MercoPress. South Atlantic News Agency

Argentina unveils fiscal incentives for new oil production

Argentina launched on Wednesday a tax rebate program aimed at boosting the reserves, production and refinement of crude oil.

"The "Petroleo Plus" program is of strategic importance, not only because it concerns an important sector like energy, but also because it offers fiscal incentives for concrete results: increasing production and creating jobs" said Argentine president Cristina Fernandez de Kirchner. "This program will give companies an incentive to explore for and produce more oil to help us meet the increasing demand for energy in the country," Planning Minister Julio De Vido said in a speech at Government House. De Vido said the program will allow Argentina to boost crude oil production by 13% over the next five years. The powerful planning minister said the program will lead companies to invest 8.5 billion US dollars in the exploration and production of crude. Of that amount, around 2.1 billion will go toward improving refinement capacity and for converting fuel oil into diesel. It was not immediately clear how much of that investment has already been announced by energy companies. De Vido said the tax incentives will be granted under programs known as Petroleum Plus and Refinement Plus. "By doing this, we will be increasing the supply of energy, which will allow for greater economic activity around the country," De Vido said. Under the program, the government will compare future production and refinement levels with current levels. The greater the increase in reserves and production, the greater the tax benefits will be for companies, De Vido said, adding that companies will also be able to qualify for reduced value added and income taxes under the program. When determining which companies qualify for benefits, the government will measure future reserve and output levels and compare them with reserve and production levels from the first half of 2008. For refineries, it will measure future production levels and compare them with the most productive month from 2008. Those companies who surpass this year's levels will be eligible for the tax benefits. If they boost production enough, energy companies will be able to use the incentives to reduce export taxes. One of the first companies to announce its willingness to subscribe to the program was Argentina's No. 2 oil and gas producer, BP PLC (BP)-controlled Pan American Energy. The company said it could invest 2.5 billion USD to build a new refinery capable of processing 100,000 barrels of oil a day. PAE, which has signed a "letter of intent" with the government, is analyzing the project as part of a new tax incentive program announced earlier Wednesday. Construction of the refinery would qualify for tax rebates and other income and value-added tax incentives, according to Planning minister De Vido. De Vido, who met with PAE executives and Argentine President Cristina Fernandez de Kirchner earlier Wednesday, said the tax incentives would be part of the Petroleum Plus and Refinery Plus programs he unveiled earlier in the day. PAE accounts for 17% of the oil and 14% of the gas produced in Argentina.