Setting the local crude oil price: the “criollo barrel”.
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Oil & Gas Department Report | Setting the local crude oil price: the “criollo barrel”
Dear Sir or Madam,
The Executive Decree No. 488/2020, published today in the Official Gazette (the “Executive Decree”), fixed the crude oil price for the domestic market at US$45 per barrel for “Medanito” crude oil. This price shall be taken as a reference and will be adjusted according to the type of crude oil. This price reference will be maintained from May 19 to December 31, 2020, unless the “ICE BRENT FIRST LINE” rises to US$45 per barrel and remains at or above such a value for 10 consecutive days, in which case said price reference will be eliminated, and the interaction between supply and demand will set the new price.
Furthermore, the Executive Decree requires production companies to maintain: (i) the activity and/or production levels recorded during 2019; (ii) the contracts currently in force with the regional services companies; (iii) the workforce that they had as of December 31, 2019, and (iv) their investment plans.
During the term of the Executive Decree, the production companies will not be allowed to access to the local exchange market for the formation of external assets or to acquire securities denominated in Argentine Pesos to purchase foreign currency or transfer the custody of said securities abroad.
On the other hand, oil refineries and traders shall acquire their total demand for crude oil from local production companies. The Executive Decree also prohibited the imports of products that are available for sale in the domestic market and/or for which a local processing capacity exists.
Finally, the Executive Decree set forth new export duties for naphtha, diesel and other oil derivatives, which range between 0% and 8% based on the international price of crude oil. In addition, Executive Decree updated the amount of the penalties imposed by Section 87 of Law No. 17,319, which now ranges from a minimum to a maximum equivalent to the value of 22 m³ and 2,200 m³ of the national crude oil in the market.
Should you require any further information on this matter, please do not hesitate to contact us.
Sincerely,
Roberto A. Fortunati
José Carlos Cueva
Lucila Parodi
Gonzalo A. Viña