BUENOS AIRES, Sept 8 (Reuters) - Argentina’s ruling party presidential candidate, Daniel Scioli, on Tuesday promised to maintain financial incentives designed to bolster oil and gas production and help end the country’s reliance on energy imports if he wins October’s election.
Argentina’s next president will lead a country that sits atop some of the world’s largest untapped shale oil and gas resources, but which needs to attract an estimated $200 billion in investments over a decade to exploit the deposits.
“We will ensure that the stimulus in place for new gas and new oil continues,” stated the agreement signed by Scioli. Governors of Argentina’s 10 oil and gas producing regions and state-run energy firm YPF also signed the pledge.
“Given the volatility seen in oil markets in past months, we will establish a path for the price of oil used in the domestic market in a way that strengthens this key industry.”
President Cristina Fernandez’s government fixes the price for locally produced crude oil at about $77 per barrel, while oil currently trades below $50 on international markets. The high local price helps the earnings of producers and bolsters the tax revenues of oil and gas producing provinces.
Until the global rout on oil prices, Argentina’s domestic oil prices were far below the international price, a policy aimed at helping consumers. Oil and gas producing regions now want assurances the local price will remain above the market rate while prices remain in a trough.
Other incentives are 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.
At stake in the Oct. 25 election is the direction Latin America’s No. 3 economy will take after eight years of interventionist policy under Fernandez.
Despite the incentives, state controls on the economy and unpredictable policymaking have deterred energy majors like Chevron Corp, Petronas and Total from making little more than foothold investments in Argentina’s nascent shale sector so far.
Scioli bills himself as the candidate of continuity, supporting gradual reforms toward more market-friendly policies rather than the wholesale change advocated by opposition frontrunner Mauricio Macri.
Jorge Sapag, the governor of Neuquen province under which the huge Vaca Muerta shale formation lies, said the agreement meant “a guarantee of government policy continuity.” (Reporting by Richard Lough; Editing by Lisa Shumaker)