An Argentinian federal judge Tuesday suspended a 500% hike in natural gas tariffs on small and midsized businesses, a fresh setback for the government's efforts to spur investment to boost gas production.
Miguel Vaca Narvaja, a judge in the heartland city of Cordoba, ordered the postponement after reviewing a collective lawsuit by the Assembly of Small and Medium Entrepreneurs, a national business chamber based in Buenos Aires.
This means that gas tariffs must return to March 31 levels, a day before the government hiked them by 500% on small and midsize companies, the business chamber said in a statement. The tariffs will remain frozen until December 27, it added.
The judge's decision is similar to one that led the country's Supreme Court to suspend a 400% hike on household tariffs in August on the arguments that by law a public consultation had to be held previously and that the increase should be less drastic for consumers.
The initial hike received widespread complaints at a time when the economy is recession and the inflation rate is touching 40%.
The government of President Mauricio Macri subsequently held the public consultation September 16 and now plans to hike residential rates 203%, effective October 1. The increase will be followed by 10% hikes twice a year, taking the wellhead portion of the tariff to $6.78/MMBtu in October 2019 from a current $1.29/MMBtu.
With higher wellhead prices, the government wants to reel in investment to pull up production from a 10-year low of 113.7 million cu m/d in 2014 by developing the country's shale and tight gas potential, as well as offshore resources. The unconventional resources, among the world's largest, have led a 7.5% recovery in production to nearly 123 million cu m/d this year.
A press worker at the Energy Ministry said he didn't have immediate information on the government's reaction to the ruling.
It is likely that the ministry will appeal, the state newswire Telam reported, citing unnamed sources.
Argentina consumes 130 million-180 million cu m/d of gas, of which households account for 25%, power plants 34% and businesses 32%, according to Enargas, the national gas regulator. Most of the rest is for compressed gas used as a motor fuel.
Macri has said that by increasing domestic gas production, Argentina will be able to reduce costlier imports that this year are meeting a third of consumption. He wants to eliminate LNG imports by 2021-22, which account for about half of the imported supplies.
The biggest gas producers in Argentina are state-run YPF, France's Total and BP-controlled Pan American Energy. They and other companies like ExxonMobil and Shell have multi-million dollar projects in development or in the planning phase to produce shale and tight gas resources in plays like Lajas, Mulichinco and Vaca Muerta.
