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Interview

Eduardo Raúl Costa – National deputy of Santa Cruz & Vice President, Energy Commission, Argentina

Eduardo Raúl Costa, national deputy of the province of Santa Cruz and VP of the Energy Commission of the Deputy Chamber, discusses the evolution of  energy policy in Argentina, attracting investment to unlock the nation’s energy potential, and the role of Santa Cruz as the second largest oil province producer of the country.

Could you introduce the main activities and responsibilities of the Energy Commission to our international readers ?

The creation of a specific Ministry of Energy, led by a minister with wide experience in the industry, demonstrates the strong commitment of the executive power to finding a solution to the current energy crisis in Argentina.

The legislative system of Argentina is bicameral with one commission in the Deputy Chamber and a counterpart in the Senate Chamber. Therefore, all political projects require the approval of both chambers before implementation.

In concrete terms, the responsibility of the Energy Commission is to rule everything related to the utilization, organization, procurement and promotion of energy sources such as oil, gas, and renewable energies such as hydroelectric, wind, solar, and other alternative sources that could be developed in the future.

Currently, the activities of the commission are tailored to the regularization of the production of shale in Argentina and better alignment between provincial and national because, since the constitution modification of 1994, the resources of the land have been owned by the provinces and local energetic regulatory frames not aligned to the national interests have started to appear since then.

One of the first things that President Macri did when he got elected in December 2015 was create the Ministry of Energy; how has it been perceived by the oil and gas industry and how has it affected the commission’s responsibilities?

In my opinion, the creation of a specific ministry for the energy industry has been a wise decision regarding the current energy crisis of Argentina. Argentina lost its energy self-sufficiency in 2011 and in 2014 we had to import around USD 9 billion of oil and gas. The creation of a specific Ministry of Energy, led by a minister with wide experience in the industry, demonstrates the strong commitment of the executive power to finding a solution to the current energy crisis in Argentina.

Since the election of Juan Jose Aranguren as the minister of energy, there have been some important advancements towards the solution of the energy challenges through corrections to the relative prices and regulating the legislative frame of renewable energies, among others. The energy industry is a cornerstone in the national economic development and, therefore, the minister of energy is advancing successfully undertaking difficult and sensitive decisions.

Thanks to the creation of this new political structure, the communication between the commission and the ministry is more intense and dynamic than before and as a consequence there have been significant improvements in the process of energy regulation.

How would you describe the collaboration and the interaction between the different commission members regarding the diversity of political orientation?

The president of the commission is elected by the congress and he is the responsible to establish the policies creation pace according to the different minorities represented in the commission. Currently, the president of the Energy Commission of the Deputy Chamber is the one who was in charge of the design and implementation of all the energy policies during the former mandate.

In addition, the members of the commission were re-elected two months ago and there is a high diversity among the different constituents. As a consequence, we are still looking for the common topics in order to advance towards the same direction.

It is worth considering that during the former mandate, the majority of the commission members were also supporters of the political party that was in executive power, minimizing the participation of the rest of the minorities in energy policy. However, this situation has changed and now we have a new president in executive power and a commission with more political diversity and higher capacity for action.

The commission has approximately 22 ongoing projects in its pipeline, nearly half of which are tailored to green energies with the other half tailored to the regulation of energy tariffs and subsidies. Could you explain the current projects of the commission to our international readers in more detail?

Currently, the projects that are being run by the commission are more focused on the form rather than the content of the Renewable Energy law approved in 2015. In comparison to how things were done in the past, the current government is taking into consideration the experts of the industry to adjust and modify the law and the Energy Commission is working towards the legislative improvement through the modification of the technique and business requirements.

As an example of this process, when the Renewable Energy law was decreed, the government obliged the big consumers and the Argentinian industry to consume a high percentage of renewable energy. Nevertheless, there was not enough renewable energy production to supply the demand imposed by the government making its implementation impossible.

There is still a long way to go in order to align the Argentinian energy industry with the nation’s needs. In this regard, there are other laws that are being launched in order to regulate private investments in infrastructure area.

As national deputy of the Santa Cruz province and knowing that your province is one of the biggest contributors to the national GDP, how do you represent the interests of your province?

The misalignment between the provinces and the country started to appear after the modification of the Argentinian constitution in 1994. Due to the fact that the provinces are the owners of their land resources, they designed their own energy regulatory framework creating differences between the different provinces.

However, the new hydrocarbon law created a common frame that has to be respected by all the provinces in order to solve the inequalities among the Argentinian territory. As a consequence of the specific regulatory frames of each territory, the debate and defense around the energy interests are carried out in each province rather than in the Congress.

What are the main energy interests of the province of Santa Cruz?

The province of Santa Cruz is the second largest oil producing province in Argentina thanks to the San Jorge’s gulf basin located in the north and Austral basin located in the south of the province. Nevertheless, as a consequence of bad management decisions in the past, the potential of both basins is not being exploited with 30 percent and 80 percent of the land of San Jorge’s gulf and Austral basins respectively lying unproductive. This entire situation must be considered a national energy crisis where the country had to import the energy resources from other countries such as Bolivia or Chile.

The province’s government, under its specific regulatory frame, tendered in the past the land using different criteria than the one established by the central government. The three national guidelines to tender the land were a minimum investment of USD 10 million, 12 percent of royalties, and the origin of the company. However, Santa Cruz gave more importance to the third criteria giving the land to those companies that were local and refusing other offers that would have reported more wealth to the region.

As a consequence, a businessman linked to the provincial government acquired the unproductive land of both basins and has never had to comply with the investment commitments needed to exploit those terrains.

What investments have been made in the province of Santa Cruz to foster its energy production?

The main strength of Santa Cruz is the land resources that it has under its domain. Indeed, the biggest basin that YPF has is in the San Jorge’s gulf basin, which represents around 80 percent of the total oil province production. Recently, an investment of USD 165 million has been signed between YPF and Enap in order to build offshore sites in the Austral basin, the so called Incremental Project of Magallanes Area (PIAM).

I am proud to say that there has been some advancement towards investment entrance facilitation through adjustments in the national and provincial regulatory frame, the elimination of the exchange block and the stabilization of the relative prices. In addition, it has carried out several exploration activities in order to identify those areas with oil and gas production potential and 70 percent of those have had satisfactory results.

The international perspective of Argentina has positively changed in the last few years as a consequence of the change of government and the discovery of non-conventional basins, among other reasons. To what extent is this international perspective real regarding the current situation of the country?

The local perspective has also positively changed as a consequence of macro-economic advancements, the discovery of shale and the improvement of legal stability. There are investment opportunities in the country and in the province and the government is working towards the attraction of investments in order to take advantage and exploit those opportunities.

In addition, the Argentinian business community is well prepared in terms of knowledge in order to take advantage of national natural resources. The big challenge is that the government, the companies and the unions should work together towards attracting investments in order to exploit these business opportunities and create new jobs.

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