Published:  12:20 AM, 14 March 2018

Oil majors' interest in Argentina tests free-market reforms

Oil majors' interest in Argentina tests free-market reforms People walk in front of a Shell gas station in Buenos Aires, Argentina. -Reuters

Oil majors are evaluating bids for offshore exploration rights in Argentina, a major change in a country that sent Spanish energy giant Repsol packing six years ago and has seen little offshore exploration for decades.To secure bids, Argentina will need to show it has moved beyond its historical fluctuations between free-market policies and left-wing populism and that it has made progress in lowering costs for energy firms.

Oil companies including Shell and Statoil told Reuters they are looking at bidding in the auctions, to be held later this year, and a government official said Exxon and Chevron have also shown interest. The country faces fierce competition to attract the billions of dollars of investment needed to develop deepwater reserves.

Brazil, Ecuador, Mexico and neighboring Uruguay will all auction offshore blocks in 2018 after undertaking oil market reforms or revising contract terms to facilitate the entry of the world's top energy companies. For Big Oil, the potential access to Latin American energy reserves is unprecedented. In many countries now opening, including Argentina, resource nationalism has long barred their entry or limited opportunities.

Six years ago, former populist President Cristina Fernandez expropriated Repsol's (REP.MC) stake in Argentina's state-owned oil company YPF SA (YPFD.BA). The move sent chills through both the energy industry and the entire private sector. Interviews with oil industry executives, consultants, geologists and officials point to optimism for Argentina's upcoming auctions and for President Mauricio Macri's government, which has sought private sector and US government help in structuring the process.

"Growing confidence in the current government's policies - their focus on trying to create an environment that is attractive for investments - has been the big change," Shell's head of deepwater Wael Sawan told Reuters on the sidelines of an industry gathering in Houston.

-Reuters, Buenos Aires

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