Thursday, November 29th 2012 - 06:42 UTC

Argentina increases 44% wellhead natural gas prices to attract investment

Argentine president Cristina Fernandez announced on Wednesday that wellhead natural gas prices are to rise substantially from current levels, an estimated 44%, with the purpose of attracting more investments and increasing production.

The country desperately needs foreign investors to develop the Vaca Muerta shale site

Argentina which is anxious to attract private investment to bring hefty shale energy resources on stream said wellhead prices would rise to 7.50 dollars per million British Thermal Units (BTU). The current price ceiling is about 5 dollars per million BTU, although prices at the wellhead average about 2.50 per million BTU in the Neuquen basin in southern Argentina, the country's main production zone.

Lower price caps had been part of a policy of supporting local industrial energy users and keeping home bills frozen, but forced Argentina in 2011 to import 3.5 billion dollars in hydrocarbons.

“We've decided to give incentives for gas production” Cristina Fernandez said at the end of an industrial forum to which was also invited her peer from Brazil, Dilma Rousseff. She added that the new price would be available for all energy companies that invest to develop new fields in the South American nation.

The government earlier this month vowed to increase consumer prices for natural gas and electricity as state-controlled energy company YPF hopes to lure partners to invest in the Vaca Muerta shale site, which may hold enough resources to double Argentina's oil and natural gas output.

A US Department of Energy report shows Argentina holds more natural gas trapped in shale rock than in all of Europe - a 774-trillion-cubic-feet bounty that could transform the outlook for Western Hemisphere supply.

YPF and US-based Chevron Corp have already signed a deal to consider jointly exploring for shale oil and natural gas in Vaca Muerta.

“We’re developing investment projects to diversify our energy matrix”, underlined the Argentine president adding that the country can overcome its current energy deficit in the mid term, and again defended the decision to nationalize a majority stake in YPF.

“Since we’ve recovered YPF there are no more queues at gasoline stations, and this was maybe because business decisions wanted Argentina and the Argentines upset over shortages. My apologies but I have become quiet susceptible about some business decisions during my government”, said Cristina Fernandez.

“The option was quite simple: instead of spending 3.5 billion overseas, let’s invest here in Argentina and produce our own gas, we have more than sufficient”, affirmed the Argentine leader.

 

30 comments Feed

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1 toxictaxitrader2 (#) Nov 29th, 2012 - 08:02 am Report abuse
Common sense at last,pay for YPF and you might attact investors,your habit of dishonouring international contracts mitigates against you however.
2 LEPRecon (#) Nov 29th, 2012 - 08:43 am Report abuse
@1

Agreed. This is a case of too little far too late.

I also think her adoring fans won't be too happy to see their fuel prices increasing at an amount way about the true inflation rate of 25%.

This could turn into a double edged sword for her. Yes, Argentina despately needs the revenue raised by its gas and oil fields, but the people of Argentina have been spoilt with extremely low fuel costs.

She should have started the price increases when she was re-elected, and gradually increased them. It wouldn't hurt the consumer too much then, as they would gradually get used to the increasing price. But to suddenly increase prices by 44%, and there is no way that these prices can't be passed on to the consumer, will no doubt see further and bigger demonstrations than occurred on 7N.

The woman is so inept...
3 CJvR (#) Nov 29th, 2012 - 08:57 am Report abuse
Hardly surprising, what would be the point of running YPF in the red when you have expropriated it.
4 British_Kirchnerist (#) Nov 29th, 2012 - 09:09 am Report abuse
#2 Keep dreamng, this is a clever move and I'm sure will NOT mean a 44% increase for the consumer...
5 Idlehands (#) Nov 29th, 2012 - 09:28 am Report abuse
4 British_Kirchnerist

How does that work then? Is the government going to buy it and then sell it to the people at a loss?
6 surfer (#) Nov 29th, 2012 - 09:50 am Report abuse
any entity that invests anything in Argentina must be out of their mind, you may as well just put a torch to it, at least you could warm your hands.
7 JuanGabriel (#) Nov 29th, 2012 - 10:37 am Report abuse
If any investments appears, expect the wellhead prices to be quickly 'converted' into Argentine Thermal Units.
8 Idlehands (#) Nov 29th, 2012 - 11:16 am Report abuse
An Argentine thermal unit is a tent.
9 Captain Poppy (#) Nov 29th, 2012 - 11:39 am Report abuse
Prices are not preventing investment and expropriation is not preventing investment. Expropriation and no reimbursement is preventing investment. If Repsol never gets reimbursed, the only investment they will get are the ones they can twist arms with like Chevron and the “lawsuits”.

BK to see asslips as clever your IQ and age must be awfully confusing for you.
10 Rufus (#) Nov 29th, 2012 - 11:41 am Report abuse
@8 Idle

That was last year, this year it's three quarters of a tent that the government statisticians tells you is a tent and a half.
11 CJvR (#) Nov 29th, 2012 - 12:48 pm Report abuse
@7 - LOL!
I think you have KFC's policy figured out.
12 GeoffWard2 (#) Nov 29th, 2012 - 01:36 pm Report abuse
If Repsol had been awarded the 44% - i.e. enough profitability to make viable their exploration and extraction program, there might well have been no expropriation - with or without any compensation (believe it when you see it).
And yes, YPE/government can sell this 'energy' temporarily at a loss, balancing the books elsewhere. Unfortunately, there are fewer and fewer places from which to balance the books.
['Temporary' means 'just before elections'.]
13 andy65 (#) Nov 29th, 2012 - 01:41 pm Report abuse
I bet that old botox queen almost choked having to use the words “British Thermal Units” not sure why any company would want to invest in such a country like Argentina
14 ProRG_American (#) Nov 29th, 2012 - 03:27 pm Report abuse
FANTASTIC!!! This will certainly yield positive results.
15 Captain Poppy (#) Nov 29th, 2012 - 04:11 pm Report abuse
#13 No real company with money will invest in Argentina unless they reimburse Repsol ...period. They can force a company like Chevron based from the court action in another country.........but nothing will change.
16 Simon68 (#) Nov 29th, 2012 - 04:14 pm Report abuse
Another tax that the Argentine people have to pay for the kirchnerist party costs!!!!

As it is where I live we pay almost 30% more for gas than do people living in Bs. As. and we produce 30% of the gas produced in the country!!!!

So now because CFK cannot keep up the payments to the unemployables we now will have to pay 44% more to heat our homes, thanks a lot CFK!!!!
17 Nostrolldamus The 2nd (#) Nov 29th, 2012 - 04:49 pm Report abuse
Bad move the companies will take those profits home and still not invest a cent. just like in the 90s when they enjoyed the world's highest rates in Argentina and the investment was nugatory.
18 Captain Poppy (#) Nov 29th, 2012 - 05:38 pm Report abuse
It a thinly veiled attempt to attract businesses to gain profitibility and then expropriate. Unlikely anyone will take the bait. Asslips the cuntina has six months to get something going before the cold weather arrives.
19 Capt.AssLips (#) Nov 29th, 2012 - 06:06 pm
Comment removed by the editor.
20 Agent909 (#) Nov 29th, 2012 - 06:12 pm Report abuse
he is an asshole
21 agent999 (#) Nov 29th, 2012 - 06:13 pm Report abuse
@19
goodnight sussie
22 Pirat-Hunter (#) Nov 29th, 2012 - 06:34 pm Report abuse
Keep up the good work CFK we love and support you 108%, let IMF thieves cry us a river.
www.gregpalast.com/the-globalizer-who-came-in-from-the-cold/
23 cuen_89 (#) Nov 29th, 2012 - 06:59 pm
Comment removed by the editor.
24 Ayayay (#) Nov 29th, 2012 - 07:03 pm Report abuse
BK is right. That's 44% in -dollars- so 69% increase in pesos. Wait, this doesn't even count in the planned deval to 5.3.
Is this is what they use to generate electricity? That would affect the cost of doing biz as well as home economics.
25 Nostrolldamus The 2nd (#) Nov 29th, 2012 - 07:10 pm Report abuse
About 52% is from fossil fuel (natural gas). Argentina is drowning in gas so that is not a huge issue. Oil is not used much in his area.

The other half is 35% hydroelectric (which is a very high figure in world standards), 10% nuclear, 2% geothermal, 1% wind and other.
26 briton (#) Nov 29th, 2012 - 08:29 pm Report abuse
even when they get their own,
they are not happy, and still want more.
27 Captain Poppy (#) Nov 29th, 2012 - 09:06 pm Report abuse
Nice to see that the moderators are keeping the knockoff posters at bay. A lot of the world today also considers hydro electric unfriendly to the environments....naturally argentina has the highest numbers
28 GeoffWard2 (#) Nov 30th, 2012 - 04:02 pm Report abuse
Every type of energy-winning is unfriendly to the environment in some way or another, either directly or indiectly (like opportunity cost).
But to live without energy is so definitely unfriendly to human beings ... like what happens to sub-Saharans when the wood/brush runs out.

Harms to the env. can be more local - eg hydroelectric, or more global - eg coal, shale oil/gas, etc ..... and the Argentinians will be helping the global destructions by favouring shale carbon over hydro-schemes.
29 toxictaxitrader2 (#) Dec 01st, 2012 - 11:10 am Report abuse
17 nostrolldamus the second
Of course the foriegn companys will take their profits home,thats what they do! why else would they my and other shareholders capital?
Of course if you had access to capital markets you do it yourselves,but you dont,so you cant
30 Doggy Rap (#) Dec 02nd, 2012 - 07:30 pm Report abuse
25 whatever name you use today

“Argentina is drowning in gas”

Really?

Why does Argentina import 2,000,000,000 US$ worth of natural gas, if Argentina is drowning in gas?

TTT caught in a lie as usual.

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