Argentina importing up to 11.3 mm cmpd in fuels

Oct 27, 2008 01:00 AM

Argentina is importing a natural gas equivalent of 300 mm-400 mm cfpd (up to 11.3 mm cmpd) in alternative fuels to meet growing consumption and declining production, Rob Johnston, an executive with Houston-based oil company Apache, said in an analyst presentation.
"The country is currently producing 4 bn cfpd and consumption is already exceeding that by 300 mm-400 mm cfpd," Johnston said. "And that's specifically consumption not demand. Demand exceeded consumption about two years ago."

While Argentina had been hoping to depend on imports from Bolivia to meet growing demand, Bolivia has only been able to supply Argentina an average of 63 mm cfpd since the beginning of the year despite having a contract to supply 565 mm cfpd for $ 9.03/tcf.
"In the last months, Bolivia has not averaged any exports and Argentina has turned to additional imports," Johnston said.

Argentina, for example, has imported nearly 17 bn cfpd of LNG at $ 15.96/thcf. Argentina has also been relying on fuel oil imports, 10 times more expensive than natural gas, to fire its thermo plants.
"They import all these commodities at world prices and sell them at domestic prices that are 1/10 to 1/15 the cost they pay and subsidize the difference," Johnston said, adding these subsidies this year would exceed $ 6.5 bn. Next year's budget, which is before the country's upper house and expected to pass in coming weeks, provides $ 2 bn for fuel subsidies.

Prices to rise
Energy prices in Argentina thus will be forced to rise. Apache expects to see prices for natural gas and oil increase because of new programs to incentivize additional production. Natural gas prices average $ 1.60/tcf and oil is averaging $ 45/bbl.
The already implemented Gas Plus program, which allows producers to sell incremental production into the unregulated market, could add $ 1-2/1,000 cf to the regulated price, Johnston said.

Apache already has received conditional approval for its Estacion Fernandez Oro and Anticlinal Campamento fields to join Gas Plus. The company expects approval for its Al Sur de la Dorsal, Al Sur de la Norte Dorsal, Portozuelo, Ranquil Co, Lomo Negra, Guanaco and La Calera fields, according to Johnston's presentation.
Argentina's government also is designing an Oil Plus program that would provide incentives for oil E&P by reducing or eliminating the retention tax that caps prices at $ 45/bbl. Apache's application to join the program will include all of its Centenario field and most of its Tierra del Fuego blocks, according to the presentation.

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