Province of Neuquén – Abrogation of Decrees No. 225/06 and No.226/06 which modified the basis for the hydrocarbon royalties’ calculation

Decree No 2200 of the Province of Neuquén abrogated with effect as of March 1, 2006:

i)             Decree No 225/06 that provided that the wellhead price that would be considered as the basis for the calculation of crude oil royalties would  be WTI (West Texas Intermediate) price, to which the only deductions that would have been allowed were those related to quality and transportation costs; and

ii)            Decree No 226/06 that provided that as from March 1, 2006, the wellhead price used to calculate gas royalties would be the average price for gas imports to Argentina with discounts related to compression, treatment and transport.

Trough these decrees, the Neuquén Provincial Government had established a calculation basis independent of the sale price in the domestic market.  For further information regarding Decrees No 225/06 and 226/06, please see “Province of Neuquén – Granting of rights to HIDENESA regarding exploration and production areas. Modification of the basis of calculation of royalties” in Marval News # 48, March 31, 2006.

Both Decrees and the Hydrocarbons Provincial Law No 2,453 had been challenged before administrative and judicial authorities by oil & gas companies producing in Neuquén. As a result of the issuance of Decree No 2200, all these cases will become moot and should be discontinued.