Argentina could become net oil importer by 2008

Aug 01, 2006 02:00 AM

Argentina is forecasted to become a net importer of crude by 2008/2010 if the absence of oil exploration persists according to Argentine consultants.
“By the end of this year Argentina will reach its self sufficiency capacity and by 2008 will become a net importer of oil for the first time in fifteen years”, says a report from the consultant firm of Economia & Regiones, belonging to economists Rogelio Frigerio and Alejandro Caldarelli.

Daneil Montamat, a former YPF CEO and an energy consultant is not so pessimistic but admits Argentina will have to import light crude to compensate for the excess heavy crude by 2008. Economia & Recursos estimates that in 18 months Argentina will be importing 8.3 % of its current oil demand equivalent to 20 % of Neuquen production which is the largest hydrocarbons producing province of the country.
“This at current prices is equivalent to over a billion dollars and more threatening: experience shows that countries which become oil importers get used to it and loose interest in further exploration”, warns Frigerio.

Although Argentina has a long history of oil importation, during the administrations of Presidents Arturo Frondizi, 1958/61, and Ricardo Alfonsin, 1988 managed self sufficiency and in 1992, under President Carlos Menem became a net exporter of oil and gas.
But with no changes in sight, “Argentina will have to import 21.5 % of its oil needs”, underlines Frigerio.

Veronica Sosa an economist involved in the compilation of information for the report said that all investment and exploration plans of oil companies are “retained or delayed”. But the situation could be reversed in “the mid term” with new findings and further development of existing deposits, adds Sosa who said that all Argentine oil producing provinces are forecasting an annual production drop between 3 and 5 %.
However Argentine government sources deny such a scenario, “production will increase slightly this year, and if production is up, there’s no need to import crude”.

Anet importer situation for Argentina could have a fulminating impact in prices of many oil industry related by products -- and inflation -- which is why the Kirchner administration is currently so insistent in keeping hydrocarbons prices under control and unlinked from international markets.
Argentina’s oil peak production was in 1998, but extraction since has dropped 21 % and at the end of 2005 was back at 1994 production levels. In 1992/93 the Menem administration launched the deregulation of the hydrocarbons sector which rapidly led to Argentina becoming a net exporter of oil and gas.
“So we’re back to where we started in 1993, but without the horizon of proven reserves we had then”, indicates economist Sosa.

Argentina and Colombia are the only South American oil producing countries which have seen output drop, while production increased 11 % in Brazil; Ecuador 1.1 %; Peru, 11.5 %; Trinidad & Tobago 13 % and Venezuela 1.1 %.
Brazil could be a model example for Argentina argues Sosa, in 1998 Argentina extracted 5 % more oil than Brazil and was a net exporter of fuels, “but now Brazil pumps three times more oil than Argentina and is almost self sufficient, a condition Argentina is loosing”.

Regarding similarities and differences between Argentina and Brazil, economist Montamat says that “both countries have oil, are not oil producing/exporting countries and have many unexplored basins”. However Brazil “respected international market prices, but not Argentina, and even when Petrobras is government owned and managed it had sufficient funds to keep exploring”.
Argentina’s heavy taxes on oil and gas exports encourage domestic consumption but hinder investment in exploration and exploitation.

Economia & Regiones supports its arguments comparing production prices in Argentina for gas and oil. While gas at the well in Argentina receives $ 1.5 per mm Btu, in New York trading the equivalent price is $ 9.1.
Similarly with oil which has a 45 % tax in Argentina pushing the barrel price to $ 38 compared to $ 57 in Texas.

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