Argentina candidate pledges gas price increase
Daniel Scioli, the current Buenos Aires province governor and clear frontrunner in the presidential race, unveiled the plan that unifies current subsidy schemes at a meeting with governors of oil-producing provinces ahead of the 27 October election.
"We need to give predictability, certainty, trust to motivate new investments that have an impact on many economic sectors," Scioli said last night.
Argentina?s artificially low wellhead gas prices are widely seen as one of the factors behind years of stagnant or declining production and reserves. Once a reliable regional gas exporter, Argentina has turned into a major importer of LNG and pipeline gas from Bolivia.
But Scioli is not proposing to allow the market to decide gas prices. Under the plan, to be implemented starting on 1 January 2016, producers would receive $5/mn Btu for "base gas," calculated as 2014 production with a 10pc/yr decline. Producers now receive an average of $2.5/mn Btu for existing flows. It is unclear how the $1.5bn proposal would be financed or implemented.
The plan maintains the wellhead price for new production at $7.50/mn Btu, a relic of a stimulus scheme implemented in February 2013. In a marked difference though, the compensation is considered the actual price and not a subsidy for fiscal purposes, meaning provinces will be able to levy taxes on the full amount.
The 2013 plan was meant to encourage local producers to increase output after years of decline amid tightly controlled prices. Argentina produced 117mn m3/d of gas in January-July, a 3.2pc increase from the first seven months of last year.
The agreement sealed last night is the latest sign that Scioli, representing the governing Front for Victory (FPV), plans continue the state-oriented policies of outgoing president Cristina Fernandez de Kirchner, but with some economic adjustments to stimulate the anemic economy.
In September, Scioli pledged continuity on the country's oil policies, including wellhead crude prices that far exceed current international levels, and subsidies for crude exports.
Scioli spoke last night alongside Fernandez and key members of her cabinet, including outgoing planning minister Julio de Vido and Anses pensions agency head Diego Bossio. Scioli has said Bossio would take over the influential planning ministry, which also includes the energy secretariat, if he wins the presidency.
Although Scioli holds a comfortable lead against his two main rivals, Mauricio Macri and Sergio Massa, it is not clear whether he will garner the 40pc and 10-point margin with the second placed candidate needed to avoid a run-off on 22 November.
The new president takes office on 10 December.