SHORT WEEKEND NEWS - ARGENTINA'S CREOLE BARREL
YPF PROPOSAL TO THE PROVINCES: $40 PER BARREL OF CRUDE OIL
The president of YPF announced that YPF will make a proposal to the oil producing estates (provinces) to alleviate the consequences of current WTI/Brent prices and of the drop in economic activity. This “barril criollo” or “creole barrel” price will be temporary. Its main features are the following:
a) YPF will bear an extraordinary contribution (for an aliquot similar to that of royalties, although technically it would not be imputed to that tax) equivalent to recognizing the provinces a price of 40 dollars for all oil production. The contribution will be calculated not only on YPF's crude production, but also on that of the rest of the non-integrated producers such as Pluspetrol, Tecpetrol, Vista Oil & Gas, Capsa, Chevron and Sinopec, among many others.
b) The price of $ 40 applicable to April production will be updated in decreasing terms month by month depending on the evolution of the exchange rate.
c) The proposal of YPF goals is to run the axis of the discussion, covering the most urgent need of the provinces that is linked to maintaining their tax collection.
d) In exchange, the YPF president proposes that the provinces and the national government validate the oil company to negotiate the internal price with non-integrated oil companies at a market value.
e) The proposal would be valid for three months until it is clearer what will be the level of demand for crude oil globally, if the central countries begin to overcome the pandemic.
f) The decree shows that the national government, in turn, would maintain a non-automatic licensing regime for oil imports. In other words, oil and derivatives cannot be imported to protect the domestic market.
As reported in prior emails, agreements have been reached with workers in the industry that will represent in a short term a reduction of the labor costs. In addition, the government of Argentina in agreement with the provinces is implementing tax deferral measures too