August 7, 2018 / 10:22 PM / 6 months ago

UPDATE 1-Argentina to set offshore oil auction terms in coming days -official

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By Luc Cohen

BUENOS AIRES, Aug 7 (Reuters) - Argentina’s government will publish the terms and conditions of an upcoming auction for offshore oil exploration rights “in the coming days,” an energy ministry official said on Tuesday, in a process that has attracted interest from large oil majors.

The auction is the first since 1991 and will allow national and international companies to bid for the rights to explore 38 blocks, including 14 in the northern Argentina basin, six in the Austral basin, and 18 in the Malvinas West basin, said the official, who was not authorized to speak publicly.

Little exploration has been done outside of the southern Austral basin, but geologists and executives from company’s including state-owned YPF, Norway’s Equinor and Royal Dutch Shell have expressed optimism about the area’s potential.

More than 20 companies had expressed interest by way of accessing information from the government’s hydrocarbons database, said the official.

“It is well advanced,” the official told Reuters. “There has been good interest.”

The auction, part of a broader opening to private investment across Latin America in the energy sector this year, is a major test of confidence in President Mauricio Macri’s free market reforms.

While he has taken steps to lower labor costs and ease restrictions on companies repatriating profits, many companies remain wary of long-term investment in a country that expropriated Spain’s Repsol stake in YPF just six years ago under former populist President Cristina Fernandez.

The process will advance first with a presidential decree authorizing the energy ministry to hold the auction, followed by a ministry resolution laying out the terms.

The government was initially expected to set the terms in July, but the process was delayed after Javier Iguacel replaced Juan Jose Aranguren at the helm of the ministry in June, said the official. The Ministry has previously said companies would have through November to present bids, and it was not clear if the timeline had changed.

Exploration rights will be granted to the company that offers the most investment, said the official. The rights will be for four years with the option to extend for another four.

Companies may begin to drill before the first four-year period is up, but are not obliged to, said the official, adding if they extend for a second period they will be obliged to drill wells in that timeframe. (Reporting by Luc Cohen Editing by David Gregorio and Chris Reese)

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