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SOUTH AMERICAN ENERGY MARKETS DAILY ROUNDUP (April 22, 2009): Eight ex energy secretaries express concern over Argentina’s ever-worsening energy situation

April 22, 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.

Wednesday, April 22, 2009

ARGENTINA/ENERGY CRISIS

Eight former energy secretaries signed a joint document expressing their deep concern for Argentina’s ever-worsening energy situation, writes Buenos Aires daily La Nacion. The former officials said that the lack of a coherent energy policy by the government had led to a plunge in drilled wells (54 in 2008 versus 103 in 1988) and investments. Argentina is also in danger of losing its self-sufficiency in oil.  The document will be presented today in Buenos Aires at the non-profit NGO Instituto Argentino de la Energia “General Mosconi.” It was signed by: Daniel Montamat, Alieto Guadagni, Enrique Devoto, Julio Cesar Araoz, Jorge Lapeña, Emilio Apud, Roberto Echarte and Raul Alocco. COMMENT: The eight ex energy secretaries reveal one of the biggest problems facing Argentina’s energy sector: the lack of adequate upstream investments to prove up hydrocarbons reserves. This is not only a problem in the present government, but also in the 1990s, when President Carlos Menem deregulated and privatized the energy sector.

PERU/GAS RESERVES

Brazilian energy group Petrobras is quoted as saying in state-owned news agency, Andina, that it will confirm in September the discovery of new gas reserves at Block 58, located next to Camisea (Block 88), Peru’s largest gasfield. Repsol is also exploring for gas in adjacent Block 57, where 2Tcf of proved reserves were announced last year. “Petrobras is already in the process of carrying out drilling and by September we plan to confirm additional reserves of gas,” said Pedro Sanchez, Petrobras Peru general manager. COMMENT: Due to low wellhead prices oscillating between $1 and $2/MMBtu, Peru has seen gas consumption soaring.  This has raised concern over whether there is enough gas to satisfy the domestic market. Peru suffered from power blackouts and bottlenecks last year due to rocketing demand.

ARGENTINA/GAS TARIFFS

Owing to mid-term elections on June 28 and the ever-worsening economic situation in Argentina, the federal planning ministry announced that 330,000 households would be exempt from tariff hikes approved by the government last year, writes Buenos Aires daily Clarin. The measure will cost the state 30 million pesos ($8.1 million/€6.3 million) and will pave the way for 25%-28% reductions in gas bills. Due to Argentina’s fiscal problems, the government finds it more difficult to subsidize energy. A charge in the gas bill is earmarked for a fund to pay for imported gas from Bolivia and LNG purchases. COMMENT: With state coffers shrinking rapidly and the economy in recession, the government will try to give and take in the ever-difficult task of balancing its books. With elections about two months away, the government will show its generocity.

BOLIVIA/GAS EXPORTS

Being hit by lower export volumes to Brazil and plummeted energy prices, the Bolivian government got a bit of good news when Petrobras, which imports 99% of Brazil’s gas, was reported to have raised purchases to 22.5 from 19 million cu m/day, reports Santa Cruz daily El Deber, citing state-owned energy company YPFB. Argentina has also raised imports from the landlocked country to 7.03 from 5 million cu m/day. YPFB attributed higher gas purchases from Brazil because hydropower installations had used up part of their water in order to generate electricity. Hydrocarbons minister, Oscar Coca, believes that gas exports to Brazil and Argentina will return to normal during the Southern Hemisphere winter months. Brazil purchased in 2008 an average of 30.917 million cu m/day, according to energy regulator ANP. COMMENT: The recession and higher output in Brazil will undermine higher imports from Bolivia in 2009. Even so, gas supplies from Bolivia will continue to play an important role in supplying Latin America’s biggest economy.

B OLIVIA-ARGENTINA/GAS EXPORTS

YPFB confirmed to SAEM late-Tuesday that Argentina and Bolivia have agreed on minimum and maximum gas supplies of 4-7.7 million cu m/day during the winter months. Bolivia has also proposed set volumes of uninterruptible gas exports to Argentina but Buenos Aires has not yet responded to the offer. YPFB authorities said that the Argentine government plans to spend $960 million on the GNA gasline, which will interconnect both countries and permit greater volumes to be supplied to Argentina.  COMMENT: Due to economic and political uncertainty in Bolivia, which has hit upstream investments, Argentina decided a year ago that it will seek LNG supplies and thereby try to reduce reliance on Bolivian gas. Like Brazil, energy-strapped Argentina needs Bolivian gas in the face of falling oil and gas reserves.

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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