Amendments to the Energy Sector

According to the presentation message of the Bill, the proposed 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 these purposes, the Bill  proposes:

1. promoting free international trade of natural gas, liquefied natural gas, liquefied propane and butane gas, oil, and its derivatives,
2. eliminating 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. fostering free trading, competition, and expansion of the markets for electricity, hydrocarbons, and biofuels,
4. establishing a legal framework for the private sector to develop energy infrastructure,
5. unifying the industry’s regulatory bodies,
6. promoting the relationship between energy and the environment,
7. creating a market for Greenhouse Gas (GHG) emission rights.

1. Amendments to Hydrocarbons Law 17319 and Law 26741 on Hydrocarbons Sovereignty

The Bill aligns the objectives of the national energy policy with the Argentina’s context and the energy transition, including maximizing the income obtained from the exploitation of oil and gas resources as one of its main goals, together with  satisfying the country's hydrocarbon needs. In this sense, the Bill derogates article 1 of the Law 26741, which declared the self-sufficiency of hydrocarbons to be of public interest and a priority objective. This implies a modification to the concept of achieving self-sufficiency in hydrocarbons as the main vector of the energy activity.

The Bill grants the right to freely commercialize hydrocarbons and establishes that the Executive may not intervene or fix prices in the domestic market. It determines the free import and export of oil, gas, and their derivatives, according to the regulations of the Executive.

1. Upstream

The Bill eliminates the need of authorization or permits for surface reconnaissance.

Regarding exploitation concessions:

1. it modifies the acquisition regime and terms of non-conventional concessions from the reconversion of conventional concessions,
2. it eliminates the “maximizing of production compatible with adequate and economic exploitation of the deposits” as a criterion for determining the investments exploitation concessionaires will make,
3.  with respect to the terms of the concessions (conventional, non-conventional and offshore), it empowers the enforcement authority to grant concessions for terms other than those established in the Hydrocarbons Law,
4.  it eliminates the ten-year extension regime and includes a bidding process as a requirement to award new concessions at the end of the term of the existing concessions.

The Bill establishes a new royalties regime for concessions and permits to be awarded as from the date in which the law becomes effective. The applicable rate will be determined on a case-by-case basis in the relevant bidding process. 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.

2. Midstream

Regarding midstream, the Bill replaces the concept of the transportation concession by that of transportation authorization and creates the concept of processing authorization. These authorizations will include the authorization to operate and build conditioning plants, hydrocarbon separation plants, oil pipelines, gas pipelines, among others, including natural gas liquefaction plants.

The new authorizations must be granted through public bids with private initiative. The Bill establishes that these authorizations do not confer a right of exclusivity and that the capacity holders do not used must be made available to third parties.

2. Amendments to the Regulatory Framework for the Natural Gas Industry, Law 24076

The most relevant amendments to Law 24076, which regulates the public services of transportation and distribution of natural gas, are:

1. the extension of the term for the renewal of the licenses upon their expiration, which was increased from 10 to 20 years
2. regarding natural gas exports, the Executive’s regulation, and the elimination of the express reference in the law to non-affectation of the self-sufficiency of the domestic market, in line with the proposed amendments to the Hydrocarbons Law and the Customs Code (Emergency Decree 70/2023).

3. Amendments to the Biofuels Law 27640

The Bill maintains the minimum blend rates of 7.5% for gasoil or diesel oil (biodiesel) and 12% for oil (bioethanol) but deregulates both prices and fees. Further, the Bill repeals the integration limitation that prohibited hydrocarbon producers and refineries from owning biofuel plants and having a participative interest in this type of companies.

4. Consolidation of regulatory agencies

The Bill creates the Ente Nacional Regulador del Gas y la Electricidad which, once established, will take up the functions of ENRE and ENARGAS.

5. Delegation in electric energy matters

Through a delegation of powers, the Bill authorizes the Executive to adjust the regulatory framework for electrical energy (Laws 15336 and 24065) until December 31, 2025, to guarantee the general principles established in the Bill, including:

1. the free international trade of electric energy.
2. the economic dispatch for energy transactions based on a payment scheme according to the hourly economic cost of the system,
3. the development of transportation infrastructure through open, transparent, efficient, and competitive mechanisms.

6. Environmental legislation

The Bill empowers the Executive to elaborate, together with the Provinces, a uniform environmental legislation at national level.

7. Energy transition legislation

The Bill allows the Executive, to comply with the absolute net greenhouse gas (GHG) emissions targets:

1. to allocate GHG emission allowances to each sector and subsector of the economy,
2.  to establish mandatory compliance limits.

The Bill also empowers the Executive to establish and regulate a GHG emission rights market and states that the demand and those liable for GHG emitting activities will be in charge of complying with the Argentina's GHG emission goals.

8. 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) and YPF SA.