National Executive Branch proposed a law incentivizing hydrocarbons production, industrialization, transportation, storage, sustainability, amongst others, which discussion at the National Senate just started

Summary of the main conditions of the draft law:

Following you will find a summary of the main aspects of the draft law.

1. Scope: sets forth a regimen for the promotion of hydrocarbons investments (RPIH, for its initials in Spanish), complements and extends the principles and fundamentals of Law 26,741 of Hydrocarbons Sovereignty, which (i) declared of national interest the achievement of hydrocarbon self-sufficiency, as well as the exploration, exploitation, industrialization, transportation and commercialization of hydrocarbons, in order to guarantee economic development with social equity, job creation; (ii) created the Federal Hydrocarbons Council and; (iii) ordered the expropriation of YPF S.A. (Section 1).

• Terms: 20 years as from the enforcement of the law (Section 2).

• Programs and Regimens: (Section 2)
  • Promotion of Exploration and Production Activities of Petroleum (RGPP, for its initials in Spanish),
  • Promotion of Exploration and Production Activities of Natural Gas (RGPGN, for its initials in Spanish),
  • Promotion of Oil Extraction from Low Productivity Wells (RPPBP, for its initials in Spanish),
  • Special Promotion Regime for Exploration, Production, Industrialization, Storage and / or Transportation of Hydrocarbons and Derivatives (REPPH, for its initials in Spanish),
  • Support Energy Sustainability (PASE, for its initials in Spanish),
  • Program to Support Hydrocarbon Employment with a Gender Perspective (PAEHPG, for its initials in Spanish),
  • Special Cancellation Regime for Large Hydrocarbon Investors (RECH, for its initials in Spanish), and
  • Promotion of Employment, Work and the Development of Regional and National Suppliers of Services and National Production and Provision of Goods for the Hydrocarbon Industry (RPEPNIH, for its initials in Spanish).

• Tax stability regimen: The promotion programs for Exploration and Production Activities of Petroleum (RGPP) and natural gas (RGPGN) and, for Exploration, Production, Industrialization, Storage and / or Transportation of Hydrocarbons and Derivatives (REPPH), are entitled to receive the benefit of tax stability (Section 5, 1^st paragraph).

Tax stability involves the national, provincial, and municipal levels, to the extent that these latter jurisdictions adhere to this law, and includes taxes, fees, and contributions of the beneficiaries with regimes promoted by this law (Section 5, 2^nd paragraph).

Regarding direct and indirect taxes, the franchise indicated in the previous paragraph means that the beneficiaries of the RGPP and / or the RGPGN, in their capacity of taxpayers of the taxes in question, will not see increased aliquots, rates or amounts corresponding to the tax legislation in force at the moment of obtaining approval of their adherence to such regimes by the activities included in the approved Project; and, likewise, no subsequent tax that replaces or complements them during the effective period from the approval of their adhesion to the respective promotion regime (Section 5, 3^rd paragraph).

In the case of REPPH beneficiaries, the tax stability established in terms of the preceding paragraphs will only apply to projects approved in this regimen (Section 5, 4^th paragraph).

The conditions set forth in the previous paragraphs will not be applicable if the increases are due to modifications in the aliquots in the terms established in articles 17 (sets forth the formula to determine the export duties), 29 (i.e., minimum export duties aliquots may vary in the future) and 48 (v.gr. REPHH) of this law (Section 5, 5^th paragraph).

In the case of the aliquots applicable to liquid fuels, in the framework of Title III of Law No. 23,966 (taxes over liquid fuels and carbon dioxide), which is provided in the previous paragraph will not be applicable if the increases are due to the exercise of the powers conferred on the NATIONAL EXECUTIVE POWER, in the terms of that same law (Section 5, 6^th paragraph).

The beneficiaries of the above established Tax Stability will be entitled to receive, if applicable, the regulatory provisions reducing the aliquots, rates or amounts mentioned earlier in this article (Section 5, 8^th paragraph).

The tax stability rights are conditional upon fulfilment of the commitments made a by the beneficiary (Section 5, 9^th paragraph).

• Programs beneficiaries: Entitiesregistered in the National Registry of Petroleum Companies that are holders of hydrocarbon exploration permits and / or hydrocarbon exploitation concessions granted by the National State or Provinces, as the case may be (Sections 6, 21 and 33).

• RGPP adherence requisites: (Section 7)
  • Adhere to the program.
  • Achieve incremental production of crude petroleum. The Baseline is defined as the total production of crude oil per beneficiary corresponding to the maximum between the 2019 volume, the volume of 2020 and the volume of the 12 months elapsed between May 2020 and April 2021 inclusive, as defined by the Enforcement Authority. For those beneficiaries who have not informed the Enforcement Authority any crude oil production in the periods defined for the calculation of the Baseline, the Baseline will be ZERO (0) (Section 8). Based on the Baseline, the incremental production determined for each beneficiary will be established on a quarterly basis by the Authority of Application, as a result of the difference between the effective production of the last 12 preceding months and the Baseline, in the terms defined by the regulation of this law (Section 9).
  • Comply with the terms and conditions set forth by the law.

RGPP Incentives: RGPP beneficiaries will be granted Export Authorizations Guaranteed (AEG, for its initial in Spanish) for 20% of its incremental production, while the remaining 80% must be offered by said beneficiaries to the domestic market (Section 11).

When there is aggregated incremental production, the percentage of that production individual incremental that each beneficiary may obtain as AEG, will be established as follows (Section 11):

1. Aggregated incremental production exceeding a 20% but below 30%, the AEG shall be of 30% of the incremental production.
2. Aggregated incremental production exceeding a 30% but below 50%, the AEG shall be of 40% of the incremental production.
3. Aggregated incremental production exceeding a 50%, the AEG shall be of 50% of the incremental production.

The volume of AEG may be increased by up to 10% if the beneficiary has an incremental production greater than 50% of the Baseline, after 24 months from the adherence to the RGPP.

Every 10 years the Enforcement Authority may reduce or increase, according to the requirements of the internal supply, in up to 10% of the AEG defined in sections a), b) and c) of this article (Section 11).

Beneficiaries of the RGPP will be able to obtain additional AEGs from up to 10% of its incremental production based on the Coverage percentage of the Internal Crude Oil Market (CMIPC). This benefit will consist of increasing the percentage of AEG in production incremental of each beneficiary in the amount of percentage points equivalent to one-tenth (1/10) of the CMIPC achieved by the beneficiary, as calculated by the Enforcement Authority, in the terms established in the regulations of this law (Section 13).

The Enforcement Authority may grant authorizations for additional exports to RGPP beneficiaries in case part of their supply to the domestic market does not have proven effective demand, in compliance of the rules that govern the matter. Additional export authorizations will be granted to the extent that the security of supply of the internal market is not affected (Section 14).

The AEGs of part of the incremental production of each beneficiary of this RGPP, as well as the granted within the framework of the RPPBP as stipulated in article 37 of the law (low production wells), and the REPPH, will be called Benefited Exportable Volume (VEB, for its initial in Spanish) (Section 15).

The VEB may be used by the beneficiaries, both to export oil in the terms established by the RGPP, such as to export the equivalent volume, defined in energy units, in derived products according to the transformation coefficients defined by the Enforcement Authority. To obtain the authorization of VEB the Producers benefiting from the RGPP must demonstrate that they have been granted the potential agents of the internal market that may be interested, the possibility of acquiring the percentage of its production not reached by the VEB, in commercial conditions that make the offer accessible for internal supply (Section 16).

RGPP Duties over exports: set forth conditions to determine duties to be applied over exportation of crude petroleum (Section 17).

RGPP Exports proceeds liquidation: RGPP beneficiaries must enter in a timely manner, as from its effective adherence to it, 50% of the VEB currencies, enjoying the free availability of the remaining percentage. Additional crude exports of the beneficiaries that are authorized but that are not part of the VEB, they must be settled in the Free Exchange Market (MLC for its initials in Spanish) under the conditions established by the BANK CENTRAL OF THE ARGENTINE REPUBLIC –BCRA for its initials in Spanish (Section 18).

Each beneficiary will have an additional guaranteed right to free availability of currencies from tis VEB, up to 10%, which will be calculated annually based on its CMIPC. This benefit will consist of increasing the percentage of free currency availability from VEB in the amount of percentage points equivalent to one tenth part (1/10) of the CMIPC calculated by the Enforcement Authority (Section 19).

RGPP Income Tax exemption over assignment of interest participation: Sets forth an exemption from Income Tax, on the income obtained by the beneficiaries of the RGPP, for the partial assignment of their participation in an area of in accordance with Law No. 17,319, provided that the following conditions are met (Section 20):

• Their purpose is to share or diversify risk, obtain financing, additional or incorporate new knowledge or relevant specific experiences.
  • The assignor continues to participate in the hydrocarbon property for at least one 10%.
  • The assignee undertakes to bear all or part of the costs exploration and drilling of wells and / or development costs in the amounts and / or percentages determined by the parties, in the same area in which the interest is obtained participation interest.
  • There is incremental production in the area in the 12 months after the partial assignment, verified by the Enforcement Authority.

• RGPGN adherence requisites: (Section 22).
  • Adhere to the program.
  • Participate with effective natural gas injection commitments in auctions or price contests in the terms defined in this law and its regulations. To that end, the following definitions are adopted a) Internal Market Demand: estimated annual demand for natural gas by all internal market users; b) Priority Demand: estimated demand for natural gas of the Licensees of Distribution and / or Sub-distributors intended exclusively for those groups of eleven consumers who, according to the regulations in force on the date of entry into force of this law, they must be supplied with natural gas by said providers c) Power Plants Demand: estimated demand for natural gas destined for the production of electrical energy; d) Committed Production Curve: the annual production curve presented by the beneficiaries and adjusted proportionally based on the volume offered that is actually awarded in each auction or price contest in which each beneficiary has participated. (Section 23).
  • Comply with the terms and conditions set forth by the law.

RGPGN pluriannual supply bid: (Section 24).

• The Internal Market Demand, Priority Demand and Power Plant Demand will be estimated and published annually, 90 days in advance of the beginning of the corresponding year,
  • Based on these estimates, a horizon of natural gas production contracting to supply the Priority Demand and the Demand for Power Plants of no less than 3 mobile years shall be promoted, with requirements of additional injection to supply the rest of the Internal Marked Demand. For these purposes, at least 30 days prior to the start of the year 2022, the Enforcement Authority may call auctions or public tenders to allocate, if necessary, the additional volumes not contracted of the Priority Demand and the Demand for Power Plants of the years 2022, 2023 and 2024, and the Priority Demand and the Demand for Power Plants of the year 2025 and subsequent years, with additional injection requirements required for supply the demand of the domestic market. Every subsequent year and in advance of at least 90 days, the Enforcement Authority may call an auction or public tender to keep the Priority Demand contractualized, Power Plant Demand and additional injection requirements for supply of the Internal Market Demand, to sustain, at least, 3 years of contract.
  • Each producer must comply with the injection commitments established in the committed production curve, in the terms defined by the Application Authority in auctions or public tenders and with the RPEPNIH, under the terms established in this law.
  • The Enforcement Authority may call auctions or public tenders complementary when it warned a not projected growth of the Internal Market Demand and / or to replace base volume imports from 365 days of the year, and / or to complement the volumes not satisfied with the contests of the Production Promotion Plan of the Argentine Natural Gas – Supply and demand scheme 2020 – 2024, approved by Decree No. 892 of November 13, 2020,
  • The Enforcement Authority will understand in the design and definition of the basic guidelines and guidelines of the aforementioned auctions and public tenders, the which should consider the differences between production costs in the different productive basins, according to the type of technology used in the activity extraction, the type of resource (conventional and unconventional), the level of local integration (upstream) and the productivity benchmarks arising from the studies developed by the Application Authority itself. Notwithstanding, the latter may propose other criteria to adapt the auctions and public tenders to adapt to the particularities of the market and the needs of internal self-sufficiency.

RGPGN Incentives: RGPGN beneficiaries will be entitled to receive export authorizations, in the following conditions:

1. For the Seasonal Summer Periods, the firm export authorizations will be the established by Decree No. 892/20, its regulatory standards and the various rules that define the auctions or price contests for the extension in the subsequent years of the contracting of the internal supply, in accordance with established in the aforementioned pluriannual supply bid (Section 25).
   1. For the Seasonal Summer Periods, firm export authorizations in addition to the defined in subsection a) may be assigned to those beneficiaries, with volumes surplus to the committed injection, presenting a pre-agreement of firm export and the commitment to offer to the domestic market during the Seasonal Winter Period said injection in addition to the one duly contracted, equivalent to the daily amount committed in the preliminary export agreement. The price of this additional injection to be offered in the domestic market during the Seasonal Winter Period may not exceed the price awarded to the beneficiary for that same period in the corresponding annual public auction or tender. The firm export authorizations obtained by virtue of this subsection do not may take precedence over those that the RGPGN beneficiaries have obtained by virtue of subsection a), and the Enforcement Authority must evaluate its complementarity before granting them (section 25).
   1. The Enforcement Authority may also, preserving the priority of the internal supply, grant firm export authorizations, in addition to those provided for in paragraphs a) and b) of this article, without affecting the benefits that would have been granted, for up to 365 days a year, under the terms and conditions that may define from time to time, provided that, for the same period that the export authorizations are requested, the average daily injection volumes committed through auctions or supply tenders defined in the aforementioned pluriannual supply bid, be they higher than the effective average daily injection during the year 2020 of all producers who have participated in the first public competition called under Decree No. 892/20. The Enforcement Authority may recalculate, every 10 years, the minimum level injection that enables firm exports for 365 days of the year (Section 25).
   1. The export prices for each period may not be lower than the prices average offered by the different bidders of the auctions or tenders public supply to the domestic market corresponding to the same period. The Enforcement Authority may raise the minimum price based on the evaluation of the conditions in which the international natural gas and its energy substitutes operates or reduce it for each case if the requesting Producer of firm exports reduces to the same level the price with which it supplies volumes equivalent to the domestic market.

In all the cases established in this article, the firm authorizations may be granted for up to the remaining term contracted through the auctions or public supply tenders defined in article 24 (pluriannual auctions). Beneficiaries who wish to obtain firm exports for terms longer than this remaining contractual term, and for up to a maximum term of 10 years, must offer the Enforcement Authority an extension of the term of the contracts that the beneficiary had in force in the framework of said auctions or contests of price, for up to double the volume to be exported, equal to the remaining conditions and at a price not higher than the minimum between the price of these contracts and the requested export price.

In case of concurrence of firm export requests to be evaluated in the terms of the previous paragraphs, the Enforcement Authority will establish the priority system based on the following criteria: higher selling prices to the foreign market, lower selling prices to the internal market sales and higher sales volumes awarded in auctions or competitions of supply price of the domestic market, under the terms established by the regulation (Section 25).

RGPGN isolated production wells: Beneficiaries whose natural gas production is associated with development of natural gas fields without access to the domestic market due to non-existence of facilities and / or facilities and / or transport capacity and / or distribution, and for which the construction of new facilities and / or new connections to gas pipelines are technically and / or economically unfeasible may, once evaluated by the Enforcement Authority, will be able to obtain export authorizations under firm condition in accordance with current regulations. These authorizations shall not be subject to interruptions or suspensions, once the Authority of Application has evaluated that the volumes of natural gas that are the object of the request for export are not useful for domestic supply.

Export authorizations related to natural gas developments isolated from the domestic market and dedicated to export will remain in force for the entire term of its granting unless the technical assumptions are modified and economic considered by the Enforcement Authority. In no case will Natural gas export authorizations obtained under these conditions will have priority over the exports of those producers that comply with supplying the domestic market (Section 26).

RGPGN offer to the domestic before requesting export authorization: At the time of the authorization request, the producer requesting the authorization firm export must offer to the domestic market, for up to 15 calendar days, as established by each auction or public tender, the volumes to be exported, so that any interested third party can acquire the entire volume to export under equal conditions of price and term of validity, under the terms defined by the Application Authority. Once this obligation has been fulfilled, if no internal demand has arisen, the export permits in firm condition will be granted, which may not be modified or interrupted by any subsequent request from the domestic market.

In the case of firm export authorizations for 365 days of the year, additionally the authorization shall comply with requirements of subsection c) of article 25 of this law.

The contracts for the supply and transportation of natural gas for export associated with export authorizations in firm condition may not be affected by present or future norms, on preferences in the allocation of production, measures of interruption, redirection, or intervention in the conditions of its commercialization, or transport, among others, either directly or indirectly. For firm export authorizations for 365 days of the year, additionally the authorization shall comply with requirements of subsection c) of article 25 of this law.

Firm natural gas export requests will be resolved by the Authority Application within a period of 30 days of receipt. Lack of answer will not be understood as tacit authorization (Section 27).

RGPGN Export authorization revocation: Firm natural gas export authorizations only may be revoked by the Enforcement Authority in the event of non-compliance with the Committed Production Curve, defined by the different auctions or contests public in which the beneficiary has been awarded. The latter may avoid such revocation by complying with the mechanisms established in the respective auctions or public tenders and / or in Decree No. 892/20 and / or in the schemes of internal supply of natural gas to be established in the future.

Only partial limitations may be established on export authorizations in technical emergency situations of the licensed gas transportation system that put at risk the supply to the Priority Demand, which respect the principle of non-discrimination, whatever the geographical location of those affected, and in all cases such limitations must be applied in a manner proportional for each demand segment, in the terms defined in the regulation of this law (Section 28).

RGPGN Duties over exports:set forth conditions to determine duties to be applied over exportation of crude petroleum (Sections 29 and 17).

RGPGN Exports proceeds liquidation: RGPGN beneficiaries must enter in a timely manner, as from its effective adherence to it, 50% of the proceeds received from the authorized exportation, enjoying the free availability of the remaining percentage. Additional crude exports of the beneficiaries that are authorized but that are not part of the VEB, they must be settled in the Free Exchange Market (MLC) under the conditions established by the BCRA (Section 30).

RGPGN Income Tax exemption over assignment of interest participation: Set forth an exemption from Income Tax, on the income obtained by the beneficiaries of the RGPP, for the partial assignment of their participation in an area of in accordance with Law No. 17,319, provided that the following conditions are met (Section 32 and 20):

1. Their purpose is to share or diversify risk, obtain financing, additional or incorporate new knowledge or relevant specific experiences.
2. The assignor continues to participate in the hydrocarbon property for at least one 10%.
3. The assignee undertakes to bear all or part of the costs exploration and drilling of wells and / or development costs in the amounts and / or percentages determined by the parties, in the same area in which the interest is obtained participatory.
4. There is incremental production in the area in the 12 months after the partial assignment, verified by the Enforcement Authority.

• RPPBP adherence requisites: (Section 34)
  • Adhere to the program.
  • Obtain in association with third-party reclaimers, incremental production of crude oil in wells of low productivity or previously inactive or closed, by traditional methods, or by means of mobile extraction systems or mechanisms and transportation, authorized by the Enforcement Authority, in the terms that establish regulations; reduce the impact with respect to liabilities and / or provisions pre-existing ones linked to the previous exploitation or the subsequent process of closure of wells, with the presentation of an insurance scheme approved by the Power Grantor of each jurisdiction.

For the purposes of this article, “third party recuperators” shall be considered to be those companies associated with the holder of the concession to carry out exploitation in low productivity wells, provided that: i) They are not holders of medium or large exploitation concessions of hydrocarbons granted by the Provinces or the National State; ii) They are not controlling or controlled directly or indirectly of companies holders of hydrocarbon exploitation concessions; iii) They are incorporated and have the main seat of their activities in the REPUBLIC ARGENTINA, as private, public, mixed or cooperative companies; and iv) Are authorized by the Application Authority of the concession to which the wells to be exploited correspond.

• Comply with the terms and conditions set forth by the law.

RPPBP Incentives: RPPBP beneficiaries will be entitled to request from the Granting Power of each Province, the possibility of operating under differential technical regulations in regarding the prevention, sanitation and abandonment of operations, for the purposes to adjust said regulations to the characterization of these projects and in accordance with accepted modern practices in the hydrocarbon industry, in full agreement with the applicable environmental protection and safety regulations (Section 35).

Holders of a hydrocarbon exploitation concession from low productivity that, in turn, are holders of other exploitation concessions adjacent, may request the Granting Power of each adherent Province, the unification of the areas as a single hydrocarbon exploitation concession. The unification of the concessions should be aimed at optimizing the operations, to ensure a recovery of hydrocarbon production compatible with the adequate and economic exploitation of the deposit through said unification. The new exploitation concession resulting from the unification must comply with the terms established in article 35 of Law No. 17,319, which sets forth the terms of the concessions depending on the classification included therein (Section 36).

Beneficiaries of the RPPBP who have also adhered to the RGPP and comply with the requirements established for both regimes, they will obtain an additional AEG by up to 2% higher than what is established for said RGPP. In the cases in which the activity promoted by RPPBP is carried out by contracting regional companies the AEG additional may be increased by up to 5 additional percentage points to what is established for said RGPP (Section 37).

Beneficiaries of the RPPBP who have also adhered to the RGPP and comply with the requirements established for both regimes, they will have a right guaranteed free availability of currencies from their VEB, in addition to the established in article 18 of this law, of up to 2%. On the cases in which the activity promoted by the RPPBP is carried out by contracting of regional companies the guaranteed right of free availability of foreign exchange from each VEB, additional to that established in article 18 of this law, it may be increased by up to 5% (Section 38).

The above-mentioned incentives will be proportional to the number of wells with low productivity, or previously inactive or closed, put to work under the activity promoted by the RPPBP, on the total number of wells that the beneficiary company has under concession under these conditions, in the terms established by the regulations (Section 39).

RPPBP Income Tax benefits: During the first 5 years of adhesion to the RPPBP, the third-party recuperators benefited may additionally deduct in the tax balance of the Tax to the Profits, an amount equal to 50% of expenses deductible according to article 83 of the Income Tax Law (Section 40).

• REPPH beneficiaries and adherence requisites: (Section 45 and 46)
  • Beneficiaries: all legal entities properly incorporated in the Argentina in compliance with all registrations and authorization required to carry on the activity according to the law, which may act through the constitution of temporary unions (Unión Transitoria de Empresas) or other forms of association contracts, which carry out or undertake to carry out any of the activities promoted by this law, and that have an Investment Project approved by the Enforcement Authority.
  • Approval of an “Investment Project” defines as “Investment Project” applicable to REPPH to all projects or projects package presented to the Enforcement Authority by the beneficiaries, that strengthens activities promoted in this law and involves an investment of at least:

a) USD 6,000,000 in projects exploration and seismic for conventional exploitation, within a maximum period of 3 years, having to include in said project the commitment to invest in exploitation associated with the eventual discovery.

b) USD 10,000,000 in hydrocarbon refining and industrialization projects in the basin of origin, within a maximum period of 3 years.

c) USD 30,000,000 in underground or onshore storage projects for hydrocarbons, or port infrastructure for export, transportation, or improvement or expansion of the existing one, within a maximum term of 3 years.

d) USD 50,000,000 for medium investments in treatment, liquefaction, commercialization, storage mobile or stationary, transportation, utilization and manufacturing of project equipment of Liquefied Natural Gas (LNG), within a maximum term of 3 years.

e) USD 100,000,000 for crude oil or natural gas exploitation projects of conventional origin, offshore or with secondary and / or tertiary recovery, within a maximum period of 4 years.

f) USD 300,000,000 for projects of industrialization, separation, fractionation, treatment, storage, transportation and / or refining of hydrocarbons and derivatives, within a period maximum of 5 years.

g) USD 300,000,000 annually, for projects both for the production of natural gas and of oil, in a massive development stage or precedent at the time of granting of the benefit, to be developed in exploitation concessions of origin not conventional, for a period not less than 5 consecutive years, provided that in such projects the investment destined to subprojects in the pilot stage or precedents is not less than 20% of the total investment of the project, and,

h) USD 200,000,000 per year for Joint Oil and Gas Production Projects, with a quotient gasoil (GOR) not less than 1000 and up to 13,000 inclusive, for a period of no less than 5 consecutive years, if in such projects the investment destined to sub-projects in the pilot stage or above is not less than 20% of the total investment of the project. These projects must guarantee the compatibility of the volumes of associated gas produced with existing transport capacity, avoiding venting and / or system congestion.

The Enforcement Authority, with the approval of the Council created by the law, is entitled to reduce by up to 50% the minimum amounts of investment established above that foresee the industrialization of the hydrocarbon in the basin of origin or Investment Projects of a strategic nature or presented by small and / or medium-sized companies in the hydrocarbon sector.

The Enforcement Authority, with the approval of the Council created by the law, may approve other Projects reducing by up to 50% the amounts minimum in terms of investment, expanding by up to 50% the maximum terms of execution of the Project, and eliminating the additional provisions established in fine in subsections g) (20% of the investment during a 5-years pilot plan) and h) (avoiding venting and / or system congestion) of this article. However, these Projects will only be able to access the benefits determined in the subsection a) of article 48 of this law (free disposition of 20% of export proceeds).

• Comply with the terms and conditions set forth by the law (Section 45 and 46).
  • These programs require approval from both the Application Authority and the Council created by the law. Said Council is integrated by the Secretary of Economic Policy (Secretaría de Política Económica) and the Application Authority and it going to be in charge of: (i) evaluating, approving and rejecting filed Investment Projects, (ii) proposing and evaluating different initial requirements for strategic projects, (iii) audit the compliance of the projects, (iv) other indicated by the draft law (Sections 41 and 42).

REPPH Incentives: (Section 48).

• The free availability of 20% of the foreign exchange obtained from exports authorized by the Enforcement Authority, under the terms that establish regulations, or free access to the MLC if there are no exports authorized in the Investment Project. In both cases, the right will be limited by up to a maximum annual amount equivalent to 25% of the gross amount of foreign currency entered by the beneficiary in the MLC to finance the development of the Investment Project and may apply once after 1 year since the entry of the foreign currency has been made in the MLC.

The first percentage defined in the preceding paragraph may go up to the 50% and the second up to 30%, in the case of the projects provided for in subsection h) of Article 45 of the law (USD200.000.000 / annual Investment Projects for the joint production of oil and natural gas).

To estimate the gross amount of foreign currency entered by the beneficiary in the MLC for finance the Investment Project, currency flows originated in export will not be considered for the same Project (Section 48).

• The reduction of up to 50%, depending on the aggregated value of the Project, of the aliquot or scheme of aliquots of rights of export applicable at the time of approval of the Project, as established by the regulation, to the exportable volume authorized by the Enforcement Authority with the approval of the Council, provided that this volume is associated with the development of the project. The specific reduction percentage to be applied in each project it will depend on the following scale: (i) 0%, if the added value is low, (ii) 25%, if the added value is average, or (iii) 50%, if the added value is high.

The Enforcement Authority, with the approval of the Council, will determine which category of the preceding scale corresponds to apply to each project.

In the case of beneficiaries who are also covered by the RGPP, the RGPGN or the RPPBP of this law, the benefits of each of the preceding paragraphs of the This article may not be accumulated with those established in the aforementioned regimes, the beneficiary having to exercise the relevant option under the terms establish regulations.

The projects provided for in subsection h) of Article 45 of the law (USD200.000.000 / annual Investment Projects for the joint production of oil and natural gas) and presented by RGPP beneficiaries who have obtained production incremental of its aggregate production (articles 8 to 10), they will enjoy the additional benefits that are detailed below:

i. If the GOR of the total gross hydrocarbon production of said project is greater than or equal to 1,000 and less than 4,550, an increase of up to 5% will be granted in its percentage of AEG to be applied on the total incremental production of crude oil of the beneficiary, in proportion to the volumes linked to the Project, in the terms established by regulation; and

ii. If the GOR of the total gross hydrocarbon production of said project is greater than or equal to 4,550 and less than 13,000, an increase of not less than 5% and up to 10% will be awarded in its percentage of AEG, to apply on the total incremental production of crude oil of the beneficiary, in proportion to the volumes linked to the Project.

The additional AEGs defined in the two preceding paragraphs will be effective when the aggregate incremental production of all the producers of crude oil in the ARGENTINE REPUBLIC complies with the minimum increase of aggregate production established in subsection a) of article 11 of this law (Section 48).

REPPH Income Tax benefits: The approval of the Project will imply certain benefits in connection with:

1. The accelerated amortization of the goods acquired under the Project. The holder of the approval will be entitled to opt between different forms of amortization (Section 49).
2. VAT devolution (Section 50).
3. Duty over capital assets importations: Holders of new capital goods imports approved by the Application Authority for the Project, who do not register national offer in the terms defined by the MINISTRY OF PRODUCTIVE DEVELOPMENT with approval of the Board and that they are destined to carry out the activities promoted according to the provisions of this law, will be beneficiaries of a Tax Credit bonus equivalent to 40% of the duties, tariffs and other import charges that have been paid against other taxes to be paid before the AFIP, under the terms established by the regulation.

The percentage defined in the preceding paragraph may reach up to 50% in the case of the projects of subsection h) of article 45 of this law (USD200.000.000 / annual Investment Projects for the joint production of oil and natural gas).

For the specific case of approved crude oil exploitation projects or natural gas, and for the sole purpose of the temporary importation of capital goods achieved by the benefits of this REPPH, which do not have an offer national and have been approved by the Enforcement Authority with the approval of the Council, the term established in subsection a) of article 265 of Law No. 22,415 (Customs Code) will be 6 years (Section 51).

1. Requisites and Additional Incentives for Large Projects of Transport Infrastructure, storage and industrialization of hydrocarbons based on natural gas.
   1. Requisites: i) an investment of at least USD1.200.000.000 invested in the first 5 years of the Project. ii) include investments in transportation capacity and hydrocarbons industrialization that would not relay total or partially in the current infrastructure. Natural gas exceeding 1.25 million of tons per year are excluded (Section 52).
   1. Incentives: i) Guarantee of exclusive use of the production of the fields dedicated to the production or export process proposed under the Project, until the repayment period of the same, or until the duration of the validity of this law, the period that is shorter. The guarantee will prevent the contracts for the supply and transport of raw materials associated to the Project be affected by present or future measures on preferences in the production allocation, interruption measures, redirection, or intervention in the conditions of its commercialization or transport, among others, be directly or indirectly (Section 53).

ii) Importations under this program that do not register a national offer in the terms that it defines the Council created by the law, will be beneficiaries of a Tax Credit bonus equivalent to 60% of import duties paid, against other taxes to be paid before the AFIP (Section 57).

iii) authorizations of firm export for up to a maximum term of 10 years, depending on the investment repayment period, both for the Summer Seasonal Periods as of Winter, for the totality of the incremental production capacity generated by in the dedicated fields of the Project itself (Section 58).

• Concessions: The Projects accepted under this program will be entitled to receive concessions in the terms of the National Hydrocarbons Law to develop, build and operate natural gas pipelines and ancillary facilities (Section 56).

1. Offshore Projects – Requisites and Additional Incentives for.
   1. Requisites: Off-Shore Projects are those developed sedimentary basins, localized total or partially as from the baseline to the outer edge of the continental platform. In order to recognize the uniqueness of these projects with respect to of its greatest risks and complexity of operation, additional benefits are established for projects involving offshore exploitation in the which well drilling is performed in locations where the distance between seabed and surface, measured at the well location, averaged between the high and low tide, exceed the number of meters established by the regulations (Section 59).
   1. Incentives: Importations under this program that do not register a national offer in the terms that it defines the Council created by the law, will be beneficiaries of a Tax Credit bonus of import duties paid, against other taxes to be paid before the AFIP. The percentage of the bonus will be determined taking under consideration the duties actually paid and the complexity of the operation: a) 40% if it is low, b) 60% If it is medium, c) 80 % if it is high (Section 60).

1. Projects of Small Companies of conventional production in declining – Additional incentives (Section 61).

1.  Energy sustainability support program (PASE, for its initials in Spanish), understood in terms of promoting projects that promote the diversification of the Argentine energy matrix or promote a greater energy efficiency in the production process, including production strategies that involve the increasing incorporation of investment in research and development technological within the firms of the sector (Section 62).

Projects that have an energy sustainability plan approved in the PASE may increase by up to 10% the benefits that would have been obtained in the REPPH (Section 63).

Creates the Energy Sustainability Fund (FSE, for its initial in Spanish) to be formed with the resources contributed by no less than 5% of additional federal revenue from export duties applicable to the VEB of the RGPP and the export duties applicable to the exports generated by REPPH Projects, in the terms decided by the Enforcement Authority with approval of the Council (Section 64).

The purpose of the FSE will be to design and implement actions aimed at the development of projects related to energy sustainability, investment in research and development and any operation tending to fulfil the Development Goals Sustainable Development of the United Nations regarding energy and infrastructure (Section 64).

The Fund will be administered by the Council created by the law, being able to make agreements and / or agreements with Universities National and public institutions of the National System of Science, Technology, and Innovation, prioritizing the Energy Integration firm for the execution of projects Sociedad Anónima (IEASA) and any other company in the hydrocarbon sector that has majority state participation (Section 65).

The Fund Administrator will prioritize financing of a Sectorial Program to Promote investment in research and development (R&D), promoting innovation and development laboratories in companies in the sector or the creation of joint stock companies of technology for diversification that are co-financed, under the terms established in the regulation (Section 66).

1. Creates the Employment Support with gender diversity perspective – (PAEHPG, for its initials in Spanish): We do not enter into this program in the benefit of the extension of the present, considering this program is focused on the labour market although clearly related to the hydrocarbons industry (Sections 67 to 73).

1. Creates the Hydrocarbons Large Investors Special Cancellation Program (RECH, for its initials in Spanish): We do not enter into this program in the benefit of the extension of the present, considering this program is focused on few large actors of the local market (Sections 74 to 79).

1. Creates the Hydrocarbons Industry Employment, Work and Regional Suppliers Program – (PDPRN, for its initials in Spanish – Section 80):

1. All the obligation arising from the PDPRN are applicable to the beneficiaries of the RGPP, RGPGN, REPPH, PASE and PAEHPG (Section 81 and 82).
   1. Jointly with the petition to be part of the programs approved by the law, the beneficiaries must submit their Plans for the Development of Regional and National Suppliers (PDPRN), which must have the following minimum contents (Section 83):

a. The expression of the vision of the integral development of the value chain through a set of initiatives focused on achieving the levels of cost, quality and articulation that maximize the participation of regional and national industry, the which should be strictly quantifiable in scope and objectives.

b. A fair, open, national supplier incorporation procedure transparent and with quantifiable requirements and precise deadlines for the discharge of new national suppliers.

c. A supply plan for the procurement of goods and services that required to carry out their operations, endowed with certain goals and objectives and quantifiable.

d. The system of standards and certifications applied by companies to access as regional and national providers and be eligible to obtain hiring.

f. Preferential financing mechanisms for suppliers of regional origin and national.

g. Express and measurable goals and objectives on the participation and development of regional and national providers.

h. Proposal to facilitate access to the national productive ecosystem as far as regarding the provision of goods and services with high added value and technological innovation.

• Preference for regional suppliers: For the purposes of acquiring and maintaining the benefits of the different promotion regimes defined in this law, beneficiaries must comply with a contracting scheme in which they will be granted the possibility of matching the best offer, with priority in case of being exercised, to the offers of provision of goods and / or provision of services of regional and national origin, when the price of the offers of goods and / or services of national origin is equal to or lower to the goods and / or services offered that are not of national origin, increased by 10% when the offers of national goods and services are from Regional Provider, and in a 5% when they are from an extra-regional National Provider (Section 84).

1. Creates the Evaluation Commission (Section 85):

The commission will be jointly chaired by 1 representative of the SECRETARIAT OF ENERGY and 1 representative of the SECRETARIAT OF INDUSTRY, ECONOMY OF THE KNOWLEDGE AND EXTERNAL COMMERCIAL MANAGEMENT, and additionally composed, in the terms that define the regulation, by representatives of the POLICY SECRETARIAT ECONOMICS; the MINISTRY OF THE INTERIOR; the MINISTRY OF SCIENCE, TECHNOLOGY AND INNOVATION; Representatives of provinces that adhere to this law, workers’ organizations and women workers, business associations that provide goods and services and the organizations of companies producing hydrocarbons benefiting from the regime instituted in this Title.

This Commission will have the function of assisting the MINISTRY OF DEVELOPMENT PRODUCTIVO and the SECRETARIAT OF ENERGY of the MINISTRY OF ECONOMY in the evaluation, monitoring and control of compliance with the Development Plans of Regional and National Providers (PDPRN) that must present the beneficiaries.

1. Creates the Fund for the regional development (Section 86):

The Fund for Expansion and Productive Diversification (FFADP for its initial in Spanish) that will be constituted as an administration and / or financing trust which purpose will be to finance the development, expansion, and diversification in productive matters of the hydrocarbon producing provinces, with the scope and limitations provided for in the regulatory decree and standards that are issued, additionally applying the rules of the Code Civil and Commercial of the Nation.

The Fund will have a fiduciary patrimony made up of 5% of the sum of federal collection from export duties applicable to the VEB of the RGPP and the export duties applicable to the exports generated by REPPH projects.

1. Amendments to the National Hydrocarbons Law 17,319:

a. Incorporates the storage concession:

The underground storage concession grants concessionaires the right to store natural gas in spaces and / or facilities suitable underground systems, including the industrial process of injection, deposit, and natural gas withdrawal. Said concession can be granted in:

a) Areas subject to their own exploration permits and / or exploitation concessions.

b) Areas subject to exploration permits and / or exploitation concessions of third parties, with their authorization from the Application Authority.

c) Lands not subject to exploration and / or exploitation rights.

Underground storage concessions may be granted to any entity that: (i) meets the requirements of technical experience and financial capacity that establishes this law and its regulatory norms, (ii) has –where appropriate– the conformity of the operating concessionaire in whose area the underground facility is located to be used for storage and (iii) the concessionaire agrees to build at your own cost and risk the facilities necessary to carry out the storage activity.

The operating concessionaire has priority to request a concession of storage within the confines of its title. The concessions of storage will be considered independent titles with respect to the exploitation and / or transport concessions granted.

Underground storage concessions will be granted for a period of 25 years, which may be extended for up to 10 additional years. Once the term of the underground storage concession has expired or reverted said concession before its expiration, the facilities will pass to the domain of the granting authority, without charge or tax and in full right.

Underground storage concessions will be governed by the conditions provided for in the concession title granted by the Enforcement Authority.

The underground storage concession will not be subject to the payment of royalties (Section 88 incorporating article 27 quarter, and Section 89 adapting article 29, both of the National Hydrocarbons Law).

b. Enforcement Authority:

The application of this law is the responsibility of the SECRETARIAT OF ENERGY of the MINISTRY OF ECONOMY or the authority that replaces it in the future, including exploration permits, exploitation concessions, transportation and / or underground storage concessions that are granted with respect to hydrocarbon areas within the scope of its competence, in terms of technical, safety and environmental. It is also the Competent Authority in relation to the technical, safety and environmental aspects of the production, transport, storage, marketing and export activities of LNG that are developed within of the national territory (Section 90 replaces article 97 of the National Hydrocarbons Law, and Section 106 of the draft law).

• Modifies the Tax of Fuel Transference Law 23,966: We do not enter into these amendment in the benefit of the extension of the present, considering these dispositions are focused on actors participating in midstream and downstream segments (Sections 91 to 105).

• Transition from pre-existing promotion regimens (Section 107): As of the entry into force of this law, it will not be admitted new beneficiaries of the Investment Promotion Regimes for the sector hydrocarbons in force in terms of exchange regulation and regimes of export and production incentives. The current beneficiaries of such regimes must choose within the period of 180 calendar days from the approval of the regulations of this law and in the terms that it establishes, for continuing in them or accessing the benefits established in this draft law. Failure to do so will be deemed not to opt for the benefits of this law.

Beneficiaries who choose to access the benefits established in this regulation may additionally obtain: i) a crude oil production baseline lower than that used for the calculation of incremental production in the RGPP; ii) up to 20% additional in the AEG percentage of crude oil defined in the RGPP; iii) up to 20% additional of free availability of foreign exchange on guaranteed exports of liquid and gaseous hydrocarbons, as established in the different regimes provided for in this law in the that the beneficiary participates; iv) an increase of up to 20% in the value that the regulations define for the CRA and CRB used for the estimation of the export duties applicable to the Profited Export Volume of the RGPP; v) additional benefits arising from the application of this law to the situation of the concessionaire opting for the same.

The entities who choose to access the benefits established in this law, which have claims pending resolution at any stage, as a consequence of previous incentive regimes in hydrocarbon matters, will be subject to enter a dispute resolution mechanism that respects the principle of shared effort.

Beneficiaries of general promotion regimes, not exclusive to the sector hydrocarbon, which therefore are not covered by this article, do not may accumulate benefits of the same nature between different regimes of promotion, having to renounce those obtained in such regimes, or any claim to obtain them, to adhere to those established in this law (Section 107).

• Establishes sanctions for breaching the promotion regimens: We do not enter into said dispositions in the benefit of the extension of the present (Sections 108 and 109).

• Invites provinces to adhere to the law: The provinces shall expressly state, through the corresponding provincial law, its adhesion to the law and shall expressly invite the municipalities to enact the corresponding rules in the same sense (Section 112).

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