Energy, News

Oil & Gas Industry in Argentina


Argentina is a significant player in South America’s hydrocarbon market, along with Venezuela, Brazil, Ecuador, Bolivia and Colombia. According to the 2015 edition of the BP Statistical Review of World Energy, Argentina is the second largest natural gas producer and the fourth largest producer of crude oil in Central and South America, based on 2015 statistics. Hydrocarbons, especially natural gas, have historically accounted for a large portion of Argentina’s energy matrix (up to more than 50% of its total consumption).

Hydrocarbon production and reserve rates have been falling since 2004. Since then, Argentina has imported increasing volumes of natural gas and LNG, as well as crude oil and liquid fuels, which were barely imported in the past.


Changes in the domestic and regional gas market (From export to import)

Changes in the domestic and regional gas market (From export to import)


However, recent reports announcing that Argentina has the third highest volume of shale gas resources in the world have had a groundbreaking impact on Argentina’s position as a global energy player. According to the US Energy Information Administration and Advanced Resources International, Argentina has the second largest amount of shale gas resources (802 Tcf) worldwide and the fourth largest shale oil resources (27 billion barrels).

More than 50% of these unconventional resources are located in the Neuquina basin. In addition to its favorable geology, the Neuquina basin has certain attributes that favor unconventional development: a long history of oil and gas operations, an established thriving service, a seasoned public sector in energy administration, as well as excellent access to domestic and international markets.


Neuquén basin

Neuquén basin


Upstream and Downstream

Ownership and Jurisdiction over Hydrocarbons

Hydrocarbon resources are severable from the general ownership of property. According to the Argentine Constitution, as amended in 1994, natural resources, including hydrocarbon reserves and resources, belong to the provinces in whose territories they are located. However, the Constitution empowers the Federal Congress to legislate on hydrocarbon matters, mainly to ensure consistency in public energy policies

As per constitutional mandate, transfer of hydrocarbon resources from the federal domain to the provinces was implemented in 2006 through Law No. 26,197. The resources that were transferred are those located in the territories of the provinces and in the territorial sea up to 12 marine miles from the base line. The enforcement of exploration permits and the production and transportation concessions granted by the Federal Government over said resources before Law No. 26,197 came into force and transferred to the provinces. Since then, the provinces have carried out the granting, enforcement and control of permits and concessions within their territories.





Offshore resources beyond the 12th marine mile from the base line remain in the federal domain and are subject to exclusive federal jurisdiction. Offshore resources are the second largest in Argentina, still waiting full development.

Exploration & Production

Federal Hydrocarbons’ Law No. 17,319 of 1967, as amended and subsequent enacting dispositions established the basic legal framework for E&P activities. The Ministry of Energy and Mining is the enforcement agency of the Hydrocarbons’ Law at a federal level.

The Hydrocarbons’ Law has undergone several amendments. The main objectives of the latest amendment approved in 2014 by means of Law No. 27,007 are to provide specific sets of rules for the exploration and development of unconventional resources, for the extension of current concessions and for the granting of new permits and concessions.

Hydrocarbon exploration, development and production require an exploration permit or a production concession granted by the Federal Government or a province, depending on the location of the reserves. Exploration permits and production concessions must be granted through a competitive bidding process and may be transferred with the grantor’s approval.

In order to become a holder of a permit or concession, companies must register with the registries of oil companies kept by the Federal Secretariat of Energy (Ministry of Energy and Mining) and, in some cases, the corresponding provincial authorities. Registration in these registries is granted on the basis of meeting certain general financial and technical standards.

Exploration permits usually provide for the performance of minimum investments and enable their holders to perform exploration activities. The base term of a permit for conventional exploration is divided into 2 periods of up to 3 years each, plus an extension of up to 5 years. For exploration of unconventional resources, the base term is divided into two 4-year periods, plus an extension of up to 5 years. In the case of offshore exploration, the base term is divided into two periods of up to 4 years, plus an extension of up to 5 years. At the end of the first period of the base term, the permit holder may choose to (i) revert 100% of the area included in the permit or (ii) keep the entire area and enter into the second period of the base term. At the end of the base term, the holder may choose to extend the term of the permit, subject to reverting 50% of the area.

A permit holder that discovers a commercially exploitable reservoir is entitled to a production concession to develop it. The term of a conventional production concession is 25 years. Concessions for the development of unconventional resources are granted for a term of 35 years. Unconventional production concessions allow conventional exploration and production subject to payment of a production bonus and an additional royalty of 3%. Offshore production concessions are granted for a term of 30 years. In all cases, concessions may be extended for successive 10-year periods.

For these purposes, “unconventional hydrocarbon production” is defined as the extraction of oil and gas through unconventional stimulation techniques applied to deposits in geological formations characterized by the presence of rocks with low permeability: shale or slate rocks -shale oil and shale gas: compact sandstones -tight sands- tight oil and tight gas; layers of coal -coal bed methane.

Holders of permits and concessions are required to pay royalties to the grantor —the Federal or provincial Government, as the case may be— at a 15% rate, in the case of exploration permits, and at a 12% rate, In the case of production concessions. Royalties are increased by 3% each time a concession is extended, up to a maximum of 18%. Royalties may be lowered to 5% under exceptional circumstances. Permit holders and concessionaires must also pay the grantor a surface canon based on the acreage of the permit or concession, as the case may be.


Transportation of hydrocarbons through pipelines requires a concession or a license from the Federal Government or a province, depending on whether the relevant pipeline system crosses into another country or runs across two or more provinces or is limited to the territory of a single province. These permits can be obtained under two different regulations: the Hydrocarbons’ Law that applies to all kinds of hydrocarbons and the Natural Gas Law No. 24,076 is applicable only to natural gas.

Under both frameworks, transportation services are defined as a public service, and therefore, cannot be curtailed or interrupted by the carrier, unless a force majeure event or other event that affects the operating conditions of the transportation facilities occurs, and are subject to open access and regulated tariffs.

Transportation under the Hydrocarbons’ Law

The holder of a production concession is entitled to obtain a transportation concession to transport the hydrocarbons produced thereunder.

A transport concession is granted for the same term as that of the production concession in which it originated: 25 years if it originated from a conventional concession or 35 years if it originated in a concession for production of unconventional resources. These concessions may be extended for additional successive 10-year terms.

Hydrocarbon transportation pursuant to the Hydrocarbons’ Law is regulated by Federal Decree No. 44/1991, which expressly provides that transportation facilities operated under concessions granted pursuant to the Hydrocarbons’ Law are subject to open access and maximum regulated tariffs.

Transportation and Distribution of Natural Gas under the Natural Gas Law

The five main high pressure gas pipelines in the country are divided into two systems on a geographical basis (the Northern and Southern pipeline systems), designed to give both systems access to gas sources and to the main centers of demand, including the greater Buenos Aires region. Gas distribution networks are also divided on a geographical basis into 9 systems. Each of these transportation and distribution systems is operated under a license granted by the Federal Government pursuant to the Natural Gas Law.

Pipeline Network in the Southern Cone

Pipeline Network in the Southern Cone


The Natural Gas Law governs transportation, storage, marketing and distribution of natural gas and defines transportation and distribution as public services. Hence, transportation and distribution services thereunder are rendered on an open access and non-discriminatory basis and are subject to regulated tariffs.

The Natural Gas Law establishes several restrictions on cross ownership between companies participating in different segments of the gas industry, including producers, distributors, large consumers, transportation companies and marketers, in order to deter monopolistic conditions in the system.

ENARGAS is the enforcement agency of the Natural Gas Law.

Given the current shortfall of natural gas production to meet domestic demand, the transportation and distribution of natural gas is subject to a special regulatory regime aimed at ensuring the proper satisfaction of the demand of protected consumers (domestic and small businesses). Under this regime, natural gas producers are instructed to allocate a determined volume of natural gas to meet the demand of protected customers. The delivery of gas to other customers (i.e. NGV and industries) is permitted insofar as the demand of protected customers is met. Tariffs has been established to the benefit of such protected segments of consumers

Transportation and distribution tariffs, including the price of gas delivered to houses and small businesses have been substantially increased.


Whether performed by oil producers or third parties, hydrocarbon refining activities are subject to Law No. 13,660 of 1949, which provides the basic regulatory framework for these activities.

Refining activities are subject to registration requirements established by the Federal Secretariat of Energy. In addition to federal rules, refining activities must comply with provincial and municipal regulations regarding technical, safety, environmental and quality standards.

Market Regulation

The broad regulatory powers provided by Decree No. 1277/2012 to the Commission for Planning and Coordination of the Strategy for the Federal Plan of Hydrocarbons that included cost control and price determination have been substantially limited. New regulations are in place, after a Supreme Court ruling on September, 2016, and gas and electricity prices has been capped by the Ministry of Energy, as per Resolutions 28/2016 & 31/2016.

The export of crude oil, natural gas and their derivatives is subject to prior governmental approval.

Incentive Programs: Gas Plus, Gas Plans and Investment Promotion

The Federal Government established several incentive programs to promote investments in hydrocarbon exploration and production in order to allow the recovery of reserves in the medium and long term. These programs include Gas Plus, Gas Plan I and II and New Projects’ Promotional regime.

Gas produced from projects approved under the Gas Plus program can be marketed at prices higher than standard regulated prices and cannot be redirected to protected customers. Since 2016, the benefits under the Gas Plus program will no longer be available for new projects but the projects to which these benefits had been awarded will continue to enjoy them.

Under the Gas Plan, gas producers are divided according to their production size. Producers that increase their natural gas production are entitled to a compensation payable by the government, the amount of which varies according to the additional volumes supplied by the producers to the domestic market.

A promotional regime for New Projects is also available for new tight and shale gas projects. Similar benefits to those available under the Gas Plan are provided by this promotional regime.

Federal Decree No. 929/2013 established a promotional regime available for direct investment projects in hydrocarbon exploration and production encompassing a minimum of US$ 1,000 million over a 5-year term. This regime is also available for direct investments of 250 million US Dollars or more over a 3-year term.

Benefits include: (i) the right to export a portion of the hydrocarbons produced by the project; (ii) the right to export said hydrocarbons free of export duties (zero rate); (iii) free disposal of the proceeds in foreign currency from the export of said hydrocarbons; and (iv) in the event that, due to a shortfall of hydrocarbons, exports are restricted to the supply of local demand, entitlement to international prices for the hydrocarbons that could have been exported and were not actually exported. For this purpose, a compensation mechanism payable in local currency must be established. Under that hypothesis, producers will have a priority right to acquire foreign currency in the Official Exchange Market up to the total amount of the local currency obtained in exchange of the hydrocarbons that were prevented from being exported, including the amounts collected for their sale in the domestic market plus any compensations received under the above mechanism.

Benefits under this regime can be enjoyed as from the fifth or third year, as the case may be, and shall apply to 20% of the production of the project, in the case of onshore projects and up to 60%, in the case of offshore projects.

Other benefits available for the Oil & Gas sector include reductions on import taxes on capital goods and supplies which are essential for the performance of investments.

Environmental Regulations

According to the distribution of powers among the Federal State and the provinces, the latter are empowered to legislate and regulate environmental matters. Provincial environmental regulations must establish standards which are equal to or higher than those approved by the Federal Congress.

Most of the hydrocarbon-producing provinces have issued specific environmental regulations for the oil industry including unconventional operations.

Pursuant to the latest amendment to the Hydrocarbons’ Law, the Federal Government and the provinces shall work towards enacting a uniform environmental legislation for the oil industry, with the purpose of implementing best practices for environmental hydrocarbon management for exploration, production and/or transport purposes.

Arturo Pera

Of Counsel


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