The proposals made by Javier Milei to liberalize Argentina’s oil markets are being scaled down as the newly elected president engages in discussions with a Congress controlled by the opposition, aiming to implement broad deregulation measures for the country’s economy.
The subject under discussion is the capacity of the Argentine government to prevent oil drillers from exporting shipments of crude oil if there is a concern about limited supply at local refineries.
This practice, known as the right of first refusal, has been in place in Argentina for a long time, and multinational oil companies such as Chevron Corp and Shell Plc have opposed it.
However, the most recent version of Milei’s influential deregulation bill changes its stance and no longer removes the practice, but instead permits it to continue.
The request for comment was not immediately responded to by the Energy Secretariat.
However, the producers’ intentions of increasing drilling in Argentina’s prestigious Vaca Muerta shale region may be hindered by the right to first refusal. This is because the risk of an export shipment being prevented creates a challenge in securing contracts with international purchasers.
Milei has granted permission for Argentina’s fuel manufacturers to increase the prices of gasoline.
This enables them to spend more on crude oil and reduces the motivation for oil producers to sell their oil internationally.
As a result, this is already assisting in maintaining a equilibrium between exporting and selling oil domestically, as confirmed by a knowledgeable trader.
In order to pass the legislation, Milei has made several compromises, such as delaying the privatization of YPF SA, which is Argentina’s largest oil and gas company and leading the development of the Vaca Muerta project.
Last year, the exportation of light Medanito crude that was produced in Vaca Muerta increased significantly by 39 percent, reaching over 100,000 barrels. This accounted for a majority of 72 percent of all oil shipments from Argentina.
