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SOUTH AMERICAN ENERGY MARKETS DAILY ROUNDUP (April 21, 2009): Bolivia’s YPFB promises to supply Argentina in winter with 4-7.7 million cu m/day

April 21, 2009

South America Energy Markets (SAEM) publishes a daily roundup of the top-five stories affecting energy markets in the region with links. The roundup includes all the major web dailies of South America and other websites that write about the region’s energy markets. SAEM Daily Roundup appears from Monday through Friday and is published by noon London time.

Tuesday, April 21, 2009

BOLIVIA-ARGENTINA/GAS EXPORTS

The governments of Argentina and Bolivia agreed on Monday on gas supplies during Southern Hemisphere winter, writes Santa Cruz-based daily El Deber. Under the gas-purchase agreement, state-owned energy company YPFB will supply in winter between 4 and 7.7 million cu m/day. Due to a plunge in exports to Brazil (see South American Energy Markets Daily Roundup, April 20, 2009), Bolivia has more gas for Argentina than last year, when it supplied Latin America’s largest economy with an average of 30.917 million cu m/day, according to energy regulator ANP. COMMENT: Argentina needs Bolivian gas as much as a human requires oxygen to survive. Argentina will also get a little help from the leased LNG terminal at Ingeniero White, located next to Bahia Blanca, which will supply a maximum of 8 million cu m/day.

ARGENTINA/GAS TARIFFS

Argentine consumers are up in arms over rising gas tariffs, which were approved last year by the government, writes Buenos Aires daily Clarin. The new tariff scheme, which excludes low-income families, punishes those households that have higher gas consumption. An analyst close to the sector told SAEM that some consumers can pay up to 50% more in tariffs than before. “The more you consume the more you pay,” the observer said. Part of the new tariff hikes, which aim to pay a higher wellhead price to producers, goes directly into a fund to finance gas imports from Bolivia and LNG purchases. COMMENT: Taking into account that the trade surplus shrunk by 60% in March to $240 million, it is no surprise that the government is desperately seeking to finance energy imports by raising tariffs. Tariffs will continue to rise in Argentina as the fiscal situation deteriorates.

BRAZIL/GAS CONSUMPION

Despite Hydrocarbons Mininster Oscar Coca’s assurances that Brazil will start purchasing more gas from Bolivia in winter, some believe that the last thing Brazil will need this year is more gas from its western neighbor. A good example of Brazil’s gas surplus is flaring, which reached 8.14 million cu m/day, up 25% from a year ago, writes Hidrocarburosbolivia.com. Another factor that makes it unlikely that Brazil will need more gas in winter is higher production, which rose last year by 19% to 59.2 versus 49.7 million cu m/day thanks to the Plangas program that aims to reduce reliance on Bolivia for gas imports. COMMENT: Irrespective of higher demand, Brazil needs Bolivian gas in the long term. Since Brazil produces 80% of its electricity by hydropower installations, gas is important if rainfall levels fall.

ARGENTINA/POWER SECTOR

(Originally published on April 20, 2009) Argentine government has secured the needed $300 million to convert the two single-cycle gas-fired plants at Campana and Timbues into combined cycle gas turbine (CCGT) plants. The plants are in Buenos Aires and Santa Fe province. Financing for the 1.6GW power CCGTs was received by the following groups: $251 million came from Anses, the former private pension fund nationalized by the government in November 2008, followed by  $49 million from banks such as Banco Nacion ($10 million), Bice ($10 million), Banco Provincia ($8 million), Banco Galicia ($5 million) as well as energy companies such as Pan American Energy ($3 million), YPF ($2 million) as well as others.  COMMENT: The government has built a lot of generating capacity in the past two years but has not yet proved up gas reserves and sufficient output. The problem will get worse before it improves.

PERU/ENERGY EFFICIENCY

(Originally published on April 20, 2009) Energy regulator, Organismo Supervisor de la Inversion en Energia y Mineria (Osinergmin), published a draft law that aims to bolster the efficiency of gas usage in Peru, writes state-owned news agency Andina. The new law aims to increase gas-consumption efficiency by power plants. Some analysts believe that the power crisis last year and surging gas consumption is due to cheap wellhead prices, which are at $1-$2/million BTU. Low gas prices encourages consumption at the cost of efficiency, according to some energy observers in Peru. COMMENT: One of the biggest questions is how this plan will work in practice. Offering cheap gas tariffs to the domestic market is a sensitive political issue in Peru that the government does not want to face head on.

These briefs can be reprinted as long as the source is cited.

If you have any feedback on today’s articles, or if there are energy industry stories you think should be covered, or need research assistance, please contact etessieri@latamreport.com.

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