Argentina ended some financial incentives that were intended to boost energy investment in its huge shale oil and gas deposits even as it seeks to narrow an energy trade gap.
The government announcement in its official gazette comes as Argentina seeks to develop its its vast, but barely tapped, Vaca Muerta shale deposits, to help it trim a $6 billion trade deficit in oil, gas and electrical energy supply.
Launched in 2008, the program grants tax credits for investments directed toward boosting reserves and increasing oil production from shale and conventional deposits.
Oil company officials privately complain that President Cristina Fernandez's unorthodox policy making is often unpredictable and makes doing business in Latin America's No.3 economy difficult.
Even so, the scrapping of the tax credits, which were introduced when the government-controlled price for locally produced oil was significantly below the global market price, is unlikely to damage the industry, with the domestic crude price now higher than that on world markets, an oil company source in Argentina said.
"The state now is looking to pay its debts from the program, which worked well as it maintained activity in the sector," said one oil company official on condition of anonymity because he was not authorized to talk on the matter.
To cancel these oil incentive debts, the economy ministry will pay out $784.27 million owed to energy companies in U.S. dollar-denominated Bonar 24 bonds and Bonad 2018 bonds, the same gazette notice said.
Producers in Argentina currently receive $77 per barrel, while Brent crude for August traded at $57.70 on Monday.
Other incentives remain in place. In January, the government unveiled a stimulus that guaranteed producers a maximum $3 per barrel subsidy when quarterly output exceeds a government-set base level. Exporters receive up to an additional $2 per barrel for every barrel of crude shipped abroad.
Developing Vaca Muerta, a formation that covers an area similar to Belgium, will cost up to $200 billion over the next 10 years, state-controlled energy firm YPF says.
