Following yesterday’s decree on the opening of Argentina’s offshore bid round, Will Scargill, Senior Oil & Gas Analyst at GlobalData, offers his view on the opportunity.
‘‘The terms announced for Argentina’s offshore round are some of the most attractive available in the region. A 5% initial royalty rate combined with the recent corporate tax rate reduction significantly improve the regime’s competitiveness.”
‘‘The government will hope that their improved fiscal terms and positive investment climate can attract new exploration through the round, which offers 38 blocks in the country’s largely unexplored offshore. Notably, the regime offers lower levels of state take than key offshore areas such as Brazil, Guyana and the US Deepwater Gulf of Mexico. The terms are also relatively competitive compared to those offered in the Falkland Islands.”
‘‘Under the terms announced for the round, production will benefit from a reduced royalty rate of 5% until cumulative revenues exceed cumulative costs by 10%. The royalty rate will then gradually increase to the standard rate of 12% as profitability increases. Argentina’s corporate tax rate was also cut from 35% to 30% for 2018 and 2019, and will reduce further to 25% from 2020. These measures build on previous moves by the Macri government to improve investor confidence, including the liberalization of oil and gas pricing.’’