On 2 November 2017, the Ministry of Energy and Mining issued the Resolution No 419/2017 (Resolution), which amended the "Incentive Program for the Production of Non-Conventional Natural Gas" created by Resolution No 46/2017 (Program) to accelerate the development and production of natural gas from non-conventional reservoirs in the Neuquina Basin (Concessions).
The Program will have the following characteristics after the amendments made by the Resolution:
1. Beneficiaries: Companies holding Concessions that (i) decide to accelerate the passage from the pilot stage (production less than 500,000 m3 per day) to the development stage (production greater than or equal to 500,000 m3 per day); and (ii) being in the development stage, decided to increase their production. The Program will consider the average monthly production calculated between July 2016 and June 2017 to determine the level of production.
2. Incentive: Minimum price of: (i) USD 7.50/MMBTU for calendar year 2018; (ii) USD 7.00/MMBTU for the calendar year 2019; (iii) USD 6.50/MMBTU for calendar year 2020; and (iv) USD 6.00/MMBTU for the calendar year 2021 calendar year (Minimum Price).
3 Calculation of the Incentive: The Secretariat of Hydrocarbons Resources (Secretariat) will pay a monthly compensation when the average sale price of natural gas in the country published by the Secretariat is lower than the Minimum Price. This compensation will be multiplied by the production included in the Program (which in the pilot stage will include all the production and in the development stage will include the increasing production). The compensation will be distributed between the company (88%) and the province where the Concession is located (12%).
4. Payment of the Compensation: The Secretariat will pay the compensation through a provisional payment of the 85% of its amount according to the companies and the Secretariat’s projections. This will be adjusted according to the affidavit to be submitted by the company (between the amount of the provisional payment and the final amount declared by the company). Payments will be cancelled in Argentine pesos according to the exchange rate of the Banco de la Nación Argentina on the last business day of the corresponding month.