities available to the applicant for performing surface reconnaissance activities.

A foreign company can apply for a permit, even if it has no corporate presence in Argentina. In such cases, the Ministry of Energy and Mining will assess the application. If approved, the applicant will be given time to register as a local company.

Licensee rights and duties

The resolution sets out the licensee's rights and duties, which include the following activities:

  • surface geology;
  • seismic refraction and reflection;
  • gravimetry;
  • magnetometry;
  • geoelectric and geochemical operations;
  • topographic and geodetic work;
  • aerial topography;
  • aeromagnetometry; and
  • any other activity that could contribute to determining sub-surface conditions favourable for hydrocarbon accumulation.

The permit is valid for a maximum of eight years from the authorisation date. The resolution also sets out requirements for the delivery of reports, data and information relating to surface reconnaissance to ensure an effective and efficient evaluation of activities.

Further, the resolution clarifies the right of commercial use by licensees. During the permit's term, licensees are responsible for disseminating and commercialising any information obtained in a transparent and non-discriminatory manner. Licensees may market and commercially use the information obtained for two additional years after their permit expires.

Licensees, together with the Ministry of Energy and Mining, will have ownership rights for information obtained from surface reconnaissance activities. Licensees must also notify the ministry of any commercial transactions carried out after reconnaissance activities.

To promote wider participation, the resolution allows for the assignment of permits to third parties. Further, surface reconnaissance permits that have been granted for offshore areas before the resolution came into force, and which are still in force, may be converted into permits at the interested party's request.

Comment

Although the Ministry of Energy and Mining has already granted a number of offshore exploration licences, significant potential for offshore basin exploitation remains.(7)

The government has announced that it will issue the terms and conditions for an upcoming auction for offshore oil exploration rights in the near future. A presidential decree will first authorise the Ministry of Energy and Mining to hold the auction and the ministry will then issue a resolution explaining and setting out its terms.(8)

The auction will grant interested parties the opportunity to bid for the rights to explore 38 blocks, including 14 in the northern Argentine basin, six in the Austral basin and 18 in the Malvinas West basin.(9)

For further information on this topic please contact Federico Godoy at Beretta Godoy by telephone (+54 11 4326 7386) or email (godoy@berettagodoy.com). The Beretta Godoy website can be accessed at www.berettagodoy.com.

Endnotes

(1) "Total starts production at Vega Pleyade (Argentina)", Offshore Energy Today (2016).

(2) Mariela Arias, "Invierten US$354 millones para extraer gas en el mar", La Nación (2018).

(3) Resolution 19-E/2017, 7 February 2017 ([33561] BO).

(4) Karyna Rodriguez et al, "Recent survey highlights frontier exploration potential offshore Argentina", Offshore Magazine (2017).

(5) Id.

(6) The applicant, whether a public or private company, can be either a national or foreign entity (acting through its Argentine subsidiary or branch).

(7) Ministry of Energy and Mining, Mapas de Exploración y Producción de Hidrocarburos (2015).

(8) Luc Cohen, "UPDATE 1-Argentina to set offshore oil auction terms in coming days -official", Reuters (2018).

(9) Id.

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