Argentina Gas Plan23 May 2020 13:44
taken from ADVFN chat:
The government launched an action plan to try to reverse the fall in investment in gas wells that began to be set up over the past year. The official intention is to move forward with the design of a Gas Plan
4, which will begin to be discussed with the industry in the coming weeks. The price to be subsidized is not yet defined, but could be around US$ 3.50 per million BTU.
What is the plan?
Faced with the political impossibility of updating gas tariffs at the pace of inflation and exchange rate depreciation, in the Government and in YPF, the state-controlled oil company it is accepted that there is no alternative but to guarantee with Treasury resources a certain income to oil companies to revive hydrocarbon production. It wasn't the Executive's initial bet. Before the pandemic, other options that do not involve greater fiscal contribution were explored. But the coronavirus obscured those paths that required that, at least, house tariffs could track inflation developments. Today it's impossible to guarantee that.
Aware of this reality, Ministry Matías Kulfas people began discussing in March the launch of a new stimulus program to revive gas investment. They resumed that internal debate last week once the decree was passed that set a support price for oil at $45/bbl. And this Wednesday they discussed it with Sergio Affronti, CEO of YPF, the country's largest gas producer, and other YPF executives. Yesterday it was known that the government was considering to uncouple gas prices from residential rates (meaning a subsidy to be applied to the price of gas to sustain investment without increasing the retail price to families and small industry and commerce activities)
Starting point
From next week the discussion will be enabled with the main producers, such as Pan American Energy (PAE), Total, Wintershall DEA, Pluspetrol, Pampa, Tecpetrol and CGC. The government knows that, without mediating concrete action that re-energizes drilling, Argentina is on track to resume an increasing pace of imports of Liquefied Natural Gas in 2021. In fact, by now, the Bahia Blanca port re-gasifying ship will most likely have to return by next winter. In technical terms, it would not be serious. And the price of LNG is at very low levels by the pandemic. But in the face of the external restraint the country is facing, spending millions of dollars to import a product that can be produced locally makes no sense.
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