Oil producers reject the government subsidy proposal

August 31 2019 - 13:05

The companies rejected the proposal made by the Secretary of Energy, Gustavo Lopetegui. The
intention is to bring the value of the dollar to $ 50, instead of the $ 45 set by the freeze decree.

Gustavo Lopetegui offered the producers a subsidy. He was rejected

Gustavo Lopetegui offered the producers a subsidy. He was rejected

Déjà vu permanent. From August 12 after the electoral catastrophe suffered by Mauricio
Macri, the Government appealed to a series of measures that were not in its basic
management manual, and that brought the economy back to the past. One of them was to
freeze the price of fuels in an attempt to curb the transfer at prices of the steep post-
devaluation post-STEP.

Although in the oil and gas industry sector they agree to seek to mitigate the impact on the
final prices of fuels and the consequent transfer to all prices of the economy, they continue to
be bothered by the unseen way in which the Secretariat of Energy, led by Gustavo Lopetegui,
carried out the freezing.

This Friday the faces of the representatives of the main firms operating in the country and
Lopetegui were seen again. To the surprise of the executives, the Secretary of Energy offered
companies a subsidy to partially compensate for the freeze, by bringing the value of the dollar
to 50 pesos, instead of the 45.19 set by Decree 566.

In this regard, one of the executives who carried the singing voice was Gastón Remy, the CEO
for Argentina of Vista Oil & Gas who said: “We strictly reject the proposed subsidy offered.
Producers do not want any subsidies, and we insist that what should be done is to find a
balanced load between refiners and producers. ”

Remy's thinking is widespread within the oil and gas industry. The production companies came
with sustained projections at the Vaca Muerta site, and the change of rules now puts them in a
situation of uncertainty that even already has an impact on production levels. For the
producing companies, the freezing falls almost entirely on them, and they aim for the impact
to be distributed with the refiners.

"Given this crisis situation, what we least want is to face society as a subsidized sector, when
we have been putting the shoulder in this situation and selling the oil locally more than 25%
below its international value," said Remy in reference to the accompaniment of the producers
to avoid transferring 100% of the devaluation to prices.

For the producers, if the Government grants them the subsidy, it will leave them in the eye of
the storm, in the midst of the social mood that Argentina is experiencing due to the impact of
the crisis and the uncertainty that the country is going through after the devaluation and the
constant Central Bank reserve bleeding to try to contain dollarization.

Decree 566 published on August 16 stipulated that the sales of oil made by the producing
companies and of gasoline and diesel made by the refiners, must be made at the prices in
force as of August 9 (the Friday before PASO), and be maintained in those values for a period
of 90 days, that is until November 15.

In addition, it establishes that both producers and refiners must cover respectively the total
demand for both crude oil and liquid fuels throughout the national territory.

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