13-08-08 Argentina's exports of crude oil and refined products have plunged by nearly 60 % over the past 10 years because of declining production, limited refining capacity, high taxes and rising domestic demand, a report showed.
Exports of crude fell 56.7 % between 1998 and 2008, even though the international price shot up nearly tenfold to $ 110/barrel from $ 12.8/bbl over the same period, the Institute of Argentine Social Development (Idesa) in Buenos Aires said. During the same period, exports of diesel and gasoline plunged by 46.6 %, it said.

According to the Energy Secretariat, crude oil exports fell 35 % to a 15-year low of 56,888 bpd, or 9 % of production, in 2007 from 87,534 bpd, or 13 % of production, in 2006. That was down from a high of 333,100 bpd, or 40 % of production, in 1997.
Argentina's export tax structure is discouraging production and exports, Idesa said. The country uses a fluctuating rate based on international reference prices, and it is now at more than 70 %.

At the same time, the structure is failing to satisfy domestic demand because it has deterred investment in exploration and production and refining capacity. Domestic diesel consumption, for example, has far surpassed refining capacity, forcing the country to import greater amounts. Diesel importers are expected to reach 9.4 mm barrels this year, up from 5 mm in 2007.
Oil production fell to an average 617,000 bpd in the first five months of 2008, the lowest since 1993 and down from a record 847,000 bpd in 1998, according to industry data.

The export taxes along with domestic price controls and regulatory uncertainty are deterring investment to find new reserves to offset dwindling capacity at maturing fields.
"This is provoking vertiginous drops in exports and the growing necessity of importing to diminish shortages in the domestic market," Idesa said. While consumers "enjoy artificially low prices, the effect is transitory because the decline in production is making the goods scarcer."

Argentina's pump prices are around 60 % below those in international markets.
"The way to increase exports without causing shortages in the domestic market is to increase production," Idesa said. "To encourage production there needs to be adequate incentives, especially attractive domestic prices."

The government is considering jacking up the price on new supplies of oil and natural gas. Oil-producing provinces want the crude cap to be lifted to $ 50-$ 52/bbl from $ 42-$ 47/bbl.
And the federal government, which sets prices, has said it is considering a hike on the price of new gas to as much as $ 4-$ 5/mm Btu from a current average of $ 1.40-$ 1.50/mm Btu.