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ECONOMY | 06-06-2024 00:50

Ex-Energy and Mining secretary Flavia Royón: 'RIGI is necessary’

Former Energy & Mining secretary in Alberto Fernández and Javier Milei governments says RIGI investment incentive scheme is “necessary to develop LNG, hydrogen and mining projects.”

Flavia Royón was Argentina’s Energy & Mining secretary in the last two years of Alberto Fernández’s 2019-2023 government, having covered the same portfolio at provincial level in Salta Province two years previous. 

She continued on with President Javier Milei’s government as Mining secretary, but lasted only until February before being forced out.

After Argentina’s recent energy crisis due to faltering gas supplies, Royón defended the track record of the Fernández government in that area, pointing out that the responsibility for this crisis belongs entirely to the Javier Milei administration.

Royón maintains that the current government has not paralysed the works on the compressor plants for the Néstor Kirchner gas pipeline, which will finally be completed.

She further argues that the RIGI (Régimen de Incentivo para Grandes Inversiones) investment scheme is necessary to reduce the tax burden and encourage projects for LNG (liquefied natural gas), green hydrogen and mining.

As for the ongoing crisis in the Human Capital Ministry, Royón pointed out that it is a challenging portfolio due to the sheer number of key areas it contains. 

“It is very difficult to consolidate a team, above all with the technically trained and the experienced,” she declared in an interview with Modo Fontevecchia, for Net TVRadio Perfil (AM 1190) and Radio Amadeus (FM 91.1).

 

Throughout recent days, different energy sectors exchanged opinions as to the responsibilities of current and previous governments for the gas crisis, arguing that the Néstor Kirchner pipeline was inaugurated with half its transportation capacity for lack of compressors. From some I heard that the compressors were 60 percent ready and would have been completed while others said that they were 20 percent ready and would have been impossible to finish before this year’s cold weather. Could you sum up this issue as didactically as possible? 

Yes, much has been said but what is true is that the gas pipeline has been completed and could double its capacity with the compressor plants whose original date of completion was at the end of last year but well, like all such works, it had its delays. But clearly, as from last December, the new government is continuing the work but it should have been ready before the arrival of winter.

The gas pipeline was indeed finished although some said that it was not or that the works had been halted for ideological reasons. The reality is that today nobody cares what the gas pipeline is called, whether Neuba, Néstor Kirchner or whatever. The pipeline is complete with the compressor plants missing.

The new government will continue work on both the compressor plants and reversing the flow of the northern pipeline but they won’t make it before the arrival of winter although scheduled for the end of last year. There are always delays with this kind of works. We could not complete them in our government, especially in its final stages because when you lose elections, you enter into a transitional period where you advance as much as you can.

That is also important with strategic works like, for example, reversing the flow of the Northern Gas Pipeline, we advanced as much as we could by tendering its three stages (one of which had to be retendered, in fact) but our government could not advance much more when entering into a transitional period. The good thing about this government, which should be highlighted, is that having said that there would be no more public works, they have had the pragmatism to continue these works although not at the desired pace to complete them before winter. 

 

Upon the change of government, were the compressors which would have permitted the volume of gas shipments to be doubled 60 or 20 percent advanced. How long was the delay as from December 10 before concluding those works? 

Well, there are three of those compressor plants, one of which in Neuquén was the most advanced at 80 percent, while the other two were more behind.

 

With 80 percent, would finishing the 20 percent lacking have solved this gas problem?

Let’s differentiate between two things. That would have increased the gas transportation capacity. Now the margin of whether the plants are ready or not – and in the case of one of them we would have known by February or March – is a factor for planning purchases but in May last year neither the gas pipeline nor the compressor plants nor the shortage of gas existed.

What I mean here is that whether the gas pipeline and the compressor plants are on stream or not is one thing and the shortage of gas, quite another. When paying for or planning the import of electrical energy and the purchase of LNG, that is a factor to be considered at the moment of planning the purchase. 

In other words, if the compressor plants are not there, you buy a bit more gas – that’s not the fault of whether the compressor plant is there or not. If it is in action, that means more savings because you import less but those are issues of fiscal austerity and foreign currency reserves, not gas shortages.

 

How much would have completing the compressor plant cost and what would have been the import savings if it had existed?

The total investment in the compressor plants was around US$300 million while the import savings in global terms, whether electrical energy, liquid fuel, etc., would be around US$500 million. Thus all those investments into the gas pipelines, the plants and fuel reversal would be recovered by the state in less than two years. 

 

Tell me about Argentina’s future mining prospects and what is your opinion of the RIGI [major investment incentive scheme]?

I think there is a huge opportunity. We have a sector of mining and energy, above all mining, which we Argentines have still not generally incorporated into our daily lives as we should. We have a sector with a vast potential but which we have still not developed and there we have a huge difference with Chile or Peru.

Mining moves from day to day. Argentina today, with the projects in the pipeline, could be one of the world’s top 10 copper suppliers and we have no project of copper. The RIGI scheme is necessary to develop projects for LNG, infrastructure, [green] hydrogen and mining.

Among what I find positive, I firstly think that it’s important to recognise and celebrate that the government has submitted a bill relinquishing taxation so that these sectors can make things happen. In fact, we had submitted a bill specifically for LNG very much aligned with the RIGI. I believe that we conversed about that in our last interview, highlighting the common points in the agenda, above all regarding these strategic sectors, the continuity of this kind of works and the conditions offered for those sectors to move ahead – we have to build on that.

Within RIGI they are correcting the issue by granting a series of advantages to local suppliers. This kind of extractive industry – gas, oil and mining – not only aims at more exports but also a multiplier effect for jobs and the network of suppliers. And Argentina is a country with skilled labour where the network of suppliers of both products and services for these major projects is already developed. Now if the bill comes with a total import duty exemption, thus placing at a disadvantage the local supplier who has to pay everything, this is a problem which the latest version tackles.

The other issue is duration. The RIGI runs for 30 years – I think that 20 years would have been reasonable but that is a point which can be moved further ahead. And then there is the issue of provincial autonomy also partially solved in the latest version of RIGI. 

Just as it is my opinion that RIGI is necessary, so we must advance and have a post-RIGI agenda of promotion and growth. Argentina is a country which has had its problems of credibility and today we must start to show that Argentina is a reliable country, respecting this régime and beginning to construct the development of these sectors with an outlook of sustainability and inclusion so that there is a multiplier effect of creating both direct and indirect jobs so that these projects can go ahead.

 

Alejandro Gomel: You were in this Cabinet between December and February under [Economy Minister] Luis Caputo, whom [President Javier] Milei called “the piggy bank” because there was no way of squeezing a peso out of him. What happened in that relationship, above all with the need for money? Was that need understood? Was it so difficult to get money out of Caputo?

I did not participate in those specific conversations.

These kind of works, apart from money, of course, also requires staying on top of things and a lot of handling of the suppliers so that they are not simple works to carry out.

Minister Caputo is a very intelligent man and I believe that if you simply explain to him the savings in comparison with the investment, above all in such a complex year for Argentina, he would understand rapidly but I did not participate in those conversations and nor can I assure you that the delays were simply an unwillingness to spend because there is also an important number of these works which run themselves. 

 

AG: When this government took office, were [public] works halted?

As I understand it, [public] works were never totally halted – they might have slowed down but they were never discontinued. What the transition did do was to underline the importance which we attached to those works.

But again, beyond ideological issues, I always try to be as objective and professional as possible. [Public] works are important for our country and during the transition we informed the new government about their state of play and they picked up the baton. I never received information that these works had been totally discontinued, I believe them to be slowed down but never halted. 

 

JF: Is it possible to take charge of government without technically trained cadres and with a Human Capital Ministry concentrating an enormous number of areas which previously had their own Ministry? I’m asking you for an opinion, beyond it being exactly quantifiable.

No, it is very difficult to consolidate a team, above all with technically trained and experienced cadres. It takes time, of course, as well as aligning them with the leadership and giving them an objective.

I do not know all the details but, of course, from the outside the Human Capital Ministry looks important and enormous, facing big challenges. When one has both provincial and national administrative experience, one understands the dynamism of administrative decision-making, especially in a new government with the technically trained cadres it has because these often retire. But it is doubtless very difficult to run things without all the technically trained.

When you enter government, along general lines there are technically trained cadres while others must also be taken back but again it depends on every case in particular. The Human Capital Ministry is enormous and I believe that it is the most difficult within all the government because of the number of key areas it contains and the number of conflicts within those key areas.

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by Jorge Fontevecchia & Alejandro Gomel

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