Argentina: New Investment Promotion Regime for the Production of Shale Oil and Gas

by King & Spalding

Unconventional hydrocarbons are today's trending topic in the oil and gas business. The U.S. shale boom, which is boosting the country's economy, makes one wonder if the U.S. experience with unconventional hydrocarbons can be replicated elsewhere.

Significant shale plays exist in several countries, among which Argentina ranks in the "top five."[1] The "Vaca Muerta" shale play located in the Argentine Province of Neuquén, became globally known during 2011, as many experts see it as the country's salvation in terms of crude oil and natural gas supply, and even as a revival of a Southern Cone energy-integrated market.

In an attempt to recreate a friendly investment environment to foster shale activity, the Argentine federal government recently issued a new promotion regime for the development of shale oil and gas projects. On July 11, 2013, the government issued Decree 929/13 creating a new "Investment Promotion Regime for the Exploitation of Oil and Gas" (the "Promotion Regime").

On July 15, 2013, the Strategic Planning and Coordination Commission for the National Hydrocarbons Investment Plan (the "Commission"), the enforcement authority of the Promotion Regime, issued Resolution 9/13 supplementing certain aspects of Decree 929/13.

The Promotion Regime

Companies interested in participating in the Promotion Regime must:

  • hold exploration permits and/or production concessions granted by the federal government and/or the provinces or be associated with a company that holds such permit or concession rights (e.g., through a production sharing contract with YPF);
  • register with the "National Registry of Hydrocarbons Investments";
  • have presented an annual investment plan; and
  • submit to the Commission an investment project to develop unconventional hydrocarbons for a minimum amount of USD 1 billion. This amount must be effectively invested in Argentina during the first five years of the project.

Following the fifth anniversary of the start-up of the investment project, the investors shall have the right to:

  • export 20 percent of the oil and gas produced under the investment project, exempt from export taxes;
  • maintain abroad the export proceeds; and
  • obtain for the 20 percent exportable production, a price that is not lower than the export parity price when domestic production of hydrocarbons is insufficient to cover domestic needs and exports of oil and gas are prohibited. [2]

The benefits shall cease upon the expiration of the concession, early termination of the concession due to breach of the concessionaire, bankruptcy of the concessionaire, or failure to comply with the investment project.

Unconventional Hydrocarbons Concession

Decree 929/13 creates a new type of concession, the Unconventional Hydrocarbon Concession, although acknowledging that all production concessions grant the exclusive right to exploit both conventional and unconventional hydrocarbon reservoirs. Holders of existing concessions that qualify under the Promotion Regime may have their concessions subdivided into new blocks to be regulated by new unconventional hydrocarbon concessions with a term of 25 years extendable, with the simultaneous granting of the new concession for ten additional years. The decree allows existing concessionaires that have discovered shale resources within their concession areas, but whose concessions are nearing expiration, to obtain new unconventional concessions for 35 years. This system only benefits existing concessionaires. Any new participant would have to enter an association with an existing concessionaire.


Argentina created a special regulatory system to promote investment in an industry that is key for its economic development, especially taking into account that hydrocarbon imports have increased greatly as a result of declining production. As of March 2013, Argentina was paying an average of USD 10-12 per MMBtu for natural gas from Bolivia and USD 16-18 per MMBtu for LNG. [3] In a country with technically recoverable shale gas reserves estimated at 802 TCF,[4] a new unconventional hydrocarbons regime seems logical for reasons including:

  • Its shale resources rank among the world's "top five".
  • It has a large natural gas domestic market (approx. 42 bcm).[5]
  • It has a well-developed gas transportation system, both domestic and for export.
  • There is demand for natural gas in the Southern Cone (mainly, Brazil, Chile and Uruguay) and export opportunities (approx. 8.3 bcm).[6]
  • Identified shale plays are located in low-density areas reducing the environmental and social concerns.

Successful investors will need to surpass certain obstacles including: a tight and discretionary regulatory system; foreign exchange rules which limit the free entry and exit of funds; lack of stabilization rights with respect to the tax or hydrocarbon regime; and the shadow of a very recent nationalization of YPF.

Argentina needs to tackle in a realistic and pragmatic manner a number of issues from a regulatory, tax, foreign exchange and environmental standpoint and possibly extend additional stabilization rights to attract potential new investors and regain the faith of former ones. In any event, the process has begun and the resources are there.
[1] According to the U.S. Energy Information Administration (EIA), Argentina stands 2nd and 4th in terms of shale gas and oil endowment, respectively. See "Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States", available at
[2] Article 6 of Law No. 17.319 (Federal Hydrocarbons Law) establishes that when the domestic market is not fully supplied, all production of liquid hydrocarbons must be used domestically.
[4] But, shale oil and gas have become what some describe as an "energy game changer" for the global energy industry. Argentina is blessed with many advantages:
[5] See Anouk Honore and David Ledesma, "The Pricing of Pipeline Gas and LNG in Latin America and the Caribbean", in The Pricing of Internationally Traded Gas, edited by Jonathan P. Stern, Oxford University Press, 2012. See also International Energy Agency, "South American Gas, Daring to Tap the Bounty", 2003.
[6] International Energy Agency, "South American Gas, Daring to Tap the Bounty", 2003.

 Vera De Brito de Gyarfas
 +1 713 495 8815

 View Profile »


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© King & Spalding | Attorney Advertising

Written by:

King & Spalding

King & Spalding on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.