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Argentina increases 44% wellhead natural gas prices to attract investment

Thursday, November 29th 2012 - 06:42 UTC
Full article 30 comments
The country desperately needs foreign investors to develop the Vaca Muerta shale site The country desperately needs foreign investors to develop the Vaca Muerta shale site

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.

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.


Top Comments

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  • toxictaxitrader2

    Common sense at last,pay for YPF and you might attact investors,your habit of dishonouring international contracts mitigates against you however.

    Nov 29th, 2012 - 08:02 am 0
  • LEPRecon


    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...

    Nov 29th, 2012 - 08:43 am 0
  • CJvR

    Hardly surprising, what would be the point of running YPF in the red when you have expropriated it.

    Nov 29th, 2012 - 08:57 am 0
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