MercoPress. South Atlantic News Agency

Repsol YPF lifts Jan-Sep. gas output 12%.

Spanish oil company Repsol YPF increased its total gas production 11.8% to 598,000 barrels of oil equivalent a day (boe/d) in the first nine months of 2004 thanks to higher production in Bolivia, Argentina and Trinidad & Tobago, the company said in its earnings statement.

Gas production in Bolivia rose 38.2% in the period because of higher sales to Brazil and the start of exports to Argentina, the statement said.

Despite strikes and operating problems in Argentina and Trinidad & Tobago, gas production increased in these countries by 8.7% and 14.9% respectively.

The improvement in Trinidad was due to a full year of production from Atlantic LNG's Train 3, the statement said. Train 4 is scheduled to start up in 2006.

Argentina

Repsol YPF's new chairman and CEO Antonio Brufau plans to be "personally involved" with the company's activities in Argentina in the coming months, he said during a conference call Thursday.

In Argentina, Repsol YPF "faces major challenges but also many, many opportunities," Brufau said, adding the company aims to contribute to the country's economic recovery.

Due to higher oil and gas export taxes imposed by the government, the company plans to make the "best use of our competitive advantages from the integrated nature of our business," Brufau said, referring to Repsol YPF's refining capacity in the country.

Meanwhile, the company is making use of its gas production facilities in Bolivia to export more gas to meet Argentina's deficit. Repsol YPF currently produces 75% of the gas exported from Bolivia to Argentina, and it expects to maintain this percentage in the future, CFO Ramón Blanco told the conference call.

Current exports are some 4mcm/d, although agreements are in place for that to rise to 6.5mcm/d. To cover the difference, northern Argentina's TGN gas pipeline is being revamped. Repsol YPF is participating in that project, which will supply gas from the company's fields in Bolivia's Tarija department.

The governments of both countries have signed an agreement to build the Gasoducto del Noreste Argentino (GNA) pipeline in northeast Argentina that would increase gas exports from Bolivia to about 30mcm/d. Construction of the US$1bn, 1,500km pipeline is scheduled for completion in 2006, when it would transport 20mcm/d.

Repsol YPF is considering participating in the GNA project which would provide "new options for our Bolivian gas that could be linked to the Argentine and Brazilian markets," Blanco said.

Export Taxes

Repsol YPF's higher income from gas production in the nine-month period was offset by a 20% tax on gas exports and a new tax regime for crude exports introduced by the Argentine government in August.

The government increased oil export taxes 3%-20% for WTI prices ranging from US$32-45 per barrel, on top of the existing 25% flat tax.

With export taxes for gasoline and diesel at 5% and 20% for (liquefied petroleum gas) LPG, "it is more beneficial to export oil products than crude," Blanco said, adding that Repsol YPF is well positioned to take advantage of the lower taxes for oil products because of its large refining capacity and integrated business.

Repsol YPF receives US dollars for some 64% of its Argentine crude production, and pesos for the remaining 36%, he said.

Repsol exports 19% of its Argentine crude output, refines 78% and sells 3% to third parties. Of the refined products, 17% are exported, 54% are marketed domestically by YPF service stations and the remainder sold to third parties.

Refining

Latin America marketing margins were lower in 2004, adversely affected by the rise in international product prices and the "inability to fully pass on these costs to customer retail prices," the statement said.

Nevertheless, sales in Argentina rose 1.1% to 9.6 million tonnes, while sales of light products to the company's own network in the nine-month period grew 7.6% from a year ago.

LPG sales rose 5.2% in Latin America thanks to strong growth in Peru and Ecuador and there was margin growth in all businesses except in Argentina and Bolivia.

Financial Results

Repsol YPF's net income for January-September 2004 rose 5.5% to 1.7bn euros (US$2.2bn) from 1.6bn euros in the same period a year earlier due to higher oil prices.

Operating income increased 10.4% to 3.3bn euros, while January to September net cash flow was up 7.1% year-on-year, reaching 3.8bn euros.