Argentina Gas Plan deal reached

BUENOS AIRES, January 11, 2017 – After months of pressure from gas producers and and provincial government officials, Argentinian President Mauricio Macri announced on January 10 that the country’s Gas Plan programme would be further extended.

The programme will see producers receive a maximum of USD 7.50 per million Btu of wellhead gas until the end of 2020. The government had previously announced in May 2016 an extension of the plan one year past its December 31, 2017, end date.

The Gas Plan was hailed by Argentina’s state-run YPF, saying it was now able to invest between 20% and 30% more in the Vaca Muerta shale play this year. According to chairman Miguel Gutierrez, 2017 spending would amount to USD 2.3 billion. The likes of Chevron, Total, Pan American Energy and Pampa Energía have also rallied behind the plan.

Originally implemented by former President Cristina Fernandez de Kirchner in January 2013, the plan has been renewed several times with the goal of attracting investment in gas production, which fell by 16% between 2004 and 2016.

The Gas Plan is part of the government’s strategy to reverse the downturn in gas production, and eventually achieve its larger goal of energy independence. To meet rapidly rising demand, Argentina has been importing large volumes of piped gas from neighbours Bolivia and Chile, as well as LNG from countries including Qatar and Nigeria.

In other news, President Energy on Wednesday said it had contracted a workover rig for its 12-month-long drilling programme in Argentina. The rig, sourced from Quintana Wellpro, will begin by performing workovers on two wells presently undergoing maintenance. By March, the rig will shift to carrying out workovers of shut-in wells. Towards the end of the third quarter, production should reach 1,200 bopd.