WEBCAST KPMG LATAM Energy Institute Energy Forum of KPMG ...€¦ · KPMG LATAM Energy Institute &...
Transcript of WEBCAST KPMG LATAM Energy Institute Energy Forum of KPMG ...€¦ · KPMG LATAM Energy Institute &...
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WEBCASTKPMG LATAM Energy Institute&Energy Forum of KPMG Argentina
October 29th - 2014
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Agenda
• Introduction and Speakers
• Opportunities in unconventional hydrocarbons: Vaca Muerta
• Risk management in the negotiation of drilling and other Oil & Gas
service contracts
• Negotiation of payment terms in a regulated exchange control
environment
• Customs benefits, regulations & restrictions for the import of equipment
in the current environment
• Setting up a regime for the promotion of investments in the exploitation
of hydrocarbons
• Foreigners working in Argentina
• Questions & Answers
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Néstor García
Moderator Lead Partner, Energy
and Natural Resources KPMG Argentina
Speaking with you today…
Juan Martín Jovanovich
Partner, Trade & Custom KPMG Argentina
Adriana Laurino
Partner, International Executive Services KPMG Argentina
Mario Pallaoro
Partner, Legal Services KPMG Argentina
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Agenda
• Introduction and Speakers
• Opportunities in unconventional hydrocarbons: Vaca Muerta
• Risk management in the negotiation of drilling and other Oil & Gas
service contracts
• Negotiation of payment terms in a regulated exchange control
environment
• Customs benefits, regulations & restrictions for the import of equipment
in the current environment
• Setting up a regime for the promotion of investments in the exploitation
of hydrocarbons
• Foreigners working in Argentina
• Questions & Answers
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Introduction
Vaca Muerta-Molles
Austral-Magalla
nes
Chaco-Paraná
Golfo San
Jorge
Chart 1: Shale Oil & Gas main formations
Source: Energy Information Administration (EIA)
Chart 2
Chart 3
TOP 10 COUNTRIES WITH TECHNICALLYRECOVERABLE SHALE GAS RESOURCES
Rank Country Shale gas (trillion cubic meters)
1 China 31.62 Argentina 22.73 Algeria 204 US 18.85 Canada 16.26 Mexico 15.47 Australia 12.48 South Africa 119 Russia 8.1
10 Brazil 6.9
TOP 10 COUNTRIES WITH TECHNICALLYRECOVERABLE SHALE OIL RESOURCES
Rank Country Shale oil (billion barrels)
1 Russia 752 US 533 China 324 Argentina 275 Libya 256 Australia 187 Venezuela 138 Mexico 139 Pakistan 9
10 Canada 9
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Source: Instituto Argentino del Petróleo y del Gas (IAPG)
Source: Banco Central República Argentina (BCRA) Source: Instituto Argentino del Petróleo y del Gas (IAPG)
year
year
I. Current situation in the energy sector
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Source: Economic study on conventional resources, shale oil and shale gas in Argentina: Current situation and prospects. KPMG Argentina.
II. Opportunities
Chart 4Type Basin Formation
Billions of
barrelsBillions of
cubic meters TCF Factor
Billions of
barrels
Billions of cubic meters TCF Factor
Billions of
barrels
Billions of cubic meters TCF
Neuquén Vaca Muerta 30.770 1.140 27.0% 8.308 308 6.5% 2.000 74
Neuquén Molles 28.198 1.044 27.0% 7.433 275 6.5% 1.833 68
Chubut San Jorge 11.826 438 20.0% 2.365 88 6.5% 769 28
Tierra del Fuego Austral – Magallanes
16.362 606 21.0% 3.436 127 6.5% 1.064 39
Chaco Paraná - Chaco 432 16 20.0% 86 3 6.5% 28 1 Total 87.588 3.244 21.628 801 5.694 210
Neuquén Vaca Muerta 265.00 42.00 1.60 6.0% 16.00 2.50 0.09 6.0% 16.00 2.50 0.09
Neuquén Molles 66.00 11.00 0.40 6.0% 4.00 0.60 0.02 6.0% 4.00 0.60 0.02
Chubut San Jorge 17.00 3.00 0.10 3.0% 0.50 0.10 0 3.0% 0.50 0.10 0.00
Tierra del Fuego Austral – Magallanes
131.00 21.00 0.80 5.0% 6.60 1.00 0.04 5.0% 7.00 1.00 0.04
Chaco Paraná - Chaco 0.30 0.05 0.00 3.0% 0.01 0.00 0 3.0% 0.01 0.00 0.00Total 479.30 77.05 2.90 27.11 4.20 0.15 27.51 4.20 0.15
Shale Oil
Shale estimate Standard Recovery Conservative Recovery
Shale Gas
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Foreign companies investing in shale
Source: Market information
III. Announced investment plans
Chart 5
E: Expected
YPF – Chevron agreement
Stage Period Drilled wells Investment (USD)
Exploration 2013 - 2014 161 1.26 billionProduction 2014 170 E 1.60 billion EProduction total 2014 - 1,500 E 15 billion E
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Energy demand (Argentina)
86% of the energy matrix of the country corresponds to hydrocarbons
Renewable9%
Oil35.03%
Natural gas51.62%
Coal1.5%
Nuclear 3%
Graph 5
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Agenda
• Introduction and Speakers
• Opportunities in unconventional hydrocarbons: Vaca Muerta
• Risk management in the negotiation of drilling and other Oil & Gas
service contracts
• Negotiation of payment terms in a regulated exchange control
environment
• Customs benefits, regulations & restrictions for the import of equipment
in the current environment
• Setting up a regime for the promotion of investments in the exploitation
of hydrocarbons
• Foreigners working in Argentina
• Questions & Answers
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Keys on contractual matters
Keys on contractual mattersfrom a legal perspective
Willful conduct and gross negligence
Applicable rules related to the payment in foreign currency
Restrictions on payments abroad. Payment in sovereign bonds as a
contractual alternative
Applicable Law. Jurisdiction
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Keys on contractual matters
Willful misconduct and gross negligence
• Concept.
• Specific contractual provisions concerningrelease of liability in case of(according to the Argentine National
Civil Code, scholars and case law)
• New Argentine Civil and Commercial Code (which will be in force and effect as fromJanuary, 2016).
• Appropriate insurance coverage.
willful misconduct
gross negligence
forbidden
could be challenged
in court
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Keys on contractual matters
Applicable rules related to the payment in foreign currency
• Argentine National Civil Code parties are allowed to agree the payment of theirobligations in foreign currency and the debtor discharges the obligation by delivering thetype of currency specified the day on which the obligation matures.
• New Argentine Civil and Commercial Code (which will be in force and effect as fromJanuary, 2016) parties are allowed to agree the payment of their obligations in foreigncurrency. Such obligation shall be considered as an obligation to give certain amount ofthings. The debtor may be released by giving the equivalent amount in legal tender.
• Current uncertain situation due to the restrictions for the purchase of foreigncurrency, the companies are adopting alternative payment methods (for example, stock-exchange transactions).
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Keys on contractual matters
Restrictions on payments abroad. Payment in sovereign bonds as a contractualalternative
• Argentine Republic has been imposing tight controls on its foreign exchange marketsince 2009. Such controls are still in full force and effect.
• Companies are not being allowed to make payments abroad to related parties andpayments to non-related parties are very limited.
• The big challenge among the parties to an agreement consists in the negotiation on thepayment conditions.
• Alternative payment methods stock-exchange transactions (for example, payment inArgentine sovereign bonds). Certain BCRA requirements must be taken into account inorder to avoid any violation with the foreign exchange control regime.
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Keys on contractual matters
Applicable Law. Jurisdiction
• Argentine National Civil Codeaccepts
• A link between the applicable foreign law and the purpose of the relevant contracts, itsparties, etc. must exist. Otherwise, it could be challenged in court.
• New Argentine Civil and Commercial Code seems to be more open to this kind ofprovisions for comercial agreements.
• Arbitration provisions (to be incorporated in the relevant agreements) arerecommended.
the subsmission of contracts to the laws of a foreign jurisdiction.
the extension of the jurisdiction in favor ofa foreign venue or arbitrators (providedthat no public order rule is affected).
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Agenda
• Introduction and Speakers
• Opportunities in unconventional hydrocarbons: Vaca Muerta
• Risk management in the negotiation of drilling and other Oil & Gas
service contracts
• Negotiation of payment terms in a regulated exchange control
environment
• Customs benefits, regulations & restrictions for the import of equipment
in the current environment
• Setting up a regime for the promotion of investments in the exploitation
of hydrocarbons
• Foreigners working in Argentina
• Questions & Answers
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Restrictions on imports
Anticipated Import Sworn Statement (DJAI)• Non-automatic import licensing procedure• Authorization of the Secretary of Commerce• WTO Panel against Argentina
De facto restrictions• Severe limitations to the access to foreign currency to pay imports• Sale of USD 150k per day to pay imports• No written regulation. Pressure of the Central Bank on Commercial Banks
Restrictions to the importation of used capital assets• Refurbishment by the original OEM• Certificate of Refurbishment• Certificate of importation of used goods must be issued by Ministry of Industry and Secretary of
Foreign Trade.
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Other Restrictions: Dividends, Royalties and Service Fees
Dividends• De facto limitations to purchase foreign currency• Pressure of the Central Bank on Commercial Banks
Royalties and service fees• Regulatory restriction to sell foreign currency to pay intercompany royalties and service fee for more
tan USD 100k.• Prior approval of the Central Bank
Virtually double exchange rate system• Official exchange rate: 8.40 pesos per dollar• Implicit exchange rate in transactions with sovereign bonds: 14 pesos per dollar.• Bonds and securities quoted both in pesos and dollars in Argentina and in foreign stock markets• Certain regulatory conditions must be met
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Exports of Oil and Gas
Distortions in the currency exchange market• Obligation to bring foreign currency collected from exports into Argentina• Obligation to sell such currency at the oficial exchange rate (8.40 pesos)• Limitations to purchase foreign currency to pay dividends• Access to foreign currency at the implicit exchange rate (14 pesos)
High export duty rates on the export of oil and gas
Regulatory incentives to the production and export of oil and gas
Requirements• Registration in the National Registry of Hydrocarbon Activities• Submission of Investment Project
– Requires disbursement of not less than 1 billion dollars (draft legislation more flexible)– Disbursement must be made during first five years
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Regulatory incentives to the production and exportation of oil and gas
Benefits are two-fold• As of fifth year, right to export 20% of production with 0% export duty rate and without obligation
to repatriate foreign currency.• If national production is not enough to cover domestic needs, right to sell 20% of the production
at reference export price and priority right to have access to foreign currency.
Draft legislation will modify the current hydrocarbons regime
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Agenda
• Introduction and Speakers
• Opportunities in unconventional hydrocarbons: Vaca Muerta
• Risk management in the negotiation of drilling and other Oil & Gas
service contracts
• Negotiation of payment terms in a regulated exchange control
environment
• Customs benefits, regulations & restrictions for the import of equipment
in the current environment
• Setting up a regime for the promotion of investments in the exploitation
of hydrocarbons
• Foreigners working in Argentina
• Questions & Answers
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Migration aspects
• Identifying the proper type of residence.• The development of any activity other than tourism requires authorization from
migration authorities (Dirección Nacional de Migraciones).• Each type of residence addresses different needs and personal situations;
therefore a case by case analysis is required. • Knowing exactly what to do in each situation will save time, efforts and money.
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Social security exemptions
• Social security costs in Argentina are among the highest in the Latam region.• Identifying exemptions will entail relevant savings in the costs of the project.• Evaluation of totalization agreements.• Evaluation of exemptions under domestic legislation.
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Payment of compensation
• Need for a mechanism to make payments outside Argentina. • Argentine bank account with unrestricted funds held abroad. The costs are borne by
Argentina. • The home country pays the compensation and bears the costs (no chargeback).
Such costs may be regarded as a non deductible expense in the home location.
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Agenda
• Introduction and Speakers
• Opportunities in unconventional hydrocarbons: Vaca Muerta
• Risk management in the negotiation of drilling and other Oil & Gas
service contracts
• Negotiation of payment terms in a regulated exchange control
environment
• Customs benefits, regulations & restrictions for the import of equipment
in the current environment
• Setting up a regime for the promotion of investments in the exploitation
of hydrocarbons
• Foreigners working in Argentina
• Questions & Answers
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www.kpmg.com/energylatam [email protected]
Nestor GarciaENR Leader for [email protected]
Daniel TrigoInstitute Manager+55 (21) [email protected]
Martiniano LopesENR Leader for Latin America+55 (11) [email protected]