Thu. Apr 25th, 2019

Argentina rejects a claim by oil company Tecpetrol for subsidies

Argentina rejects a claim by oil company Tecpetrol for subsidies



Argentina rejected an administrative claim filed by oil company Tecpetrol, a member of the Argentine group Techint, for supposedly unpaid subsidies from the state in relation to the company's activities in the formation of unconventional hydrocarbons Vaca Muerta.

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"It is not appropriate to pay subsidies above the volume reported and approved," the Argentine Ministry of Finance said in a statement Monday.

According to the Argentine Government, the "intended by Tecpetrol", the "double of what has been approved", is "unreasonable and would constitute an abuse of right".

The controversy originates from the oil company's accession to the Investment Stimulus Program, created by the Government in March 2017 to accelerate gas investments in Vaca Muerta, the gigantic formation of unconventional hydrocarbons in southwestern Argentina.

In that same month, not yet being part of the program, Tecpetrol then announced a development plan for the Fortín de Piedra area, with an investment of 2,300 million dollars until 2019, projecting a production of natural gas 10 million cubic meters per day .

Five months later, in August 2017, the oil company requested to join the Program with a smaller investment plan, for 1,723 million dollars until 2021 and with a maximum production of 8.5 million cubic meters per day by April 2019 .

As the official statement recalls, in September 2017, the company made "numerous public statements" in which it is clear that it planned to produce more than 15 million cubic meters per day by the end of 2018, with greater investments than reported to the State.

"These greater investments are also reflected in the prospectuses of issuing titles of the firm of the time," noted the Ministry of Finance.

In November 2017, the company's adhesion to the Program was approved based on the information provided by the company to the Government.

According to the statement, it was established that, if the project was successful, the State would pay a subsidy equivalent to 37% of the committed investment, with a fiscal cost of 729 million dollars.

In April 2018, Tecpetrol informed the authorities that it would double its production with respect to the approved curve, but, according to the Executive, this new production plan was never approved by the Government.

According to the statement, if the request were made, the subsidy to be paid would represent 74% of the committed investment, with a fiscal cost of 1,446 million dollars.

The Executive considered that the amount of the subsidy to pay can not be subject to the "arbitrary" of the company, "especially when the information provided to the State when requesting approval was inaccurate, and when the company had the obligation to present complete, accurate information and updated and immediately communicate any news that will significantly affect the project. "

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