On August 21st, 2019, Disposition No. 168/2019 issued by the Under-Secretary of Hydrocarbons (the “Disposition” and the “Undersecretary”), which depends of the Ministry of Treasury, has been published in the Official Gazette. The Disposition has:

  1. Approved the terms and conditions applicable for gas exports on a firm basis to Chile (the “Regime”);
  2. Established that the Regime will be applicable for exports comprised within September 15th, 2019-March 15th, 2020 (the “Exports Period”);
  3. Determined a maximum capacity of ten million cubic meters (10,000,000 m3/d) for daily exports under the Regime; and
  4. Foreseen the Republic of Chile as destination of natural gas exports under the Regime, framed within the Economic Complementation Agreement executed between Argentina and Chile.

The Disposition has been issued within the framework of: (i) Resolution No. 104/2018 (“Resolution 104”) issued by the former Ministry of Energy, which foreseen the so-called “Authorization Procedure for Natural Gas Exports”, and (ii) Resolution No. 417/2019 (“Resolution 417”) issued by the Secretary of Governmental Energy (the “SGE”).

Resolution 417 defined the export methods available and in turn further delegated in the Undersecretary the implementation of the Energy Substitution Mechanism applicable to natural gas exports on a firm basis.

Since the issuance of the Disposition, applicants willing to export gas under the Regime shall comply with the provisions set forth in Resolutions 104 and 417, and the Disposition, which most relevant aspects are outlined below.

Moreover, the Disposition also contains the necessary guidelines for the Energy Substitution Mechanisms applicable to exports under the Regime.

Finally, the Disposition establishes September 6th, 2019 as deadline for submission of applications.

  1. Scope

As indicated before, the Disposition approves the natural gas exports on a firm basis procedure, for the Exports Period, to the Republic of Chile.

  1. Available volumes to export scheduled by exploitation zone
Zones Available Volume Export Pipeline
Northwest 1 MMm3/d Norandino and Atacama
Central – west 6,5 MMm3/d GasAndes and Pacífico
South 2,5 MMm3/d Methanex
  1. Applicable procedure

The authorization for gas export will be granted by the Undersecretary which shall analyze whether the applicants comply with the requirements established in the Disposition and Resolutions No. 104 and 417. For those purposes, applicants must verify all requirements mandated in the aforementioned regulations and the procedure established in the annex attached to the Disposition.

Should the applicant already have a prior authorization for the Exports Period but not on a firm basis, such authorization may be converted into a firm one, either partially or totally.

The application must be submitted through an online platform named “Plataforma de Trámites a Distancia” (TAD) and comply with the following requirements:

(i) File a summary of the envisaged operation which includes: (a) the source and destination of the exported gas; (b) daily and total, maximum and scheduled volume quantities; (c) projected price in the node on which the gas is delivered into the transportation grid and adjustment formula, if applicable; (d) tenor of the exports; (e) export nodes on which the gas will be exported outside Argentina into Chile; (f) price of gas at such locations; (g) final destination of the exported gas;

(ii) Indicate whether the exported gas will be allocated to residential, industrial or electricity generation purposes; and

(iii) File an affidavit of both the selling and gas off-taker regarding the use of gas exported.

  1. Application deadline

The deadline to submit any application for exports under the Regime expires on September 6th, 2019, 16:00 hours (Buenos Aires time).

  1. Assessment and award

Applications will be analyzed by the Undersecretary. For those purposes, the Undersecretary will consider the provisions foreseen in Resolution No. 104 (supply and gas demand; gas production; transportation) and such assessment will be carried out in accordance with Sub-Annex B of the Disposition.

Said Sub-Annex B establishes that the award of export volumes will be divided by zone, in accordance with a performance index for each applicant and its application, integrated with (i) historic production performance; (ii) historic export performance; (iii) current performance and, (iv) tenor of the required exports.

This performance index will act as ordinating factor upon which the applicants will be organized decreasingly in accordance with their obtained score (“Initial Share”).

Further, each one will be assigned with the minimum between the Initial Share and the maximum daily required capacity, except that such minimum volume falls below the minimum value applied (CMO), which determines no volume assignation.

If further to such allocation, there is still remaining volume to be assigned, the surplus will be distributed in decreasing order.

  1. Energy Substitution Mechanism

If the Wholesale Electricity Market (“WEM”) demands a larger amount of imported natural gas, GNL, carbon, fuel oil and/or gasoil, and such incremental amount is borne by the Federal State, the Energy Substitution Mechanism provided in the Disposition shall apply, which considers the following:

  • Exporters must bear incremental amounts faced by the Federal State as described above.
  • Such compensation fee will be determined by CAMMESA once the period of application has elapsed.
  • The maximum value of such compensation nominated in US Dollars per million BTU (USD/MMBTU) will be established by the SGE.
  1. Other relevant aspects
  • The authorization cannot be assigned nor transferred by the applicant.
  • If the assigned volumes cannot be achieved, the exporter must inform such circumstance to the Under-Secretary which shall thereafter inform former applicants not awarded with an authorization of this nature for purposes of reallocation.
  • If such obligation is not upheld by the exporter, the Regime stipulates a penalization in an amount equal to those volumes not subject to export. Failure to pay this penalty prevents the penalized party to request further authorizations during a 24-month term.

At TRS&M we are available to provide clarifications or further information of any matter addressed above. If you need any assistance, please do not hesitate to contact either Nicolás Eliaschev or Javier Constanzó.