Implementation of the Access to Hard Currency for Hydrocarbon Producers

The Executive Branch –through Decree No. 484/2022, published in the Official Gazette on August 16, 2022– regulated the Hard Currency Regime for Incremental Oil and Gas Production (RADPIP and RADPIGN, respectively), created through Emergency Decree No. 277/2022 (Decree 277).

 

(For further information on the beneficiaries, requirements, and scope of the regime, please see our article Access to Hard Currency Regime for Hydrocarbons Producers Increasing their Production.)

 

 

Although Decree 484 regulates several aspects of the RADPIP and RADPIGN, which were added to the provisions of Decree 277 that had created them, it also delegates powers to the Secretariat of Energy (SE) and the Argentine Central Bank (BCRA) to create the remaining regulations within the framework of their relevant powers.

 

The main aspects regulated by Decree 484 are:

 

• Beneficiary companies can file their requests jointly with other legal entities, which will be considered “third-party associates” (whose inclusion criteria in this category will be established by the SE), and will be able to access the benefit if they meet the requirements and show proof of a contractual relationship for a term longer than a year and with a minimum investment of USD 50 million.

 

• Beneficiaries may request to be granted the benefits as from the third quarter of 2022. This request must be filed within 15 business days as from the end of each quarter, and the procedure for granting the benefits must close within a term of up to 90 calendar days as from the closing of the relevant quarter for which the benefits are requested. If the requirements are met, the SE will issue a certificate that will be notified to the beneficiary, the Argentine Tax Authority (AFIP), and the BCRA.

 

• Decree 484 defines certain technical parameters and calculation formulas for aspects determining access to the benefit for both regimes and, if applicable, the increase of the initial percentage of 20% or 30% (depending on whether RADPIP or RADPIGN, respectively, are applicable). These parameters include: baseline, quarterly incremental production, coverage of domestic crude oil market, reversal of adjusted technical decline, inactive or closed well, low productivity well, regional companies, national companies, national content, direct and indirect hard currency, among other definitions of relevant terms used to calculate the amount of the benefit.

 

 

• Direct suppliers of the beneficiaries are defined as “those legal entities that provide special services aimed at hydrocarbon production, including fracking services, drilling of wells, tower equipment, and those which the Enforcement Authority [i.e., SE] defines as special services”. Decree 484 also states that if the beneficiary wishes to transfer the benefits to its direct suppliers, it should request the transfer of the benefit for a specific amount, specifying the services provided, the terms of the commercial relationship, and the type of contract. Direct suppliers may file a plan for imports substitution and these efforts will be considered when evaluating the suppliers’ requests for imports.

 

 

• Decree 484 regulates aspects related to the regional and national suppliers’ development plans to be submitted by the beneficiaries, as well as details of the process for their approval and follow-up by the SE.

 

 

• The calculation in favor and the discount in the access to hard currency will be applicable when the access to the foreign exchange market in relation to RADPIP and RADPIGN, respectively, is effectively carried out.

 

• Beneficiaries, third party associates, and/or direct suppliers that have obtained the right to access the foreign exchange market through such regimes must inform the BCRA and the SE the destination allocated to the hard currency at the time of exercising the right, following the procedure established by these agencies.

 

• The benefits obtained will have no expiration date and can be accumulated to exercise the effective access to the foreign exchange market.

 

Decree 484 states that, for the purposes of the regimes and benefits of RADPIP and RADPIGN, every time the interested parties request the benefits, they must expressly waive the right to initiate administrative and/or judicial actions against the Federal State in relation to any aspect regarding the Gas Plan, with the rounds carried out to award volumes and with the export authorizations granted within the framework of Decree No. 892/20 and supplementary legislation. They must also desist from any claim initiated in connection with such aspects prior to the issuance of Decree 484. Implementation of the waiver will be determined by the SE. 

 

Decree 484 also instructs the Argentine Tax Authority (AFIP) and the National Gas Regulatory Entity (ENARGAS) to provide the necessary means to guarantee the necessary information to verify the truthfulness of the sworn statements submitted by the beneficiaries to access the regime. In addition, it provides for the exchange of information between the AFIP and the BCRA regarding access to hard currency, to verify compliance with the requirements of the regime.

 

The SE and the BCRA are expected to issue regulations and implement the corresponding measures to implement the access to the benefits.