Argentina approves incentives for large oil, gas infrastructure projects

Argentina's government got approval June 28 for sweeping reforms, allowing it to privatize Enarsa, the state gas importer, and roll out incentives for large projects, which likely will include the construction of an LNG export terminal.

The lower house approved the incentives as part of a battery of reforms proposed by President Javier Milei to help pull the country out of a financial crisis that began in 2018 and worsened last year, pushing inflation to nearly 300% this year.

With the reforms already approved by the Senate, they will now be signed into law by the president and implemented.

No timeline has been set for selling Enarsa and other state companies, a list that does not include the state's 51% stake in YPF, the country's biggest oil and natural gas producer.

Better conditions for investment

The reforms are designed to deregulate the economy, including by providing better conditions for large-scale investments through the Incentive Framework for Large Investments, or RIGI for its Spanish acronym.

"RIGI will play a fundamental role in obtaining investments," Milei said June 28 on LN+, an online video channel.

The energy industry has been lobbying for the incentives to build oil and gas pipelines, as well as export terminals, to take advantage of rising output from the Vaca Muerta shale play.

RIGI will provide 30 years of legal and regulatory stability for projects of more than US$200 million in the country, of which 40% must be invested in the first two years.

For projects of more than $1 billion, tax breaks are included as well, plus an exemption on paying export taxes after two to three years, depending on the size of the project. Imports of parts and other goods related to the project will also be exempt from taxes, and access to foreign currencies will be liberated once the projects are underway, at 20% after two years, 40% after three and 100% after four years.

YPF has said it plans to use the RIGI for projects to build an LNG export terminal and related pipelines to move gas from Vaca Muerta to the Atlantic.

The project will initially export 40 million cu m/d via two floating liquefaction terminals by 2030 and then an additional 80 million cu m/d with an onshore terminal by 2031. In total, the Argentina LNG project will have capacity to export 120 million cu m/d, CEO Horacio Marín has said in several presentations since taking the post last December.

YPF is working on the LNG project with Malaysia's Petronas as joint partners. They will have a 50% share of the total exports, while the other participating gas producers will have the other 50%, Marín has said, adding that the first step is to install a floating terminal to export 6 million cu m/d, starting in 2026 or 2027.

The key for the project to go ahead, however, has been the approval of the incentives.

"Without RIGI, there is no LNG project," Marín said May 8. "It will just be another frustrated project in Argentina."