Argentina to remove subsidies for local oil production -sources

Centaurus Energy

18/11/2016 19:04

BUENOS AIRES, Nov 18 (Reuters) - Argentina's government will 
eliminate subsidies to the country's oil producers in the coming 
weeks, resulting in a 25 percent to 30 percent drop in the local 
value of crude, industry sources said on Friday.   
    The price of domestic crude averages $58 per barrel because 
of the subsidy, well above international benchmark Brent crude 
 LCOc1 , which traded at around $46.56 on Friday afternoon. 
 O/R   
    The subsidy cuts are part of President Mauricio Macri's 
efforts to close a wide budget deficit. Vaca Muerta, one of the 
world's largest shale reserves at some 30,000 square km (7.4 
million acres) in southern Argentina, has attracted investment 
from Chevron Corp  CVX.N  and Exxon Mobil Corp  XOM.N  but 
remains largely unexplored.  
    Madalena Energy Inc  MVN.V , a Canadian exploration and 
production company that holds nearly 1 million acres in 
Argentina, said in a statement on Thursday that the price it 
would receive for its crude in November and December would fall 
by about 30 percent.  
    "Other producers have confirmed to the company that they 
have been similarly advised," Madalena wrote, noting that it had 
been informed of the price decrease by the refineries to which 
it delivers its oil.  
    During the third quarter, the company received an average 
price of $61.65 per barrel.   
    One government source said Macri's administration was in 
negotiations with unions, companies and governments of 
oil-producing provinces over the elimination of the subsidies, 
but the talks have not yet concluded.  
    An industry source said it was unclear if local prices would 
fall completely in line with those internationally by the end of 
the year, but they would likely move in that direction. A source 
from a different company said the subsidy cuts could prompt 
companies to revise investment decisions.  
    Madalena said it had been working on selling assets, but the 
other buyer withdrew as a result of the oil price reduction.  
 
 (Reporting by Juliana Castilla; Editing by Lisa Von Ahn) 
 ((luc.cohen@thomsonreuters.com; +54 11 4318 0645; Reuters 
Messaging: luc.cohen.thomsonreuters@reuters.net)) 
 
Keywords: ARGENTINA OIL/