Argentina's Congress OKs Oil Exploration Incentives Bill

BUENOS AIRES Sep 14, 2006 (Dow Jones Newswires)

Argentina's lower house Wednesday night approved a long-awaited incentives package aimed at reviving oil and gas exploration that has been largely dormant since the 1990s.

The measure passed 121-74, with one abstention, and now heads to the Senate for approval.

Planning Minister Julio De Vido first promised the incentives bill in May 2005, but it made little initial progress in the legislature.

Among incentives, the measure aims to provide value-added tax breaks on exploration and production expenses. The bill requires companies to form associations with Argentina's state-run oil firm, Enarsa, however.

It is unlikely that the measure will excite oil company officials, who would prefer a reduction in the government's heavy oil export tax, which runs at 45% the price of a barrel of oil.

Oil companies are also not keen on the inclusion of Enarsa, a two-dozen employee outfit that has taken 35% stakes in a handful of recent offshore exploration agreements. Enarsa doesn't front exploration costs, but has agreed to pay its way if production begins, while retaining a stake in total reserves.

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