The Oil and Gas Law Review: Argentina


Since the first oil discovery 111 years ago, the Argentine oil and gas sector worked under different rules and contractual schemes, from service contracts (1950s), risk service contracts (1970s) and agreements with YPF SE under the 'Plan Houston' (1980s), all of them characterised by the omnipresent role of the national state-owned company YPF SE, which owned the exploration and production rights in the hydrocarbons fields, to the 'deregulated' era (1990s) during which YPF SE was privatised, becoming YPF SA, existing contracts were converted into exploitation concessions and exploration permits and exploitation concessions were granted through public bidding rounds organised by the federal government.

Between 2002 and 2012, many of the basic rights permits and concessions holders enjoyed were affected by regulations and governmental practices in a context of an economy that, in general terms, became less investor- and market-friendly. Finally, in 2012, 51 per cent of the shares of YPF SA were expropriated and the 'deregulation' regime was formally repealed.2

As a result of the policies and practices implemented between 2002 and 2012, production and reserves dropped dramatically, and the country lost the hydrocarbons self-sufficiency it had achieved during the 1990s.

After the expropriation of YPF SE, the same administration that had been responsible for the policies and practices of the previous decade and for the adverse consequences derived therefrom showed a positive change of attitude towards the upstream industry, evidenced by a new pricing policy and the passing of legislation aimed at encouraging investment in new projects, especially those relating to unconventional resources.3

Argentina's technically recoverable shale resources are among the largest in the world and, in recent years the industry's attention as well as the government's policies have been focused on the exploration and development of these resources.4

By the end of Mauricio Macri's administration, the development of the country's shale resources seemed to gather momentum, with a significant increase of shale oil and shale gas production balancing the declining production from conventional fields. So much so that by the end of 2019, the country had reverted the declining trends of total oil production and total gas production registered until 2018 and 2014, respectively, driven by the development of shale resources in the Vaca Muerta formation.

The problems affecting the Argentine economy and the result of the 2019 general elections, in which Mr Macri (leading a centre-right coalition) was beaten by Mr Alberto Fernández (candidate of a centre-left-populist coalition led by former president Cristina Kirchner), the crash of international oil prices early this year and the covid-19 pandemic, which hit the country only three months after the new administration took office, resulted in a dramatic reduction in exploration and production activity and put any investment in the oil and gas sector on hold until the situation improves.

Having said this, it seems that, once the effects of the covid-19 pandemic are left behind, and subject to the government taking the appropriate actions, the development of Argentina's shale resources will continue to be the driver for a sustained increase of the country's production of hydrocarbons, in spite of the declining conventional fields.

High ranking officers of the government have repeatedly stressed that the continuing development of the country's hydrocarbon resources (mainly, but not only, shale) will be strategic for this administration and that they intend to thrust investment in exploration and production, infrastructure and even a liquified natural gas (LNG) export project for the excess gas from Vaca Muerta, bypassing new legislation containing benefits and incentives schemes for the industry. Now that the country is on its way to restructure its sovereign debt, something this administration saw as a condition precedent to the implementation of any economic or energy plan, and that the government's efforts are focused not only on urgent sanitary issues but also on the post-covid-19 economy, the time has come to turn such declarations into actual and effective policies.5

Legal and regulatory framework

In Argentina, the state (the federal government or the provinces, as applicable) owns the hydrocarbons in the subsoil, and the rights the state grants for the exploration and exploitation of hydrocarbon reserves are separate from surface ownership. Once extracted, the hydrocarbons belong to the companies holding the relevant exploration and production rights.

The National Constitution, as amended in 1984, provides in its Article 124 that 'the eminent domain of the natural resources existing in their respective territories belongs to the provinces'. The provision became effective when Law 26,197, enacted in 2006, amended Law 17,319 (the Hydrocarbons Law) in accordance with Article 124. Therefore, as per the current Hydrocarbons Law, hydrocarbons belong to the provinces where they are located or to the nation if the resources are located in federal territory.

This means that the relevant state (nation or province) owning the resources has full authority to award rights for the exploration, development and exploitation of the resources (exploration permits, exploitation concessions and association agreements with state-owned companies) and is the enforcement authority in connection with these awards and contracts.

i Domestic oil and gas legislation

The federal Hydrocarbons Law amended, among others, by Laws 26,197 and 27,007, contains the basic material legislation in relation to the exploration, development and production of hydrocarbons.

In line with the basic rule contained in the National Constitution, the law provides that the hydrocarbons fields located in Argentine territory belong to the public domain of the national state or the provinces where the fields are located and that fields located beyond 12 nautical miles from the shoreline and until the external limit of the continental shelf belong to the federal state.

The law also sets forth, as basic principles applicable to the sector, that: (1) the federal state shall establish the general policy in relation to the exploration, exploitation, industrialisation, transport and commercialisation of hydrocarbons; (2) the holders of permits and concessions shall own the hydrocarbons extracted by them and shall be able to freely market, transport and industrialise them, subject to such regulatory provisions issued by the federal executive branch on a reasonable and economic basis; and (3) during periods in which the production is insufficient to cover domestic needs, the entire availability of locally produced hydrocarbons shall be used to supply domestic demand.

The law provides for an exploration and production licences scheme, as will be explained below.

The Hydrocarbons Law is supplemented by numerous executive orders and resolutions.

Other important laws are Laws No. 24,145 (federalisation of hydrocarbons), No. 26,659 (restrictions in connection with the exploration and production of petroleum in the continental shelf) and No 26,741 (establishing the achievement of petroleum self-sufficiency as a matter of national strategic interest and expropriating the controlling shares of YPF SA).

The Hydrocarbons Law coexists with hydrocarbon laws and regulations passed by certain oil and gas-producing provinces, like the Province of Neuquén Hydrocarbons Law No. 2,453, Province of Mendoza Hydrocarbons Law No. 7,526, Province of Chubut Hydrocarbons Law XVII No. 102, or Province of La Pampa Hydrocarbons Law No. 2,675, which, in general, are substantially aligned with the provisions of the Hydrocarbons Law.

ii Regulation

At a national level, the Secretariat of Energy, a subdivision within the Ministry of Productive Development, is the main governmental body involved in energy regulation. The secretariat's under-secretariat specifically devoted to oil and gas is the Under-Secretariat of Hydrocarbons.

Each oil- and gas-producing province has its own oil and gas regulators. Provincial regulators are governed by the federal Hydrocarbons Law and by provincial legislation and regulations.

Under the Hydrocarbons Law, the national policies in respect of exploration, development, production, transportation and marketing of hydrocarbons shall be determined by the national executive branch. This means that although the provinces own the hydrocarbons, have the power to grant permits or concessions and have regulatory powers as regards the way in which the federal hydrocarbons regime is applied in their territories, the power to establish the national hydrocarbons policy and to pass material legislation remains with the federal government and Congress (as provided by the National Constitution and several federal regulations, such as the Hydrocarbons Law, Law No. 26,197 and Law No. 26,741).

iii Treaties

Argentina is a party to several conventions governing dispute resolution and recognition and enforcement of awards and judgments including, among others, the 1958 New York Convention, approved by Law No. 23,619.6

Argentina is a party to 58 bilateral foreign investment protection treaties.7

Argentina is a party to 21 double taxation treaties.8


Private parties can obtain exploration and production rights through superficial inspection permits, exploration permits, exploitation concessions and association agreements with state-owned companies.

i Surface inspection permits

Under a surface inspection permit, the permit holder is granted the right to conduct a surface survey on a certain area, including carrying out geologic and geophysical studies, and employing other methods, such as the drafting of plans or the performance of topographic and geodesic surveys.9

Upon the expiry of the term of the permit, the primary data obtained from the surface inspection shall be delivered to the enforcement authority, which may process the data or have it processed by third parties, and may use it as it deems convenient for its own purposes. During the two years following delivery, the information shall not be disclosed without the express consent of the party that performed the surface inspection, except if permits or concessions are awarded in the prospected zone. Surface inspection permits on offshore areas (beyond 20 nautical miles from the coastline) are subject to a specific set of regulations provided for by former Ministry of Energy Resolution No. 197/18.10

ii Exploration permits

The holder of an exploration permit has the exclusive right to perform exploratory activities within the permit area and to obtain an exploitation concession if the holder discovers oil or gas in commercially exploitable quantities and conditions (commercial discovery) during the term of its permit.11

iii Exploitation concessions

Exploitation concessions grant the exclusive right to exploit the existing hydrocarbon fields located in the concession area.12

The exploitation of a field involves the development of its potential. By the same token, the exploitation concession implies for the concessionaire the ability to build and operate treatment plants as well as other facilities needed for the operations, including having the right to request a transportation concession for the transportation of the production out of the concession area.

The hydrocarbons shall belong to the concessionaire in accordance with its participating interest in the concession, and the concessionaire shall be able to dispose of its share of the production freely, subject to the general limitations contained in the Hydrocarbons Law and its supplementary regulations.

iv Association agreements with province-owned companies

Typically, in these agreements the province-owned company is the owner of the exploration and production rights and makes such rights available to the joint venture with the private party or parties.

Usually, the province-owned company holds a 10 per cent participating interest.

The private parties assume all the exploratory risk on an exclusive basis. In some agreements, the private parties are allowed to recover these costs from the province-owned company upon a commercial discovery and the entry into the exploitation stage by applying a certain percentage (usually 50 per cent) of the provincial company's entitlement to the production. Upon the occurrence of a commercial discovery and the subsequent grant of an exploitation concession on the block, the province-owned company must pay its share of capital and operating expenditures (CAPEX and OPEX).13

The hydrocarbons shall belong to each party in accordance with its participating interest in the contract and each party shall be able to dispose of its share of the production freely, subject to the general limitations contained in the Hydrocarbons Law and its supplementary regulations.

The private party (or one of the private parties if there is more than one) shall be the operator.

The association agreements are awarded, within the framework of a public bidding process called by the executive branch of the relevant province, by the province-owned company, and the award requires the approval by the province.

v Processes by which licences are awarded

Surface inspection permits are granted by the relevant governmental authority upon a request made by a company willing to conduct the surface inspection.

Exploration permits are granted through public bidding rounds. The criteria to award the blocks are based on the work units' commitment made by the bidder and, in some bids, on the entry fee offered by the bidder. The public tender will be awarded to the bidder proposing the highest offer, in accordance with a formula that considers the aspects mentioned above.

Exploitation concessions can be obtained: (1) by the holder of an exploration permit, upon the occurrence of a commercial discovery, over all or a portion of the exploration area; (2) through a public bidding round in connection with 'proved' blocks (blocks where exploration activities are deemed unnecessary); or (3) in the case of unconventional exploitation concessions, by the holder of an exploitation concession that, based on the unconventional potential of the block, asks for a subdivision of the concession area and for the grant of an unconventional concession on the subdivided area with unconventional potential.

Association agreements with state-owned companies are granted through public bidding rounds.

vi Key terms for licences

As per the Hydrocarbons Law, the exploration periods shall be set forth in the terms and conditions applicable to each public bid, within the following maximum terms.

For a permit with a conventional objective, there is a basic term of three years plus three years, plus an extension term of five years. In permits referring to offshore exploration, each of the periods of the basic term can be increased by one year.

For a permit with an unconventional objective, the basic term is four years plus four years, plus an extension term of five years.

At the end of the first period of the basic term, the permit holder shall be able to keep all the exploration area, while at the end of the second period of the basic term, the exploration area shall be relinquished, unless an extension is requested, in which case at least 50 per cent of the area shall be relinquished.

The term of exploitation concessions is 25 years (30 years for offshore concessions). The term of unconventional exploitation concessions is 35 years.

Concessions can be renewed for 10-year periods, and there is no limit on the number of renewals, which must be requested not less than one year before the expiry of the current term and can be requested by concessionaires that are in compliance with their obligations under the relevant concession. Extensions are not granted automatically but require governmental approval so, in practice, some negotiation is required.

vii Revocation and expiry of licences

Permits and concessions will be revoked for the following reasons:

  1. failure to pay any annual surface fee within three months of becoming due;
  2. failure to pay royalties within three months of becoming due;
  3. substantial and unjustified failure to comply with specified obligations with respect to productivity, conservation, investment, works or special benefits;
  4. repeated infringement of the duty to submit information, to facilitate inspections by the enforcement authority or to use adequate techniques for the execution of the works;
  5. failure to comply with the obligations provided in Articles 22 and 33 of the Hydrocarbons Law;
  6. bankruptcy of the permit or concession holder; and
  7. death of the individual or dissolution of the legal entity holding the permit or concession.14

Before declaring the revocation owing to any of the aforementioned causes, the enforcement authority shall serve notice to the permit or concession holders requiring them to remedy the infringement within the term stated in the notice.15

Permits and concessions will expire upon the lapse of their terms or upon relinquishment by the holder. In case of partial relinquishment, the permit or concession will expire in respect of the relinquished area only.16

viii Government take

Royalties on the production of hydrocarbons must be paid every month to the relevant province or to the national government.17

The Hydrocarbons Law provides for a 12 per cent royalty on the net price obtained from the sale of hydrocarbons produced under exploitation concessions and a 15 per cent royalty on the net sales of hydrocarbons produced under exploration permits.

Royalties can be reduced by up to 50 per cent in tertiary production (enhanced oil recovery and improved oil recovery), extra heavy oil and offshore projects that, owing to their particular productivity issues and location, present especially unfavourable technical and economic characteristics.18

During the extension periods of concessions, an additional royalty of up to 3 per cent can be added, with an 18 per cent total cap.

The royalty provided in the law shall be the only government take calculated on the production.19

The Hydrocarbons Law establishes that the holders of exploration permits and concessions must pay a fixed yearly fee (payable in advance in January), which is calculated by each square kilometre of the permit or concession area. During the exploration phase, these yearly fees vary depending on the exploration period, as explained below.

Law No. 27,007 allows for an extension bonus to be charged when a concession extension is granted. The maximum bonus shall be equal to the figure resulting from multiplying the proved reserves remaining at the end of the term of the concession by 2 per cent of the average price in the relevant basin for the two-year period prior to the granting of the extension.

Production restrictions

Licence holders own and have the free availability of their share of the petroleum substances produced from the relevant area, subject to the general limitations established in the applicable regulations, basically to secure adequate supply of the domestic market.20

In line with the aforementioned, the production of crude oil exports has to be offered to the domestic market first.

Governmental authorisation is required for any gas exports.21 Owing to the surplus production during the 2019–2020 warm season (October to April), the Ministry of Energy and Mining authorised several exports of natural gas for the first time in a decade, under interruptible supply terms, without applying any reimport requirements.22

Market prices apply for crude oil, taking Brent as a reference and applying certain discounts thereon.23

As regards natural gas prices, there is a mix of regulated and market prices.

The Ministry of Energy Resolution No. 46/17, as amended by Resolutions No. 419/17 and 12/18, established a subsidies programme to stimulate investments for the development of production of natural gas from unconventional reservoirs in the Neuquén Basin. Pursuant to this scheme, a guaranteed minimum price of US$7.50/MMBtu applied during 2018, and, thereafter, it will decrease US$0.50 per year until it reaches US$6/MMBtu in 2021. On 31 December 2021, the programme will end and prices should match import parity values. The difference between the minimum guaranteed prices and the actual market prices will be paid to the producers by the federal government. A few projects qualified for this subsidy before the government announced that no more projects would be approved under this scheme earlier this year.

Gas for power generation and distributors (who supply the priority natural gas demand) shall be acquired through tender processes, subject to certain maximum prices, to be conducted through the Electronic Gas Market, pursuant to Ministry of Productive Development Resolution No. 12/19, issued on 27 December 2019, and Secretariat of Energy Resolution No. 32/19, issued on 8 February 2019, respectively.

Assignments of interests

According to Article 72 of the Hydrocarbons Law, participating interests in permits and concessions can be assigned, with the prior authorisation of the executive branch (federal or provincial, as applicable), in favour of those that fulfil the financial and technical conditions and requirements needed to be a permit holder or concessionaire.

Under Article 73 of the Hydrocarbons Law, a concessionaire can assign its interest in an Exploitation Concession as a security interest in respect of loans obtained to finance the upstream operations in the relevant concession area.

Provincial hydrocarbon laws contain provisions in line with the ones described above.

The change of control of the company holding the licence does not require governmental authorisation.

The federal state and most of the provinces do not have any rights of first refusal upon the assignment of participating interests in permits or concessions submitted to the relevant authorities for their authorisation.24

The transfer of any upstream licence is subject to the rules of Argentine Antitrust Law No. 27,442, and, therefore, approval by the antitrust regulator might be required, depending on the specific circumstances of each transaction.

Usually, assignment authorisations can be obtained within 60 or 90 days of the request and the information required being submitted.


Within the national jurisdiction, in accordance with the relevant provisions and as long as they are applicable, upstream companies will be liable for the payment of all federal taxes generally applicable in the country (income tax, value added tax, debits and credits in bank accounts tax) and any applicable customs duties.

They shall also be liable for the payment of all provincial (gross income tax and stamp tax) and municipal taxes in force as of the date of the award. During the term of duration of the permits and concessions, the provinces and municipalities shall not levy new taxes upon the holders thereof, nor increase the rate of pre-existent taxes, except for those rates paid in consideration for the performance of services and as contributions for improvements, or a general increase of taxes.25

Environmental impact and decommissioning

i Environmental laws and environmental regulators

Pursuant to Article 41 of the National Constitution, legislative powers are transferred by the provinces in favour of the federal state for the issuance of basic rules of general application in environmental matters.

Following this criterion, at the national level the hydrocarbons sector is governed by: (1) general regulations containing minimum environmental protection standards, such as Law No. 25,675 (the General Environmental Law) and Law No. 24,501 (the Hazardous Waste Law); and (2) general regulations and minimum standards specifically applicable to hydrocarbon activities issued by the enforcement authority while exercising the powers delegated by the Hydrocarbons Law to that effect. For a long time, this authority was held by the Secretariat of Energy. Other regulations could also be issued by the Secretariat of the Environment and Sustainable Development.

The main applicable regulations include:

  1. policies and procedures for the protection of the environment: Resolution SE No. 105/92: (1) requires the submission of a prior environmental study before drilling the first exploratory well and commencing development of the reserves; (2) provides for the implementation of an annual monitoring of works and tasks; and (3) sets out in detail technical guidelines to be followed in the exploration and exploitation of hydrocarbons;
  2. Joint Resolution No. 3/19, issued by the Secretariat of Energy and the Secretariat of Environment and Sustainable Development, published in the Official Gazette on 27 November 2019, set forth a set of rules governing the environmental impact assessments to be conducted in connection with exploration and exploitation activities (excluding the drilling of wells) in the continental shelf subject to federal jurisdiction (beyond 12 nautical miles from the coastline);
  3. annual environmental monitoring reports: Resolution SE No. 25/04 defines and describes the technical characteristics, structure and scope of environmental studies and annual environmental monitoring reports. The environmental studies include four phases:
    • an initial environmental status;
    • an identification and characterisation of environmental effects and prioritisation of environmental impacts;
    • an environmental impact mitigation plan; and
    • a monitoring plan;
  4. contingency plans and information about incidents: if an environmental incident occurs, contingency plans must meet the guidelines provided under Resolution SE No. 342/93 and the enforcement authority must be informed within the deadlines and satisfying the requirements established by Resolution SE No. 24/04;
  5. emission (i.e., venting) of gas to the atmosphere: Resolution SE No. 143/98 establishes guidelines and mandatory limits on this matter and the exceptions, under certain justified circumstances, authorised to exceed these limits;
  6. safety conditions and maintenance of storage tanks of crude oil and by-products: Decree No. 10877/60 describes the active and passive defences to be implemented in the facilities. Resolution SE No. 785/05 created the Programme for the Control of Spills from Surface Storage Tanks, which established that companies that have these facilities have to register and inspect the tanks. Companies must also comply with a maintenance plan, report any incidents and report the abandonment of the tanks;
  7. safety auditing service: Resolution SE No. 419/93 and other supplementary regulations provide for the refineries', storage companies' and operators of service stations' obligation to hire safety auditing services to certify, on an annual basis, compliance with the applicable safety regulations; and
  8. provincial regulations: the provinces are empowered to supplement the federal regulations with local regulations, provided they do not overstep the established principle of federal law pre-eminence.26 In this regard, provincial regulations have been passed in connection with several environmental matters, such as a gaseous emissions control regime, subterranean water exploitation regime, groundwater exploitation regime and pressurised devices control regime.

ii Environmental approvals necessary for oil and gas operations

An environmental study must be prepared prior to the development of a new project and submitted to the relevant (provincial or national) environmental enforcement authority. Upon the approval of the study, the operation can begin and the operator shall comply with recommendations, restrictions and conditions (if any) contained in that approval (Resolution SE No. 105/92 and related regulations).

Additionally, the operator will have to obtain an authorisation for the use of water in the project, which shall include the origin of the water and the conditions under which it shall be used, and register with the National Hazardous Waste Generators Registry and the issuance of the Annual Environmental Certificate (Law No. 24,051, Decree No. 831/93 and other regulations).

iii Legal requirements with respect to decommissioning

Resolution No. 5/96 issued by the former Secretariat of Energy established rules and procedures for the abandonment of oil and gas wells, including a timetable for the abandonment of certain wells. On an annual basis the operator shall report the decommissioning works performed in the past year and those to be performed in the following year. Four years before the expiry of the respective concessions, or as from the date of relinquishment of all or part of an exploitation block, the concessionaire must submit a technical and economic study explaining the reasons why the abandonment of each inactive well could be inconvenient. Recommended techniques for performing definitive abandonment are detailed in the same resolution. The technical conditions applicable to the abandonment of gas pipelines and ancillary facilities are established in resolutions NAG 100 and NAG 153 of Enargas.27 The abandonment of these facilities requires the prior consent of Enargas, which will evaluate whether there is a general interest in keeping the facilities operative.

There is no requirement to constitute a fund to pay any costs associated with the abandonment of wells and facilities.

Foreign investment considerations

i Establishment

There are no foreign investment approvals or restrictions in relation to investment in petroleum.

Foreign investors wishing to hold an interest in an upstream licence will have to (1) register a branch of a foreign company with the Public Registry of Commerce;28 or (2) set up a local company (usually a stock company, a stock company with a sole shareholder or a limited liability company. To act as a shareholder or quota holder of an Argentine company, a foreign company must register with the Public Registry of Commerce with the sole purpose of being a shareholder or quota holder of a local company.29

In the City of Buenos Aires, registering a branch may take between 30 and 45 days, while establishing a local company may take between 60 and 90 days, including the registration of the foreign companies that will be the shareholders and the incorporation of the new company.

A branch is not a separate entity from the foreign company that has registered it. A stock company, a stock company with a sole shareholder and a limited liability company are separate entities from their shareholders or quota-holders who limit their responsibility to the integration of their respective capital contributions.

From an administrative point of view, branches are quite simple structures as the only requirement is to have a legal representative, while companies require the appointment of a board of directors or managers. Two-thirds of the members of the board must be Argentine residents.

ii Capital, labour and content restrictions

Capital restrictions

Decree 609/19, issued in September 2019, followed and supplemented by Decree 91/19 and several Central Bank resolutions, reinstated foreign exchange control regulations, similar to those that had been in place during the 2002–2015 period. These regulations have established certain restrictions, including, among others, the need to obtain Central Bank's authorisation to remit dividends out of the country, the obligation to bring exports' proceeds to the country and trade them for Argentine currency within certain terms, and the prohibition for companies to trade Argentine currency for foreign currency or to transfer foreign currency to accounts outside the country without a specific purpose contemplated in the regulations (like repaying loans to external creditors or paying for imported goods or services). In order to legally avoid this last restriction, many companies and individuals carry out transactions in which they purchase, with Argentine currency, certain bonds that are then sold for dollars in exchange markets abroad.30

Local content requirements applicable to oil and gas operations

The Hydrocarbons Law provides that those performing works it regulates shall prefer to hire nationals and, particularly, residents of the region where the works shall be performed, and that the proportion of nationals employed by each concessionaire or permit holder shall not be less than 75 per cent.31 In practice, exceptions to the above-mentioned rule are accepted in connection with specialist workers that are not available in Argentina or in the region where operations are conducted.

Similar provisions can be found in provincial laws and regulations, as well as in the terms and conditions applicable to bidding rounds organised by the provinces.

Also, there are certain provincial regulations establishing an obligation to favour the hiring of services from local suppliers.32

Restrictions on the ability to hire foreign workers

There are no restrictions to hire foreign workers, provided that the applicable immigration regulations are complied with.33

iii Anti-corruption

The following is a summary of the anticorruption regulations.

Public Ethics Law No 25,188 and its regulatory Decree No. 164/1999

Public Ethics Law No 25,188 and its regulatory Decree No. 164/1999 set forth the duties, prohibitions and incompatibilities applicable to all public officers and establish, among other duties and prohibitions, that public officers shall:

  1. strictly abide by the National Constitution and the laws;
  2. act honestly, diligently and in good faith;
  3. act in the public interest;
  4. not obtain or receive any personal benefit related to the performance, the delay in performing or the omission to perform any act inherent to their functions;
  5. use public property only for authorised purposes related to the performance of their duties and shall not use or allow any third party to use any information obtained in connection with their public functions in the benefit of private interests; and
  6. observe, in any public bidding process, the equality, publicity, free competition and reasonability principles.

The Anti-Corruption Agency is the Authority of Application of Law No. 25,188 and is responsible for preparing and coordinating anti-corruption policies as well as investigating corruption cases. The agency also keeps public officers' assets disclosure records and provides a whistle-blower mechanism on its website.

Argentine Criminal Code

Bribery of foreign or local public officers is prohibited and penalised in Article 258(b) of the Argentine Criminal Code (ACC).

Article 258(b) punishes with prison any person who offers or gives to a public officer from a foreign state or from an international public organisation, personally or through an intermediary, money or any object of pecuniary value or other gifts, promises or benefits, for their own benefit or for the benefit of a third party, for the purpose of having the officer perform or not perform an action related to their function or to use the influence derived from the office they hold in an economic, financial or commercial transaction.

Articles 256 to 259, on the other hand, punish both the citizen who bribes an Argentine public officer and the public officer who receives the bribe. The punishment is increased when the public officer is a judge, prosecutor or any other person related to the administration of justice.

Article 256(b) of the ACC sets forth provisions regarding 'improper lobbying'. This article states that anyone who requests or receives money or any other gift or accepts a promise of such to exert unlawful influence on a public official will be punished.

Criminal liability of legal entities

Law No. 27,401, enacted in late 2017, provides the criminal liability of private legal entities in connection with the offences contemplated in Articles 258 and 258-bis described above, Article 265 (negotiations that are not compatible with the exercise of public functions), Article 268 (extortion) and Article 300-bis (false or fraudulent financial statements) of the Criminal Code.

The sanctions provided by the law include fines, suspension of activities and dissolution. The company may receive a reduced fine, and it may even be released from any criminal liability if it self-reports an offence provided for in the law, of which it has become aware as result of proper internal controls implemented before the occurrence of the wrongdoing that is being reported, and provided it returns the unlawful benefit obtained.

Anti-corruption conventions

Argentina has signed – without reserves – the following anticorruption conventions:

  1. the Inter-American Convention against Corruption (IACAC) 1996;
  2. the Convention for Combating Bribery of Foreign Officers in International Business Transactions (OECD Anti-Bribery Convention) 1997;
  3. the United Nations Conventions against Business Corruption 2003; and
  4. the United Nations Convention against Private Corruption, 2003.

Current developments

By the end of the third quarter of 2019, Argentina's oil production was undergoing a modest but steady recovery that began in early 2018, while the production of natural gas continued to show the V-shaped recovery that began in 2014, because of the development of unconventional oil and gas blocks, now driven by shale rather than by other unconventional hydrocarbons.

Since then, these positive trends have been severely affected by a number of domestic and international situations. On the domestic side, the result of the primary and general elections held in August and October last year, in which President Macri, who ran for a new term in office, was beaten by Mr Alberto Fernández, the candidate of the centre-left, populist coalition lead by former president Cristina Kirchner, was certainly not welcomed by the financial markets, triggered a new devaluation of the Argentine peso and forced both the exiting and the new administrations to reinstate and maintain or deepen stringent foreign exchange restrictions among a context of economic recession, and, as regards the oil and gas sector, to take actions that were at odds with policies that had been implemented between 2016 and 2018.34 The current administration's first steps after taking office in December last year did not help to improve the situation. Despite Mr Fernández and other members of his team having stated that the development of the hydrocarbon resources would continue to be a main objective of their administration and that certain incentives for the industry would be enacted shortly, no effective actions or announcements were made in this respect. This uncertainty in connection with the policies to be implemented in relation to the oil and gas sector, together with the crash of international prices caused a significant reduction in exploration and production investment during the first quarter of 2020. In this context, the covid-19 pandemic broke into the country in late March, with a massive impact on the economy in general and on the oil and gas industry in particular.35

In this scenario, the national Executive issued Decree No. 488 on 19 May 2020, which (i) established, until 31 December 2020 or until the price of Brent oil exceeds US$60/bbl, that the price of all domestic sales shall be calculated on a fixed 'Medanito' crude oil reference price of US$45/bbl and the prices so calculated shall be used for the calculation of the royalty payable to the provinces;36 and (ii) replaced the existing fixed-rate export duty applicable to hydrocarbons exports by a mobile rates system pursuant to which the applicable rate will be 0 per cent if the international reference price (Brent) does not exceed US$45, and will be determined by certain formula set forth in the decree when such international reference price is higher than US$45 but not higher than US$60. If the international reference price is US$60 or more, the rate shall be 8 per cent. So far, and until domestic demand recovers in a more vigorous way, the fixed domestic reference price has proven to be a problem rather than a solution for producers, as the prices they could actually charge to refineries were – and still are – lower than the prices they should have charged pursuant to the decree. This resulted in several disputes with the provinces in connection with the base price to be considered for the calculation of royalties.37 On the other hand, the change made to the export duty rates has helped producers to increase exports as international demand and prices began to recover. In fact, in July approximately 40 per cent of the oil produced in Neuquén – 1.85 million barrels – was exported.

Despite the delays and adverse effects caused by the situations described above, the development of shale resources, as opposed to the declining conventional production, will continue to be the trend in years to come. Currently, unconventional oil production represents 19 per cent of the total national production, when it represented only 1 per cent of the total production until 2012, showing an average annual growth rate of 40 per cent during the last five years. The unconventional gas production represents 43 per cent of the total national gas production, showing an average annual growth rate of 33 per cent during the last five years. During the last two years, the production of shale oil and gas increased significantly with regard to the production of other unconventional hydrocarbons (tight oil and gas).

Loma Campana (YPF – Chevron) and Fortín de Piedra (Tecpetrol) continue to be the most prolific shale oil and shale gas projects, respectively, among several blocks that have already entered their full development or pilot stages.38

Key government officials have repeatedly declared that the development of the country's shale potential, as well as other hydrocarbon resources, will be strategic for this new administration and have announced, on several occasions, their intention to enact laws and regulations that will bring certainty and incentives for companies to invest in the sector. Now that, after lengthy negotiations with private bondholders, the government has managed to restructure part of the country's sovereign debt, which the government considered a condition precedent to the implementation of any economic plan or energy policy, and is on its way to do the same with the International Monetary Fund, and as the effects of the pandemic are left behind, the government will need to show the industry that it is really committed to this objective. To do so, it will have to implement at least some of the incentives announced and refrain from imposing new restrictions or taking actions that are inconsistent with this end, like the 'interpretation' the former government made of the gas subsidies scheme provided by Resolution No. 46/17, or the establishment of a fictional and unreasonable fixed price like the one provided for in Decree No. 488/20, or the gas regulator's (ENARGAS) challenge of decree 1053/18 and suspension of payments thereunder.39

So far, the government has announced that a new tender process and subsidies scheme for the supply of natural gas for the domestic market, called 'Gas Scheme 2020–2024' will be implemented shortly. This new scheme will aim at keeping certain injection level, with the objective of mitigating the effects of the reduction of exploration and production investment during 2020, and reducing, as much as possible, the need to import LNG and gas from Bolivia in the next cold seasons. Under the Gas Scheme 2020–2024, producers will be able to submit bids for the supply of gas to the domestic market, subject to a maximum price of approximately US$3.40/MMBtu. The portion of the price that is not passed through to the consumers will be paid by the federal government. The companies submitting bids shall commit to maintain the average injection of gas to the system registered during May and June 2020. The companies which bids are awarded the supply will also be entitled to certain firm export quotas to be used during the warm season.


1 Pablo J Alliani and Fernando L Brunelli are partners at Alliani & Bruzzon.

2 YPF SA was expropriated by Law 27,461 while the 'deregulation' decrees were repealed by Decree No. 1722/12.

3 Among others, incentive plans for the development of new gas resources (SE Resolution No. 1/13) by which a minimum price was guaranteed by the Federal Government; Decree No. 929/13, which established certain tax, exports and free availability of proceeds benefits in connection with projects involving a minimum investment amount; and Law No. 27,007, which amended the Hydrocarbons Law No. 17,319 and enhanced the benefits scheme provided for in Decree No. 929/13.

4 A United States Energy Information Agency's report issued in April 2011 estimated Argentina's technically recoverable resources of shale gas in 774 trillion cubic feet (tcf), while a similar report issued by the same agency two years later increased its estimate to 831tcf of shale gas and 30 billion barrels (bbl) of shale oil, which amounts to 70 and 13 times, respectively, the present proved gas and oil reserves of the country. Argentina's technically recoverable shale resources are the fourth and second largest in the world in connection, respectively, with oil and gas.

5 Recently, the government completed the restructuring of a substantial portion of its sovereign debt (bonds governed by New York law) with private bondholders, in the amount of US$66 billion. The next step is to restructure the US$48 billion debt with the International Monetary Fund.

6 Other conventions to which the country is a party are the Convention on the Settlement of Investment Disputes between States and Nationals of Other States; the 1991 Inter-American Convention on International Commercial Arbitration; the 1979 Montevideo Inter-American Convention on the Extraterritorial Efficacy of Foreign Judgments and Arbitral Awards; the 1940 Montevideo Convention on International Procedural Law; the MERCOSUR International Commercial Agreement; and the MERCOSUR Protocol on Jurisdictional Cooperation and Assistance Agreement in Civil, Commercial, Labour and Administrative Matters.

7 Algeria, Armenia, Australia, Austria, Belgium-Luxembourg, Bolivia, Bulgaria, Canada, Chile, China, Costa Rica, Croatia, Cuba, the Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Finland, France, Germany, Greece, Guatemala, Hungary, India, Indonesia, Israel, Italy, Jamaica, Korea, Lithuania, Malaysia, Mexico, Morocco, the Netherlands, New Zealand, Nicaragua, Panama, Peru, the Philippines, Poland, Portugal, Romania, Russia, Senegal, South Africa, Spain, Sweden, Switzerland, Thailand, Tunisia, Turkey, Ukraine, the United Kingdom, the United States, Venezuela and Vietnam.

8 Australia, Austria, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Italy, Mexico, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland, the United Arab Emirates and the United Kingdom.

9 Hydrocarbons Law, Articles 14 and 15.

10 Resolution No. 197/18, provides for a much longer term (eight years) than that applicable to other areas (12 months plus 12 months' extension), and gives the permit holder commercial exploitation rights, whereby the permit holder has the exclusive right to disclose (subject to a few exceptions) and commercialise the data obtained from the inspection activities, on a non-discriminatory basis, until two years after the expiry of the permit. Surface inspection permits that were already in force could be converted into permits under this new Resolution, at the permit holder's request.

11 Hydrocarbons Law, Articles 16 to 26.

12 id., Articles 27 to 38.

13 The agreements executed by Gas y Petróleo del Neuquén SA – the Province of Neuquén-owned company – provide that, upon the grant of an exploitation concession, the provincial company may opt between keeping its participating interest in the production and CAPEX and OPEX expenditures, or assign the participating interest to the private parties and receive a 2.5 per cent overriding royalty on the production from the concession area.

14 Article 33 provides for the obligation of the permit holder to declare commerciality within a certain term after the occurrence of a commercial discovery. Article 33 refers to the size of each exploitation lot and certain concessionaire's obligations in this respect.

15 Hydrocarbons Law, Article 80.

16 id., Article 81.

17 Royalty is regulated by Articles 59 to 65 of the Hydrocarbons Law and by Decree No. 1,671/1969.

18 Hydrocarbons Law, Article 27-ter (introduced by Law No. 27,007).

19 However, in concessions that were extended before the enactment of Law No. 27,007 (2014), extra payments on the production may apply, such as additional payments of up to 3 per cent of the production, and certain windfall profit payments apply, which are triggered when the prices obtained for the hydrocarbons produced from the concession area exceed certain parameters.

20 Hydrocarbons Law, Article 6.

21 Law No. 24,076 and Secretariat of Energy Resolution No. 104/18 (passed on 21 August 2018) which, subject to the authority's authorisation, allows seasonal, long- and short-term firm and interruptible exports and exports required to deal with emergency situations with a subsequent obligation to reimport the same volumes that were exported

22 These were exports of natural gas to Chile, Uruguay and Brazil by companies such as YPF, Total, Pan American Energy, Pampa Energía, Wintershall and Exxonmobil.

23 Currently, the reference price applicable to domestic sales has been temporarily fixed at US$45/bbl, between 19 May 2020 and 31 December 2020 or until the price of Brent oil exceeds US$60/bbl, whichever occurs first, by Decree No. 488/20. Despite this regulated price, which constitutionality is being questioned, reality has shown that, in the present context, the market cannot pay prices based on such fixed reference price, as evidenced by numerous sales closed for much lower prices. Decree 488/20 is discussed in further detail in Section IX.

24 As an exception, Decree No. 348/15 of the Province of Río Negro provides that the province will have a right to match the commercial terms of the intended assignment and acquire the participation once assignment authorisation has been requested.

25 Hydrocarbons Law, Article 56(a).

26 National Constitution, Article 3.

27 Enargas is the national gas regulator.

28 General Companies Law No. 19,550, Article 118.

29 id., Article 123.

30 This implies an additional cost as well as certain risk in respect of the market value of the bonds used in the transaction, as the bonds must comply with a minimum five-day 'parking' term before they can be sold.

31 Hydrocarbons Law, Article 71.

32 Like Neuquén Law No. 3032, which contains an obligation to acquire certain percentages a minimum of 60 per cent of the contractual amount from companies based in Neuquén, which is calculated on an annual basis, in respect of each item or type of activity. This preference must be granted if the economic offer submitted by the Neuquén company is up to 7 per cent greater than the best offer submitted by the other companies, provided that the Neuquén company accepts to reduce its prices to match the best offer received.

33 Immigration Law No. 25,871, its Regulatory Decree No. 616/2010 and supplementary dispositions enacted by the enforcement authority, the National Immigration Directorate.

34 Foreign exchange restrictions include, among others, the obligation to bring to the country and convert to local currency all exports proceeds, the requirement of Central Bank's authorisation to remit dividends abroad, restrictions to acquire foreign currency with Argentine pesos and to transfer foreign currency to bank accounts outside Argentina. Decree 566/19 froze crude oil and fuels' domestic prices for 90 days. Ministry of Energy Resolution No. 46/17 (which enacted the subsidies scheme that boosted investment in large shale gas projects in Vaca Muerta, such as the extraordinarily successful shale gas block Fortín de Piedra) was 'interpreted', without any solid legal grounds, so to significantly reduce the amount of subsidies that the companies whose investment plans had been approved legitimately expected to collect; and export duties were reinstated for all goods and services, including oil and gas.

35 Decree 297/20, issued on 20 March 2020, imposed a mandatory lockdown that, although softened in many aspects, is still in force after five months. The demand for fuels in April dropped between 80 per cent and 50 per cent, depending on the type of fuel, with this demand slowly recovering since May, which resulted in the temporary shutting-in of fields, temporary shutting-down of refineries and production being kept at minimum levels (no fracking stages were reported during April).

36 Medanito is the light oil produced in the Neuquén basin, which price is used as reference for domestic sales.

37 The actual price received by the producers, as set forth in the Hydrocarbons Law and acknowledged by profuse National Supreme Court caselaw (position sustained by the producers) or the fictional fixed price provided for in the decree (position sustained by the provinces).

38 Eleven blocks in the Vaca Muerta formation are already in the massive development stage. Eight of them are shale-oil blocks: Loma Campana, La Amarga Chica, and Bandurria Sur (operated by YPF), Bajada del Palo Oeste (operated by Vista), Coirón Amargo Suroeste, Sierras Blancas and Cruz de Lorena (operated by Shell), Bajo del Choique – La Invernada (operated by Exxon). Three of them are sale-gas blocks: Fortín de Piedra (operated by Tecpetrol), Aguada Pichana Este (operated by Total) and El Orejano (operated by YPF).

39 Pursuant to Decree No. 1053/18, the federal government assumed to pay, in accordance with a certain payment schedule, the debt, originated in peso-dollar exchange differences, owed to gas producers by distributors that could not pass through the entire purchase price to end consumers.

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