The governor of Argentina's Neuquen province, Omar Gutierrez, said Thursday he has asked President Mauricio Macri to keep domestic oil prices above international ones and provide gas pricing incentives to help to boost production after more than a decade of decline.
Gutierrez made the comments after meeting late Wednesday in Buenos Aires with Macri and national Energy Minister Juan Jose Aranguren.
Neuquen has emerged as a hot spot for shale oil and gas, holding some of the world's largest resources in huge plays such as Vaca Muerta.
The southwestern province, which produces 20% of the country's 514,000 b/d of oil and 48% of its 124 million cu m/d.
Gutierrez said he would defend "a price of oil without a roof and a floor" to encourage development of the resources.
Macri's government plans to bring domestic crude prices in line with international benchmark references, and has been working to reach that by the middle of 2017.
However, this month it emerged that the target would be reached this month.
That would mean cutting domestic prices by 30% to less than $45/b , ending a government-orchestrated agreement between refiners and producers to sustain the price by allowing diesel, gasoline and other products to be priced accordingly.
Macri's government has not announced the plan publicly and said in a statement that the meeting with Gutierrez was for pushing ahead with the creation of a federal energy development plan.
The Energy Ministry, which sets energy pricing policies, declined to comment on the meeting. VACA MUERTA
The governor also told Macri and Aranguren of his plan for developing the Neuquen Basin so the country can regain the energy self-sufficiency it has lost on declining production since the late 1990s and early 2000s.
Oil production has declined by nearly 40% since a peak of 847,000 b/d in 1998 while gas has dropped 13% from a record 143 million cu m/d in 2004, mostly because of low investment and maturing conventional reserves.
As well as sustaining domestic oil prices at around $63/b, Gutierrez urged the government to extend pricing incentives for gas production to 2020.
The incentives allow producers to sell output from new developments like Vaca Muerta and tight plays such as Lajas and Mulichinco at $7.50/MMBtu, more than the average price of $4.75-$5.00/MMBtu.
With the oil and gas pricing guarantees from the national government, companies will be able to plan investments for the next few years, including in the infrastructure needed to sustain a recovery in production led by Vaca Muerta, Gutierrez said.
YPF, the country's state-run energy company, is producing about 58,200 b/d of oil equivalent from Vaca Muerta and about 10 million cu m/d of tight gas from other plays.
YPF has said $50/b is a break-even price for Vaca Muerta, and it has been focusing on ramping up productivity and cutting drilling and completion costs to make its projects more economically viable. CHUBUT
With Vaca Muerta gaining the attention of oil companies, other provinces such as Chubut are concerned about a pullback in drilling activity in their fields. On Thursday, Chubut Governor Mario Das Neves called a meeting with oil officials and union leaders from his province and from Mendoza, Salta, Santa Cruz and Tierra del Fuego to discuss Macri's plans to cut oil prices.
They will meet November 30 in Rawson, Chubut to draft a plan to defend keeping local oil prices at around $63/b, according to a statement.
