The Government officialized the return of the “Creole barrel” to 45 dollars and established requirements for the producing companies

The national government made official on Tuesday the return of the so-called “Creole barrel” to $ 45, with which it seeks to support productive projects such as Vaca Muerta and the level of royalties from the provinces in the face of the severe collapse that oil registered in the international market. by the crisis that unleashed the coronavirus.

The measure was established by decree 488 published in the Official Gazette. “From the publication of this decree and until December 31, 2020, deliveries of crude oil made in the local market must be invoiced by the producing companies and paid by the refining companies and trading entities, taking as a reference for Medanito crude oil the price of 45 dollars per barrel. This price will be adjusted for each type of crude oil by quality and by loading port, using the same reference, in accordance with the usual practice in the local market, ”the text stated.

The decision was made while Brent crude that is mined in the North Sea is trading in London at $ 34.68 for July contracts in the foreign market, still well below levels that, according to industry specialists, make investment in Argentina profitable.

Regarding the latter, the Government clarified in the resolution that the Creole barrel will rule until next December 31 or until the price of Brent exceeds its value for a period of 10 consecutive days.

“During the validity of this article, the price established in the first paragraph, or the one that may eventually be set by the Application Authority in use of the powers conferred in the first paragraph of article 4 of this decree, will be applicable in all cases. of crude oil deliveries in the local market for the liquidation of the hydrocarbon royalties established in article 59 of Law N ° 17,319 ”, they remarked.

In addition, it was stressed that “the production companies must sustain the activity or production levels registered during the year 2019, taking into account the current situation of contraction of local and international demand, both for crude oil and its derivatives, as a result of the effects of the Covid-19 pandemic ”.

“Producing companies must apply the same criteria to sustain the contracts in force with regional service companies and must maintain the number of workers that they had as of December 31, 2019. This will be done within a framework of consensus with the organizations of workers and in a joint effort to achieve labor modalities that improve efficiency, technology and productivity and that are in accordance with the best national and international practices in the hydrocarbon industry, ”the decree warned.

In this sense, also the Ministry of Energy “will control that the production companies comply with the Annual Investment Plan” and “apply sanctions” if these projects are not carried out.

Another of the conditions defined is that while the Creole barrel rules, “the producing companies will not access the exchange market for the formation of external assets nor will they acquire securities in pesos for their subsequent sale in foreign currency or custody transfer abroad. “

“During the term of the measure ordered, the refining companies and trading entities must acquire the total demand for crude oil from local producing companies, considering the quality of crude oil required by the refining processes, in each case”, indicates the decree.

And he clarifies that “in the case of integrated companies, if they find it necessary to purchase crude oil over their own production and that of their partners, they will make these purchases with parameters similar to those of 2019, considering the quality of crude oil they require the refining processes in each case ”.

“During the same period, the integrated companies, the refiners and the commercial entities may not carry out import operations of products that are available for sale in the domestic market and / or for which there is effective local processing capacity”, defined in the national government.

Before the measure becomes official, some analyzes began to be carried out regarding the return of the Creole barrel to $ 45, which indicated that the measure could contribute some $ 16,345 million to the oil provinces until the end of the year, generating a monthly flow of more than the $ 2 billion for all jurisdictions.

This was calculated by the consulting firm Aerarium based on the conversations that the national government had with the provinces and with the oil companies in the face of the historic collapse of the international price of crude oil.

“Apart from the oil companies, the major beneficiaries of the measure are the producing provinces, which are benefited by the royalties collected on the value at the wellhead of the production,” said the work.

In order to assess the impact of the support price, the royalty differential was estimated by comparing the scenario with a Creole barrel (US $ 45 / bbl) against the current price (US $ 30 / bbl).

From the reference of the average production of the first quarter of each of the producing jurisdictions for the May-December period, an increase in royalties of $ 16,345.1 million would be recorded until the end of the year, with 92% of the profit concentrated in 4 jurisdictions: Chubut, Mendoza, Neuquén and Santa Cruz.

Thus, according to the Aerarium report, Neuquén would be the most benefited province with the receipt of royalties of $ 5,142.7 million for the period from May to December, that is, about $ 642.8 million per month, along with Chubutque would receive income for $ 4,938.3 until the end of the year.

The impact is reflected in a decreasing way in the rest of the producing provinces and would represent for Santa Cruz $ 2,742.7 million; Mendoza $ 2,198.6; Río Negro $ 774.6 million; La Pampa $ 254.3 million; Tierra del Fuego $ 224.7 million; It jumps $ 37.2 million and Formosa $ 31.9 million.

Although there are 9 oil-producing provinces, 86% of the production is concentrated in Patagonia, for this reason the work proposes that “the restoration of the Creole barrel represents a lifeline for the treasuries (and economic activity) of said region, taking Keep in mind that royalty income represents a fundamental source of resources for the member jurisdictions. “

In these provinces, oil royalties represent almost 70% of their source of resources, in a context in which the level of activity stagnation since last year, added to the drop in the price of oil and the impact of social isolation on own collection and transfers by co-participation constituted a strong effect on Patagonian finances.