Increase in Oil Export Duties

1.    Background and previous framework

As a result of the crisis experienced in Argentina in 2002, Law No 25,561, also known as the “Public Emergency Law”, created export duties applicable to hydrocarbons exports for a term of five years and authorized the Argentine Executive Branch (“EB”) to establish the applicable rates. In December 2006, Law No 26,217 extended the effectiveness of the export duties and the powers of the EB to establish the applicable rates for five additional years.

Until last November 15, Resolution No 532/2004 regulated the rates applicable to crude oil and certain refined petroleum products, as follows:

(i)    a fixed rate of 25% if the West Texas Intermediate (“WTI”) crude oil price did not exceed US$ 32 per barrel;

(ii)   a progressive additional rate calculated on a sliding scale to be added to the rate mentioned in (i), from 3% to a cap of 20%, if the WTI crude oil price ranged from US$ 32 to US$ 45 per barrel, respectively; and

(iii)   a rate of 45% (25% plus 20%) if the WTI price exceeded US$ 45 per barrel.

2.    New system

From November 16, 2007, Resolution No 394/2007 establishes the duty applicable to crude oil and certain refined petroleum products exports. In the case of crude oil, such duty will be determined as follows:

(i)    if the international price of the barrel ranges from US$ 45 to US$ 60.9 (defined as a “reference value”), the applicable export duty will be 45%;

(ii)   if the international price of the barrel exceeds the reference value of US$ 60.9, the export duty will be obtained by application of the following formula which links the international price and the cut-off price, fixed at US$ 42 per barrel:

D =          IP – CP      Х 100

CP

Where:

D: Export Duties

IP: International price of crude oil in USD/barrel

CP: Cut-off price (USD 42/barrel)

(iii)  if the international price per barrel is below US$ 45, the government will fix the applicable duty within the next ninety days.

The new regime also provides for the application of the same system to determine the export duty applicable to other fuels and lubricants, for which different reference values and cut-off prices are fixed for each product.

3.    Uncertainty in the application of the formula

It is not clear how the fomula mentioned in (ii) above will be applied. A key issue that needs to be confirmed is whether the exporter would always receive the cut-off price of US$ 42 and the remainder would be the export duty amount. This interpretation was communicated by several newspapers and other media, but does not have an identifiable legal source. 

Applying this unconfirmed criteria that the US$ 42 cut-off price would always remain for the producer / exporter, the new formula would work as follows:

(*) Assuming the cut-off price of USD 42 would always be paid to the exporter.

New resolutions clarifying the existing uncertainties should be issued in the near future.