October 24, 2014
Sapag draws a hard-line on Vaca Muerta
In the middle of his fight with the federal government over the proposed new hydrocarbons law, Neuquén Governor Jorge Sapag yesterday went to a conference sponsored by the Clarín Group and sat in a roundtable with three presidential hopefuls, sharing kind words with each of them as he criticized the new legislation that is being pushed by YPF chief executive Miguel Galuccio.
Sapag argued that replacing the current hydrocarbons law “is not necessary,” suggesting instead the incorporation of “new norms for the long term” development of the Vaca Muerta shale oil and gas formation and other energy resources throughout the country.
The statement was hardly surprising — Sapag has long been opposed to the new legislation — and the setting of Sapag’s speech was a gesture in of itself, as the governor sat alongside Renewal Front leader Sergio Massa and FA-UNEN’s Hermes Binner and Julio Cobos at the third Democracy and Development conference, organized by the country’s largest media conglomerate, which has long been at odds with the government.
At the roundtable, Sapag doubled down on his criticism of the legislation.
“We agreed that we need laws that bring stability to the sector,” he said, claiming the government’s bill to update the 1967 Oil and Gas Law “really brought more problems than it resolved ... proposing efforts only from the provinces and not from the country as a whole.”
The bill’s aim core implies re-working production regulation, as well as revenue sharing for shale, which isn’t included under the current legislation. The bill would give oil and gas companies more benefits to encourage their investment in the country.
The opposition leaders did not showcase a unanimous stance, with Cobos leaning the most toward Sapag’s point of view.
“We must respect the original dominance of the provinces over their resources,” he said, also calling for a “diversification of energy sources,” for which oil and gas were said to currently account for 90 percent.
Massa, who called for a “free currency exchange market for Argentina first and foremost,” highlighted the need for a new law that covers shale resources, but “respecting that the resource belongs to the provinces.”
He also favoured “rewarding the reinvestment of profits.”
Without defining a stance on the need for an entirely new law, Binner called for the gap between “energy demand and supply to be closed.”
Neuquén has been the most vocal opponent of the government’s bill, for which governors last met with President Cristina Fernández de Kirchner in June.
Last week, eight former Energy secretaries who served between 1983 and 2003 signed a document calling for the debate of the new legislation to be postponed until 2016, “removed from the urgencies brought about by the change of governments.”
Julio César Aráoz, Roberto Echarte, Enrique Devoto, Raúl Olocco, Jorge Lapeña, Alieto Guadagni, Emilio Apud and Daniel Montamat, the latter of whom was at yesterday’s conference, argued that the government was pushing for a “pact with governors” based on the principle of “crony capitalism” whereby companies “will be able to access perpetual concessions.”
Salta — where the country’s eigth liquefied natural gas plant was inaugurated yesterday by YPF — along with Jujuy and Formosa provinces are more approving of the draft bill, while Chubut and Nequén, previously aligned with the government, have shown apprehension.
While the federal government seeks to move forward with its new law, Neuquén’s Energy Minister Guillermo Coco, said over the weekend that the province is considering abandoning its seat on the board of state-controlled energy company YPF because of the alleged lobbying by its CEO, Miguel Galuccio to convince oil companies to support the government’s bill.
“Galuccio visited Exxon’s president to ask him to support the bill sponsored by YPF. Because of that we are now evaluating taking a judicial measure. This is clearly commercial disloyalty,” Coco said.
Opposition to the federal government’s bill has been growing since the draft was first proposed to the Ofephi grouping that joins together the country’s oil-producing provinces.
— Herald with DyN