(Adds photo, comments from former hydrocarbon secretary)
By Eliana Raszewski
BUENOS AIRES, May 19 (Reuters) - Argentina established a local crude oil reference price of $45 per barrel on Tuesday to help protect producers at the country’s massive Vaca Muerta shale play that have been hit hard by the global price crash arising from the impact of the coronavirus pandemic.
Reuters reported in April that Argentina was planning to set a higher local oil barrel price after the pandemic shattered world demand and local demand was hurt by domestic lockdowns imposed in mid-March.
The country’s center-left Peronist government said in a decree the decision was due to “the drastic fall in the international price of a barrel of oil that is seriously damaging the activity of the national hydrocarbon sector.”
Brent crude traded at about $35 per barrel on Tuesday after recovering slightly from a low in April.
Argentina’s locally set oil price, known as the “criollo barrel,” has been used before to offset global price swings.
The country’s huge Vaca Muerta shale deposit, which is the size of Belgium, is thought to hold one of the world’s largest reserves of unconventional hydrocarbons, which are costly to exploit.
The decree said that the measure would be in place until the end of 2020, although the local reference rate would be voided if the price of Brent crude exceeded $45 for 10 straight days.
A source at state energy firm YPF said the price set would help guarantee a competitive local energy price, head off the need for imports, and protect the country’s precious reserves of foreign currency.
“It is vital to adapt quickly to the new reality that the industry is experiencing based on the economic impact generated by COVID-19,” the person said, asking not to be named.
The decree said firms must maintain production and employment at 2019 levels, and included regulations that lower tariffs on exports while preventing firms from using loopholes to swap pesos for dollars.
José Luis Sureda, Argentina’s former hydrocarbons secretary, told Reuters the decree will not have an immediate impact on production as long as demand does not recover.
“There is lots of bark but little bite,” he said. “It is going to have a time lag effect for companies because obviously there is a lot of crude stock and demand has not yet recovered and it is not known when it will recover.”
Reporting by Eliana Raszewski and Adam Jourdan; Editing by Bernadette Baum and Steve Orlofsky