Tecpetrol Threatens Legal Action in Argentina
The oil and gas affiliate of Argentinean Techint, TecPetrol, is considering recourse in national and international courts to defend its multi-billion dollar investments in Argentina, it said April 2. It said it was entitled to funds owed by government for boosting gas production under the country’s gas subsidy scheme.
“The scheme doesn’t provide a limit to the volumes entitled under the incentive, nor was there a limit to benefits granted by the gas production stimulus programmes 1, 2 and 3 – the latter implemented by the administration of president Mauricio Macri,” Tecpetrol said. “Resolution 46/17 expressly defines that the benefit covers the entire production of the project.”
Argentina’s Resolution 46/17 offered subsidies to companies to produce unconventional gas resources by paying them above the market price. Argentina’s government is now only willing to pay subsidies to Tecpetrol and other companies for meeting the originally-agreed production targets.
Buenos Aires-based Tecpetrol initiated work in 2017 on a fast-tracked unconventional shale gas project at Fortin de Piedra in the Neuquen basin. So far it has spent more than $1.8bn of the $2.3bn earmarked for the project. Production at the project reached 17.5mn m3/day in February 2019, up 1,150% from 1.4mn m3/day in October 2017, Tecpetrol said last month. Production at the project was nil when the company initiated operations.
Tecpetrol’s original plan under the gas scheme was to achieve production of around 8.5mn m3/day, which would have resulted in government subsidy payments of around $729mn, reported specialized website Econojournal. However, based on actually production, Tecpetrol is seeking payment from government for around $1.446bn, reflecting the doubling of output.
“Vaca Muerta’s new gas production, contributed mainly by the project executed by Tecpetrol, has transformed Argentina’s gas production matrix in only 18 months, and has contributed to lower the cost of energy in the country and the replacement of more expensive imports by approximately $2bn in 2018,” Tecpetrol said.
South America’s Argentina is home to the world’s second largest accumulation of recoverable shale gas, according to US-based Energy Information Administration (EIA), but it relied partly on imports of LNG to meet gas demand. Of the country’s estimated 802 trillion ft³ of shale gas, the bulk is in the Vaca Muerta formation. Argentina’s plan to boost gas production aims to reduce gas imports and convert the country into a full-fledged gas exporter over the short-to-medium term.
“Tecpetrol acted at all times in good faith, guided by the regulations, and indications given by government. To consider that to increase investment and production of a vital resource for the country within the framework of a regime that didn’t contemplate any limit, is to abuse a right,” Tecpetrol said. “The rejection by the government is an error.”