MercoPress. South Atlantic News Agency

Argentina picks a fight with Brazil oil giant Petrobras and revokes oil concession

Petrobras CEO Maria das Graças Foster surprised by the announcement, but intends to continue operating in Neuquén.

Brazilian oil giant Petrobras assured that it has complied with all terms of its Argentine Patagonia Neuquén province oil exploitation contract, following provincial governor Jorge Sapag's announcement of the termination of the concession contract in Veta Escondida area.

The company said in a communiqué that it was informed on Wednesday of Governor Jorge Sapag’s decision of “unilaterally deciding on the termination“ of the Veta Escondida exploitation contract.

”We have complied with all the requirements and as we see it, the exploration and exploitation contract we signed three and a half years ago remains in force,“ the communiqué continued.

Sapag announced the termination of the contract ”after proving that the area remains with no proven production or reserves and with insufficient investment,” according the Neuquen province Ministry of Energy.

However, the Brazilian company insists that the exploration and exploitation contract, which was agreed upon by the Executive branch on December 10th 2008 and is valid until 2027 remains in force.

“We hold 55% of the concession and we carried out investments according to the search for hydrocarbon, amounting to a total of 10 million dollars in the last three years. Additionally, the company has began efforts in the search of non conventional hydrocarbons in the area, aided by new technologies”, said Petrobras release.

Earlier, Petrobras’ head Maria das Graças Foster said she was surprised by Sapag’s announcement, but confirmed the company’s intention of continuing its operations in Neuquén. “I was surprised by the news. We were not expecting it. We have very positive relations with Argentina and we were analyzing future opportunities to remain in that country.

The Brazilian giant operates in Argentina under the name of Petrobras Argentina of which it holds a 67.25 stake.

The statement from the province of Neuquen said that the licences of (Canada’s) Argenta Argentina SA and Tecpetrol SA, a unit of the Italian-Argentine group Techint Group, had also been removed.

Neuquen’s government said it will continue to evaluate fields where output has fallen and will seek investors to develop those where licenses were revoked.

Ptrobras entered Argentina in 2002 when it bought the oil assets of billionaire Gregorio Perez Companc, following Argentina’s record 95 billion dollars debt default in 2001.

The Brazilian company’s Argentine assets are its biggest overseas. It produces most of its oil in the country from the Puesto Hernandez oil field in Neuquen province, and the Medanito and El Tordillo fields in the provinces of La Pampa and Chubut.