Amendments in the Energy Sector

According to the recitals, the reforms for the energy sector aim to promote an integrated and international approach to the energy sector—in accordance with the existing natural resources and the ones to be developed—and foster the participation of the private sector. 

 For this, the Law seeks to: 
1.    promote free international trade of natural gas, liquefied natural gas, liquefied propane and butane gas, oil, and its derivatives, 
2.    eliminate the restrictions to allow third parties (non-producers) to carry out activities related to natural gas processing and liquefaction, as well as transportation and storage of hydrocarbons,
3.    foster free trading, competition, and expansion of the markets for electricity and hydrocarbons,
4.    establish a legal framework for the private sector to develop energy infrastructure,
5.    unify the industry’s regulatory bodies, 
6.    promote the relationship between energy and the environment. 
The following is an outline of the main amendments in the energy sector. We highlight that paradigm shifts and the regulations to be issued will need to be thoroughly analyzed to determine their impact on regulations currently in force, and on the ways and extent of the activities under development.

1)    Amendments to Hydrocarbons Law 17319 and Law 26741 on Hydrocarbons Sovereignty
The first major amendment the Law introduces is the maximization of the income obtained from exploiting oil and gas resources as one of its main goals, together with satisfaction of the domestic market's hydrocarbon needs. In this sense, the Law amends article 6 of Hydrocarbons Law 17319 and repeals article 1 of Hydrocarbons Sovereignty Law 26741, which declared the self-sufficiency of hydrocarbons to be of public interest and a priority objective. This relativizes the concept of achieving self-sufficiency in hydrocarbons as the main vector of the energy activity. 
Further, the Law substantially limits the role of the State in the hydrocarbons sector. On the one hand, it provides the right of producers to freely commercialize, transport, and industrialize hydrocarbons and their derivatives, and on the other, it prohibits the Executive Branch from intervening or fixing prices.
In terms of foreign trade, the Law also provides the free export and import of hydrocarbons and their derivatives. Exports will be subject to non-objection from the Secretariat of Energy and will be carried out in accordance with the regulations the Executive Branch will issue.  

a)    Upstream 
The Law removes the need for authorization or permits for surface recognition.
Regarding exploitation concessions, the Law: 
1.    modifies the acquisition regime and terms of non-conventional concessions from the reconversion of conventional concessions,
2.    eliminates “maximization of production compatible with adequate and economic exploitation of the deposits” as a criterion for determining the investments exploitation concessionaires will make,
3.    empowers the enforcement authority to grant concessions (conventional, non-conventional, and offshore) for terms different from those established in the Hydrocarbons Law, 
4.    amends the regime of extensions for new concessions,
5.    requires a public bid for the awarding new concessions at the end of the term of existing concessions.
The Law establishes a new royalty regime for concessions and permits awarded after  its effectiveness. The applicable rate will be determined on a case-by-case basis in the respective bidding process. Starting from a base royalty of 15%  on the wellhead value, bidders may propose a percentage that increases or reduces such base, as a variable of their bids. The result will be adjusted throughout the term of the permit or concession according to the variation of international hydrocarbon prices.

b)    Midstream 
The Law also provides a large number of amendments and novelties for the midstream sector. In this sense, on the one hand, it replaces the concept of “transport concession” with that of “transport permit” while clarifying that transport concessions granted prior to its enactment will be governed by the terms and conditions under which they were granted. On the other hand, it creates the concepts “processing authorization” and “storage authorization.” 
The Law introduces a novelty by establishing that the owners of projects and/or facilities for the conditioning, separation, fractionation, liquefaction, and/or any other hydrocarbon industrialization process may request the authorization for the transport of hydrocarbons and/or their derivatives to their industrialization facilities and from such facilities to the centers and/or facilities for subsequent industrialization or commercialization processes. These authorizations will not have a deadline. 
Further, transport authorizations associated to exploitation concessions will be granted and extended for the same terms as those of the related exploitation concessions. If these authorizations are assigned, their holders may request successive extensions for terms of ten years each, if they complied with their obligations and are transporting hydrocarbons at the time of requesting the extension.
The Law establishes that transport authorizations and processing authorizations do not grant their holders a right of exclusivity. The capacity their holder does not use must be made available to third parties at the same price in equal circumstances, always subordinated to the needs of the authorized party itself. These rules have some exceptions.   
Regarding the processing authorization, the Law establishes the obligation of the holder of such authorization to process hydrocarbons from third parties for up to 5% of the capacity of the authorized facilities, if the safety of the process and other matters foreseen in the law are not compromised. However, this provision does not apply to refining facilities or natural gas liquefaction plants.
The Law also creates the concept of authorization for underground storage of natural gas in depleted natural hydrocarbon reservoirs, which includes the processes of injection, storage, and withdrawal of gas. No deadline is established for these authorizations. Their holders are not obligated to store natural gas from third parties and may request a transport permit for transporting to their storage facilities and from there to another transport systems.

2)    Amendments to the Regulatory Framework for the Natural Gas Industry, Law 24076
The Law also introduces amendments to Law 24076, which regulates the public natural gas transport and distribution. 
First, the Law establishes a special regulation for Liquefied Natural Gas (GNL) exports, introducing this procedure be authorized:
•    GNL export requests must be authorized within 120 days of their receipt, in accordance with the regulations the Executive will issue.  
•    The Secretariat of Energy will establish the information and documents applicants must provide. It will not be necessary for applicants to have GNL sale and purchase contracts at the time of applying.
•    The GNL export authorizations will have to be granted on a firm basis with respect to the GNL volumes authorized for a term of up to 30 years as of the start-up of the liquefaction plant (on land or floating), its expansions, or its successive stages. These may be assigned with the prior authorization of the enforcement authority.
•    The Secretariat of Energy may issue, within six months of the enactment of the Law, a gas resources declaration of availability that contemplates the sufficiency of such resources in Argentina, forecasted to regularly supply the domestic demand and to supply GNL export projects on a firm and interruptible basis.
In this sense, the Law establishes that the amendments the Executive or the enforcement authority make to the GNL export authorizations will have no effect unless they are more favorable to exports.
Another relevant amendment is the extension of the renewal deadline for natural gas transport and distribution licenses upon their expiration, which was extended from 10 to 20 years. 

3)    Consolidation of regulatory agencies 
The Law creates the Federal Electricity and Gas Regulatory Agency [Ente Nacional Regulador del Gas y la Electricidad] which, once established, will consolidate the functions of the Federal Electricity Regulatory Agency (ENRE) and of the Federal Gas Regulatory Agency (ENARGAS).

4)    Delegation in electric energy matters 
The Law empowers the Executive Branch to adjust the regulatory framework for electric energy (Laws 15336 and 24065) until December 31, 2025, to guarantee, among others: 

1.    the free international trade of electric energy,
2.    the free commercialization and maximum competition in the electricity industry, guaranteeing end users the free choice of supplier,
3.    the economic dispatch for energy transactions based on a payment scheme according to the hourly economic cost of the system,
4.    the development of transportation infrastructure through open, transparent, efficient, and competitive mechanisms.
5)    Environmental legislation
Regarding environmental matters, the Law empowers the Executive Branch to draft, together with the provinces, uniform environmental laws for the hydrocarbons sector at federal level in compliance with Law 27007.
6)    Companies of the energy sector that might be subject to privatization
The list of state-owned companies subject to privatization includes Energía Argentina SA (ENARSA).
7)    New Incentive Regime for Large Investments (Régimen de Incentivos para Grandes Inversiones or RIGI)
The Incentive Regime for Large Investments (RIGI)—created by the Law—will apply to energy, oil and gas, and infrastructure projects. Investments in these sectors that meet the requirements will be eligible for its benefits.
See chapter for more information on RIGI, its requirements, and benefits.