On 2 October 2018 the government published Decree 872/2018, ordering the Secretariat of Energy to launch the first round of international competitive bidding for offshore exploration permits. Interested parties can submit their bids until February 2019. It is believed that there will also be a second round.(1)
The Argentine Continental Shelf and its exploratory basins remain underexplored, with less than 1% of the area being under concession. There are only two major hydrocarbon development projects in the Argentine offshore area at present, both of which are located in the Austral Basin (ie, the Vega Pleyade gas field and the Magallanes Area Incremental Project).
As regards the Argentine Continental Shelf area, in 2016 the UN Commission on the Limits of the Continental Shelf officially recognised an additional 1,782,500 km2 of continental shelf area, thus increasing the Argentine Continental Shelf territory to 6,581,000 km2.(2)
Given Argentina's size and the potential for the discovery of new energy sources, the government aims to exploit its resources through effective investment in seismic surveys and hydrocarbon explorations in partnership with major oil and gas companies.
Decree 872/2018 sets out the following exploration blocks that will be included in the current bidding round:
- 14 blocks in the Northern Argentine Basin;
- six in the Austral Marina Basin; and
- 18 in the West Malvinas Basin.
Exploration permits awarded in the national offshore area will extend up to 12 nautical miles from the baselines established by Law 23,968.
Duration of permit Exploration permits for blocks in the Northern Argentine Basin and the West Malvinas Basin will include two four-year terms and can be extended for a further five years. Permits for blocks in the Austral Marina Basin will be valid for four years during the first term and three years during the second term and can be extended for four additional years.
Permit holders will be granted a production concession in accordance with Article 17 of the Hydrocarbons Law (Law 17,319). Production concessions give concessionaires the exclusive right to extract any hydrocarbons discovered in the area covered by the permit.
Production concessions for offshore areas are valid for 30 years. Subject to compliance with their obligations under the concession agreement, concessionaires may also successively extend the production period for up to 10 years.
Royalties The decree sets out the formula for calculating royalties, which will vary from 5% to 12% depending on:
- hydrocarbon sales;
- investments in exploration and exploitation; and
- operating expenses during the exploration stage.
Dispute resolution The decree grants jurisdiction to international arbitral tribunals based in a country that is party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).
In May 2018 the Argentine government issued Resolution 197/2018, detailing the requirements and procedures for reconnaissance permits and the commercial use of data collected during these activities on the Argentine Continental Shelf.
For further information on this topic please contact Federico Godoy at Beretta Godoy by telephone (+54 11 4326 7386) or email ([email protected]). The Beretta Godoy website can be accessed at www.berettagodoy.com.
Endnotes
(1) "El gobierno llamará a Concurso internacional para explorar la plataforma continental", Energía & Negocios.
(2) "Argentina increases its continental shelf across the Atlantic Ocean", Ministry of Foreign Affairs (2016).
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