Bases Law: Amendments to the Hydrocarbons Law Now Regulated

Decree 1057/2024 was published in the Official Gazette on November 29, 2024, implementing the amendments to the Hydrocarbons Law 17319, the Gas Law 24076, and the aspects related to uniform environmental legislation for the sector that were established in the Bases Law  27742. For a description of the amendments provided by the Bases Law to the main energy laws, see our article “Amendments for the Energy Sector.”

This article summarizes the main aspects of the regulations for the Hydrocarbons Law as provided in Annex I of the Decree. For an overview of the regulations under the Gas Law, refer to our article “Bases Law: Amendments to the Gas Law now Regulated.” 

1.    Guidelines for Achieving Energy Policy Objectives
The Decree establishes the following guidelines for achieving the energy policy objectives defined by the Bases Law: free market, competition incentives, alignment of domestic prices with international prices, efficient allocation of resources, fostering of long-term contracts, and the security of domestic market supply.

2.    Granting of Interjurisdictional and International Authorizations and Permits
The Decree provides that the federal government will have the power to grant: 

(i)    transportation authorizations aimed at interjurisdictional or international trade, 
(ii)    processing permits for natural gas liquefaction plants and/or regasification plants whose production is intended for export or whose supply is provided by import transactions.

3.    Exports of Hydrocarbons (Excluding Liquified Natural Gas)
The new article 6 of the Hydrocarbons Law, as amended by the Bases Law, establishes the free export of hydrocarbons and their derivatives, as long as the Secretariat of Energy (SE) does not object it. For this purpose, the Decree defines the commercialization prices of hydrocarbons and their derivatives in the domestic market as the prices “resulting from supply and demand in their free trade.”

The Decree delegates to the SE the regulation of the objection procedure and provides that the free exercise of export rights may not be interrupted once the SE issues the Certificate of Free Export, subject to the provisions of the Decree.

To obtain such certificate, interested parties must submit an export notice including technical and commercial information describing the transaction (product, destination, quantity, price, term, pipelines, and end-use) and evidencing productive capacity and commercial commitments, among other requirements. For exports exceeding one year, applicants must submit documentation of reserves and/or prospective resources and production capacity (certified by independent experts) with the notice to evidence the right to dispose of the volumes and terms indicated. The SE may request additional information, and this request will suspend the administrative terms for the SE to issue its decision. 

The SE will have 30 administrative business days as from the  date the submission to raise objections (total or partial) was filed. The grounds for objections are specifically established in the Decree and must be based on well-founded technical-economic studies, including insufficient hydrocarbon availability, lack of proof of projected hydrocarbons reserve availability (proven, probable, and possible), lack of proportion of such projections vis-à-vis their impact on domestic market supply, or the existence of significant and unforeseen variations in domestic market prices, among other grounds.

If there is an objection to export volumes due to domestic market needs, interested parties may replace the objected volumes by means of: 

(i)    acquiring or importing equivalent volume and quality of hydrocarbons, 
(ii)    partially or entirely waiving their export rights during the period in which the supply security of the domestic market is affected. 
The SE must approve the replacement alternative based on technical-economic studies and may require guarantees to ensure the supply.

If no objections are raised within the 30-business-day deadline, exporters will have five business days to request the Certificate of Free Export. Once issued, firm exports cannot be affected. However, the Decree provides that the SE may adopt specific measures in exceptional circumstances that compromise domestic market supply security, such as force majeure.

The Certificate of Free Export may provide the exportation of surplus daily gas volumes, which are subject to interruption. Non-objected export rights and Certificates of Free Export may be transferred in whole or in part, subject to prior SE approval. 

The SE will maintain a registry of export transactions, including: 

(i)    notices, 
(ii)    objections, 
(iii)    exports carried out. 

The Registry of Contracts for Export Transactions—provided under Decree 645/2002 and Resolution 241/2017—and their amendments will remain in effect until their amendment or repeal.

4.    Conventional and Non-Conventional Exploitation Within the Same Area
Under the Decree, the grantor may determine one or more exploitation methods (conventional and non-conventional) within the same area, establishing subdivisions—as appropriate— without affecting acquired rights.

5.    Model Bidding Terms
The Decree provides that model bidding terms for granting exploration permits and exploitation concessions to be issued by the SE and the provincial authorities must include the following minimum requirements: work units, royalties, entry bonuses, technical and economic capabilities, abandonment conditions, corporate social responsibility, dispute resolution, and environmental protection, among other requirements.

6.    Other Obligations
Exploration permit holders and exploitation concessionaires must submit annually-certified information on proven and unproven reserves, contingent resources, and prospective resources for their areas. Forecasts for conventional and non-conventional (shale and tight) hydrocarbon production must also be submitted, including remaining resources for each block.

7.    Term of Exploitation and Transportation Concessions Granted Before the Bases Law
Following the Bases Law, the Decree clarifies that the term of exploitation and transportation concessions granted before its enactment will include extensions approved under the legal framework applicable to those concessions ( the one in force before the Bases Law was passed).

8.    Concessions, Authorizations, and Licenses for Transportation

The Decree categorizes transportation-related enabling titles after the enactment of the Bases Law as follows:

(i)    Concessions Granted before the Bases Law granted to (a) exploitation concessionaires (under article 28 of the Hydrocarbons Law) and (b) non-producer third parties: these concessions will remain subject to the legal framework applicable to them (the one in force before the Bases Law was passed).
(ii)    Authorizations Granted After the Bases Law to Producers (under article 28 of the Hydrocarbons Law): Their terms will match those of the related exploitation concessions and will be renewable every 10 years. Facilities will revert to the grantor upon its expiration. Public bidding is not required to grant them. They are not considered public services, and their holders may freely carry out the activities for their benefit or agree on terms with third parties on non-discriminatory basis, under similar conditions.
(iii)    Authorizations (1) granted for Hydrocarbon Industrialization Projects, Including conditioning, separation, fractionation, storage, liquefaction, and any other hydrocarbon industrialization processes, and (2) exclusively dedicated to transport (not included in article 28 of the Hydrocarbons Law): These are not subject to a term, and facilities do not revert to the grantor. Public bidding is not required, and they are not considered public services. Holders may freely transport hydrocarbons for their benefit or negotiate freely with third parties, without discrimination.

Concessions and authorizations referred to in paragraphs (i) to (iii) will be subject to open access regime pursuant to Decrees 44/1991, 729/1995, and 115/2019. (iv)    Authorizations: (a) for refining complexes and their storage facilities, (b) affecting natural gas liquefaction plants, or (c) aimed at underground storage projects: These are not subject to a term, facilities do not revert to the grantor, and public bidding is not required. Their facilities are not subject to open access. In this case, the Federal Gas Regulatory Agency (Ente Nacional Regulador del Gas or ENARGAS) will supervise compliance with specific conditions, technical standards, and environmental protection regulations to implement the construction of the facilities, as well as to other circumstances related to the design, construction, operation, and maintenance of the gas pipelines. Decrees 44/91, 729/95, and 115/19 (as amended) will apply to these concessions and authorizations (i through iv) if their application is consistent with the Decree.
(v)    Gas transportation licenses and their extensions, granted under the Gas Law 24076: These are governed by the Gas Law and its regulatory framework.

9.    Hydrocarbons Processing Licenses and Underground Gas Storage Authorizations
The Decree delegates to the SE the regulation of hydrocarbon processing licenses and underground gas storage authorizations. The SE will keep a registry of licenses and authorizations granted by the federal government, the provinces, and the City of Buenos Aires. 

The Decree clarifies that owners of facilities for conditioning, separation, liquefaction, and/or any other hydrocarbon industrialization processes authorized before the Bases Law do not need to reconvert their authorizations to the new processing permitting framework. 

The holders of underground storage authorizations are allowed to store third-party hydrocarbons on non-discriminatorily basis and at equal prices under similar conditions. Under the Decree, ENARGAS safety and environmental protection regulations will apply to underground gas storage authorizations.