Page 9 - LatAmOil Week 33 2019

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Under the charter contract, MODEC assumed responsibility for engineering, pro- curement, construction, mobilisation and installation work on the FPSO. It also tasked a subsidiary based in Brazil with providing main- tenance and operational services for the vessel.
Petrobras and its partners achieved rst oil at BM-S-11 in October 2014 and have continued
to use the FPSO for development work at the block ever since then. e vessel now accounts for about 4% of Brazil’s total hydrocarbon output.
e NOC has a 65% share in BM-S-11 and serves as operator of the project. e remaining equity is split between Royal Dutch Shell, with 25%, and Petrogal, with 10%.™
Argentina freezes fuel prices, shrugging off investors’ concerns
ARGENTINA’S government has announced a 90-day freeze on motor fuel prices, and the new policy could spell trouble for upstream operators.
Buenos Aires unveiled the new pricing pol- icy last week in Emergency Decree 566/2019, which was published in the Official Gazette. In the document, the government said it was capping gasoline and diesel prices at the levels recorded for August 9. It said the price ceiling would remain in place until November 15 and ordered all wholesale and retail fuel sellers to comply with the provisions of the decree. (It also excluded CNG from the freeze, saying the new policy would not a ect motor fuels derived from natural gas.)
e cap will e ect a reduction in feedstock costs for oil-processing plants. Estimates pub- lished in the Argentinian press indicate that local refinery operators will now pay a final price of $40-42 per barrel for crude, not includ- ing import tari s. Re ners had previously been buying oil at around $59 per barrel.
ese lower costs will be of some bene t to the owners of oil-processing plants. And for companies such as the national oil company (NOC) YPF with both upstream and down- stream operations, they will help compensate for the inevitable reduction in revenues from crude oil sales.
But they will hurt investors that are working exclusively on upstream projects, such as Sino- pec (China) and Vista Oil & Gas (Mexico), and companies working in the Vaca Muerta shale basin, where break-even prices now stand at around $40 per barrel. Several domestic rms, including Tecpetrol and Pluspetrol, will also suf- fer, since they have no downstream assets.
Argentina’s government imposed the price ceiling within the framework of a wider cam- paign to rein in in ation rates, which have now
topped 55%.
ese price increases, along with the Argen-
tinian peso’s recent fall against the US dollar, could undermine President Mauricio Macri’s upcoming bid for re-election. If Macri loses the vote on October 27, he will have to cede power to the same populist faction that led the govern- ment between 2003 and 2015. is shi would almost certainly dampen investors’ enthusiasm for exploration and development initiatives in the country’s Vaca Muerta shale basin, since that faction favours policies that are less friendly to business.
Oil companies have repeatedly expressed concern about the potential impact of the fuel price cap on the investment climate. Indeed, representatives of upstream operators entered into negotiations with Energy Minister Gustavo Lopetegui last week in the hope of forestalling the freeze or revising the terms of the new policy. However, their e orts were unsuccessful. ™
Norte Bonaerense
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