Argentina’s Chamber of Deputies passed a bill yesterday that updates the country’s 47-year-old hydrocarbon law. The bill, which has President Christina Fernández de Kirchner’s support and has already been approved by the Senate, would ease foreign investment in energy exploration and production. Significantly, it includes regulations for off-shore and shale gas production—categories that were not included in the 1967 law.
The bill provoked significant debate along party lines, and passed largely on the strength of President Fernández de Kirchner’s Frente Para la Victoria (Front for Victory—FPV) representation in Congress.
Argentina’s energy deficit is estimated to reach $7 billion this year. The new bill is part of an attempt to set the country on a course towards energy independence by ramping up domestic production—especially in the country’s Vaca Muerta region, which is considered one of the largest reserves of shale oil and gas in the world. Faced with dwindling foreign reserves and access to credit, the government has looked to increased foreign investment. To do attract investment, the bill would lower the level of investment needed for companies to avoid export taxes and foreign exchange control to $250 million from $1 billion. “The desired horizon for Argentina is only possible if there are investments,” said Mario Metaza, a deputy for the FPV.
Opposition lawmakers have accused the government of steam-rolling provincial interests and selling off strategic resources. “They are ratifying the concept of hydrocarbons as a commodity and not as a strategic resource and a common good,” said Claudio Lozano, a deputy for the Frente Amplio Progresista (Broad Progressive Front—FAP). Outside observers have also raised questions about the current administration’s ability to manage any potential windfall derived from the energy reform, pointing to the mismanagement of the country’s wealth during the economic boom of 2003-2008.