Energy Information Administration
Argentina is a significant and growing Latin American energy consumer and a leader in the privatization of state-owned energy companies. It is also a net exporter of energy, primarily to neighboring Brazil and Chile.
To print this report, please download the PDF file and print it from Adobe's Acrobat Reader.
GENERAL BACKGROUND
Argentina's
economy has likely recovered from the downturn in 1995 following
the Mexico peso crisis which began in December 1994. According
to the WEFA Group July 1997 Report, Argentina's
economy grew by 8 percent the first half of the year and should
average 6.3 percent for 1997. This follows a moderate growth of
4.3 percent in 1995 and an economic downturn of 4.6 percent in
1995. The economy is expected to grow in the 4.5-5 percent range
for the next 5 years. The major risk to the forecast is not Mexico,
but a financial crisis in Brazil-such as, a major devaluation
of the Brazilian real even though Argentina's
economy barely reacted to the July 1997 scare in the Brazilian
financial market. Argentina has the highest per capita income
of the Latin American countries.
Economic stabilization has been a high priority under
President Menem, who took office in 1989 and was reelected to
a 4-year term in May 1995. The next election is in 1999. A key
component of current economic policy is the Convertibility Law,
enacted in 1991, which fixes the value of the Argentine peso at
par with the U.S. dollar and requires full backing by foreign
reserves. Another significant feature is the aggressive privatization
of state companies coupled with unbundling of services. Most public
utilities have already been privatized. These include telecommunications,
airlines, power generation and distribution, natural gas transportation
and distribution, water and sewage systems, and passenger and
cargo railways. In addition, a majority of state-owned production
facilities (including oil and gas extraction, coal mining, and
steel mills) have been sold.
In July 1993, Argentina privatized YPF, the state
oil company and the country's
biggest corporation, via the largest initial stock offering in
the New York stock exchange (more than $3 billion). Planned privatizations
remaining to be implemented include additional power plants (four
hydroelectric and three nuclear), airports, the post office, and
some petrochemical facilities.
Argentina's
continuing privatization activities over the last several years
caused someone to say: "The
1980's belonged to Chile, the 1990's belong to Argentina."
Major recent energy announcements in Argentina over the last year
involve a multitude of joint ventures. In the oil sector, major
ventures include Brazil's
Petrobras, Argentina's
YPF, and U.S. Dow Chemical "Mega"
LPG Project worth $650 million; Spain's
Repsol's
subsidiary Astra's
and YPF's
purchase of Mexpetrol Argentina for $200 million and plans to
invest $345 million; drilling for oil worth $200 million may begin
soon in the Falklands as Britain and Argentina resolve last minute
problems. The natural gas sector realized several major natural
gas pipelines and more proposals as Argentina eyes Brazil's
and Chile's
rapidly growing domestic gas markets. Most notable projects include:
natural gas is flowing through the GasAndes Project, 290 miles
at a cost of $325 million to take gas from Argentina's
Neuguen Basin to Santiago, Chile; and consortium of Alberta Energy
Company, Marubeni Corporation, and Mobil proposes to construct
a 1922 mile gas pipeline ("the
Mercosur pipeline")
to link the gas rich Argentina Salta region to Sao Paulo, Brazil
at a cost of $1.5 billion; Transportation Gas del Norte (TGN)
plans a 310 mile gas pipeline from Entre Rios in northern Argentina
to Rio Grande do Sul in southern Brazil. The possibly most important
event in the electricity sector is the August 1997 agreement
between Argentina and Brazil to integrate the two countries'
electricity markets with guaranteed free competition among generators,
banning all state subsidies, and requiring pricing be based purely
on costs. Privatization continued with the April 21, 1997 sale
of three distribution systems: U.S.'s
AES and CEA purchase of Empresa Distribuidora de Energia Norte
(EDEN) and Empresa Distribuidora de Energia Sur (EDES) for $565
million, and the purchase by Inversora Electrica de Buenos Aires
of Empresa Distribuidora de Energia Atlantica (EDEA) for $404
million; August 1996 purchase by Sodielec and Chile's
Electricidad of Empresa Electrica de Rio Negro (ERSA) for $97
million. However, problems continue to plague the Argentine and
Paraguayan Yacyreta hydroelectric project.
Argentina is a member of the World Trade Organization
and Mercosur (the Southern Cone Common Market agreement with Argentina,
Brazil, Paraguay, and Uruguay and associate members Bolivia and
Chile). Mercosur became fully effective on January 1, 1995 and
includes a free trade area and common external tariffs covering
85 percent of traded goods. Brazil is the largest single outlet
for Argentine exports.
OIL
Industry reform has encouraged many companies to
participate in Argentina's
oil industry, with more than 30 operators active as of early 1995.
Nevertheless, YPF still dominates production, accounting for 43
percent of oil production and 38 percent of natural gas production
in 1995. YPF is also seeking to evolve into an international producer
by expanding its upstream holdings overseas. In 1995, it acquired
Maxus Energy -- a U.S. company with operations in Bolivia, Ecuador,
Venezuela, Indonesia, Texas, and Oklahoma -- for about $750 million.
With $6 billion in annual revenue, YPF is by far the largest of
Argentina's
companies.
Most of Argentina's
oil is produced in two onshore basins: Neuquen (about 0.3 million
b/d) and Golfo San Jorge (0.2 million b/d). Other producing basins
are Noroeste (Northwest), Cuyana, and Austral. To date, there
has been little activity offshore. Puesto Hernandez, in the Neuquen
basin, serves as the starting point for three major pipeline routes
transporting crude oil north to the Lujan de Cuyo refinery near
Mendoza; over the Andes to Concepcion, Chile; and east to Puerto
Rosales on the Atlantic. About 30 percent of production is exported,
primarily to neighboring Brazil and Chile. The pipeline terminus
at the port of Concepcion, Chile, provides an outlet for shipments
to the U.S. Gulf Coast or the Pacific Rim, but so far only small
volumes have been shipped to these more distant customers.
Argentina has many unexplored areas in current producing
basins, plus 14 other basins that have not yet been developed.
Its offshore shelf holds particular promise for future discoveries
given its large size (larger than the North Sea) and relatively
shallow depths close to shore. However, the area is subject to
conflicting sovereignty claims near the Falkland Islands, which
Argentina claims as Islas Malvinas, 400 miles off Argentina's
southeast coast.
In 1982, the United Kingdom defeated a challenge
by Argentina in a brief war over claims to the Falklands/Malvinas,
and retains control over the islands. Despite continuing disputes
over sovereignty, Argentina and the United Kingdom signed an agreement
in September 1995 to share the potential economic benefits from
oil exploration in an 18,000 square kilometer (7,000 square miles)
cooperation zone southwest of the islands. Under the agreement,
a joint commission (U.K. and Argentina) will oversee exploration
and revenue-sharing in this area. In addition, Argentina agreed
not to obstruct a licensing round by the Falklands in areas outside
the cooperation zone. However, just before the Falklands announced
its bidding round in October 1995, Argentina announced plans to
charge companies operating in Argentina exploration fees and up
to 3 percent of oil revenues in these areas. As recent as July
1997, the two countries confirmed their interests in tendering
oil permits; but, their year end deadline may be in doubt.
Refining and Petrochemicals
Argentina's
petrochemical industry benefits from the availability of feedstocks
from the country's
substantial reserves of natural gas. Petrochemical operations
are also being privatized. In early 1996, U.S. firm Dow Chemical,
in partnership with YPF and Japanese firm Itochu, purchased 51
percent of ethylene producer Petroquimica Bahia Blanca (PBB) and
38 percent of polyethylene producer Indupa. In June 1997, Dow
Chemical joins Petrobras and YPF to operate the "Mega"
natural gas treatment project in Argentina. The plant will produce
600,000 tonnes of LPG per year.
NATURAL GAS
Argentina's
Gas Law, enacted in June 1992, privatized the natural gas industry.
Former state monopoly Gas del Estado was split into two pipeline
companies, Transportadora de Gas del Sur SA (TGS) and Transportadora
de Gas del Norte SA (TGN), and eight distributors. TGN and most
of the distribution operations were sold to private investors
in December 1992. Later, TGS -- which supplies gas mainly to southern
Argentina and greater Buenos Aires -- went public in early 1994.
State regulatory agency ENARGAS sets rates for natural gas carriers
operating under a non-discriminatory "open access" system.
Additional pipeline capacity is needed to serve growing
domestic markets, as TGN and TGS now operate near capacity. Argentina
also plans additional pipeline capacity to serve new markets in
neighboring Brazil and Chile. The most advanced of these plans
are two competing projects to transport natural gas from the Neuquen
basin over the Andes to Chile by mid-1997: GasAndes, a $325 million
project led by Canada's
NOVA Corp., was opened August 1997 with Chile purchasing 3.2 million
cubic meters of gas daily. At this point the competing TransGas
project, a $689 million project led by Tenneco, British Gas, and
YPF appears to be stalled. The GasAndes project involved construction
of a 290-mile pipeline (350 million cubic feet/day capacity) from
La Mora, Argentina to Santiago, Chile, with gas shipped from the
Loma La Lata area via existing pipelines to La Mora. TransGas
proposes a 750-mile route beginning near Loma La Lata to Concepcion
(Chile), then north to Santiago. GasAndes has firm contracts with
Chile's
main electric power producers (Endesa, Chilgener, and Colbun)
and other large customers. TransGas plans to serve new combined-cycle
power plants scheduled to come on-stream between 1998 and 2001.
Recently announced by Marubeni, Mobil, and Alberta Energy Co.
(AEC) is a proposed $1.5 billion "Mercosur"
gas pipeline to Sao Paulo, Brazil by the end of 1998. TGN proposes
a 265 mile pipeline to Rio Grande de Sul. Gasoducto Atacama project
of U.S. CMS and Chile's
Endesa include a 575 mile pipeline to run from Argentina to Mejillones,
Chile. Two 355 megawatt power plants are to be built with toal
costs at $750 million. Future exports to Uruguay are also being
considered.
ELECTRICITY
Between April 1992 and June 1995, over twenty five
state operated electric power companies were privatized. (See
1992-1995 Electric Power Privatization table at the end of this
document). In April 1996, Argentina sold its remaining stake in
distribution company Empresa Distribuidora La Plata (Edelap).
Government shares in two distributors serving the Buenos Aires
area - Edenor and Edesor - were sold in December 1995. The government
retains a 19.5 percent share in Edenor, since the winning bidder
declined to purchase the full 39 percent offered. The government
also chose to retain its 25 percent share in transmission company,
Transener, after receiving only one bid in December 1995. In August
1996, the power utility of Rio Negro was sold for $97 million.
In November 1996, the Jujuy province in northwestern Argentina
electric distributor, Compania General de Electricidad (CGE) was
sold for $46 million. On April 21, 1997, the government sold 3
electricity distribution systems, EDEN, EDES, and EDEA, for $969
million. Several electric power ventures are in the works. Chilgener
Power Generator plans to build a 164-mile transmission line to
link gas-fired power plants in Argentina's
Salta province with northern Chile; U.S. CMS purchased a 128 megawatt
cogeneration unit in Buenos Aires.
Argentina's
oil industry has been revitalized in the 1990s as a result of
two developments: 1) the drastic restructuring and privatization
of former state oil company YPF and 2) increased private (including
foreign) investment, encouraged by changes in investment law and
a favorable tax regime. Production increased by about 50 percent
over a 4-year period (from less than 500,000 b/d in 1991 to more
than 750,000 b/d in 1995) and is projected to reach 1 million
b/d by 2000. The company's
annual growth goals announced in June 1997 are 9 percent per year
in natural gas and 3.5 percent per year in petroleum.
Argentina
YPF-Petrobras Service Stations
The two companies plan to jointly operate 1500 services stations in other Brazil and the Buenos Aires area.
Repsol's (Spain) Astra Capsa-YPF
Through its subsidiary Astra Capsa, Repsol and Argentina's YPF have purchased Pemex's Mexpetrol Argentina for $200 million and plan to invest $345 million in Argentina. Astra purchased 10% of YPF during its privatization for $753 million.
Mega Natural Gas Treatment Project-Petrobras, YPF, Dow Chemical
Dow chemical continues to expand in Argentina with 38 percent share of proposed natural gas liquids treatment plant in Argentina with a capacity of 36 million cubic meters, and lans to produce 600,000 tonnes of liquefied petroleum gas (LPG) and other products. Will have to construct a 420 mile pipeline and GOSP. Total cost estimated at $650 million.
Falkland Islands Oil Exploration
Argentina and Britain plan to jointly drill for oil in the cooperation area off the Falkland Islands at a cost of $200 million. This project has been stalled severa times and bidding cannot start until the two governments reach agreement. In July 1997, the two confirmed their interest in tendering oil permits before the end of the year.
Argentina's
12 oil refineries produce petroleum products primarily for the
domestic market. In addition to the three largest refiners --
YPF, Shell, and Esso -- the much smaller EG3 consortium (Astra,
Isaura, and Puma) is an important player in the downstream market,
controlling 14 percent of the retail fuel market. Shell, Esso,
and YPF (the largest refiner) are investing heavily in upgrading
to produce lighter products and enhance octane in gasoline as
the country makes the switch to unleaded gasoline. Refiners run
local, low-sulfur crudes almost exclusively.
Argentina has the second largest proved reserves
of natural gas in South America (after Venezuela). Because most
of these reserves were discovered as a result of oil exploration,
current production is concentrated in the same five basins as
oil production (Noroeste in northern Argentina, Cuyana and Neuquen
in the center of the country, and Golfo San Jorge and Austral
in the south).
Argentina
GasAndes Pipeline - (Operational August 1997) \
Argentina - Chile
Canadian NOVA Corp.
The GasAndes Pipeline is 290 miles in length and runs from the Neuquen Basin gas fields in Argentina to santiago, Chile across the Andes. Cost is $330 million. Chile purchased 3.2 million cubic meters per day at startup
Tartagul-Antopagasta Link
Argentina-Chile
U.S. CMS
Merconsur Gas Pipeline
Argentina-Brazil
Alberta Energy Co. (AEC)
Marubeni
Mobil
Proposed pipeline is 1922 miles long and is to connect the gas rich Salta region of Argentina to Sao Paulo, Brazil. Expected costs are $1.5 billion. Could start building at the end of 1998 if sufficient contractual gas customers.
TransGas Pipeline
Argentina-Chile
Tenneco
British Gas
YPF
Apparently TransGas Pipeline stalled as GasAndes pipeline completed route first.
Gasoducto Atacama Project
Argentina-Chile
U.S. CMS
Chile's Endesa
Proposed pipeline is 575 miles to run from Argentina to Mejillones, Chile. Chilean ENDESA to build two 355 megawatt power plants. Total costs at $750 million. Gas to be supplied by Pluspetrol and Astra at 93 million cubic feet per day and by YPF at 32 million cubic feet per day.
TGS Pipeline Expansion (Transportadora de Gas del Sur SA - Argentina
TGS is South America's largest pipeline company with 1.9 billion cubic feet per day capacity in 3 pipelines an dprocesses most gas in Argentina. This expansion is at the General Cerri gas processing plant of 490 million cubic feet per day at a cost of $60 million.
Gas Distribution
Gas de France, Bridas Sapic, Argentina Emprigas
$150 million to distribute gas in five northeastern provinces of Argentina.
TGN, (Transportadora Gas del Norte) Pipeline
Argentina-Brazil
TGN plans to build a 265 mile pipeline fro Entre Rios in northern Argentina to Rio Grande do Sul in southern Brazil.
Rasmos Gas Field Development
Amoco
Shell
Repsol
Total
Plan to purchase Argentina's second largest gas field, Ramos, at between $300-400 million with expected output of 7 million cubic meters per day (200 million cubic feet per day). Argentina's largest gas field is YPF's Loma de la Lata.
Tocopilla Pipeline
Argentina-Chile
ElectroAndian SA
Plans to build and operate a gas pipeline from the Argentina's Salta region to the tocopilla port in North Chile.
Argentina's
electric power sector has been privatized and deregulated, with
separate markets for generation, transmission, and distribution.
The administration of the wholesale market is carried out by CAMMESA,
a non-profit institution whose capital stock is shared equally
among the generators, carriers, distributors, major users, and
the Energy Secretariat representing retail customers. Recent additions
to capacity have been mainly hydroelectric plants. The largest
project is the Yacyreta plant (3200 megawatts), located on the
Parana River and jointly owned by Argentina and Paraguay. The
first unit began generating electricity in 1994 and the plant
is expected to be fully operational in 1998. The Yacyreta and
other hydroelectric projects (including Pichi Picun Leufa and
Piedra del Aguila) are slated for privatization. Some additional
problems have arisen with respect to the Yacyreta dam construction,
and it was announced in March 1997 that the World Bank is to evaluate
environmental and resettlement problems. The plant was to be the
largest hydroelectric exporter, but is nine years behind schedule.
Yacyreta is to be privatized as soon as the governments of Argentina
and Paraguay approve the sale. Argentina is also building a nuclear
power plant (Atucha 2), which it plans to privatize along with
its two operating nuclear plants (the 335 megawatt Atucha 1 and
600 megawatt Embalse).
Argentina
Electric Power Privatization
1996-1997