[R-G] "Cheap" Energy Costs Argentina Billions and More Blackouts + Argentina Energy Find May Relieve Crunch

[Yoshie Furuhashi]

<http://www.mercopress.com/vernoticia.do?id=12474&formato=html>
Monday, January 28, 2008

"Cheap" energy costs Argentina billions and more blackouts

Keeping electricity rates frozen cost the Argentine Treasury four
billion US dollars in four years, from 2003 to 2007. A sum which could
have been invested in six 800 MW thermal generation plants or two gas
pipelines from Bolivia according to Argentina's Cammesa, manager of
the country's wholesale electricity market.

The four billion US dollars were invested in heavy oil provision,
purchase of electricity from Uruguay and Brazil and direct payments to
local companies to prevent rates from increasing. On the other hand if
the money had been invested as suggested, Argentina would now not be
exposed to power cuts and could even have a surplus.

A report from Cammesa indicates that during December/January the
northern tropical provinces of Chaco and Formosa suffered 18 major
blackouts between 14:00 and 16:00 hours, top peak consumption moments.
Something similar happened with metropolitan Buenos Aires and the
country's capital Buenos Aires City.

In the hot Buenos Aires summer for the first time since 1992 supply
fell short of demand and government officials desperately asked some
of the main factories to cut on demand so as to keep residents
satisfied.

For several weeks now every Tuesday an emergency assessment group
meets at Cammesa with the main energy suppliers, Spain's Endesa;
Argentina's Sadesa and Pampa Holding and the US AES. Besides, these
corporations must send Cammesa a daily report on production levels and
the state of equipment, in an attempt to advance critical moments.

But consumers must also deal with other surprises, for example the
range of electricity intensity that can vary from 180 to 240 volts.
Watch out for the electronic equipment!

The government has tried to address the issue with small Sullair
portable generators on trailers particularly along the Atlantic coast
resorts and by advancing time 60 minutes which means abrupt
consumption peaks between 19:00 and 21:00 hours have extended up to
23:00 hours.

But on very hot days energy distributors have the official instruction
of "lowering the charge", which has become ever more difficult to
comply since industry is reluctant to abide and therefore residential
areas are exposed to temporary "adjustments" or as officially
described "isolated power cuts".

The fact is that electricity rates in Argentina are four and five
times cheaper than in neighboring Brazil, Chile and Uruguay, and half
the price in the province of Cordoba according to Consultants Montamat
& Associates, a Buenos Aires energy advisor.

Although rates for industry in Argentina are higher than for
residential clients, they are still a third of their cost in
neighboring and Mercosur countries.


<http://www.ft.com/cms/s/0/3653bc3e-ce97-11dc-877a-000077b07658.html>
Argentina energy find may relieve crunch

By Jude Webber in Buenos Aires

Published: January 29 2008 18:53 | Last updated: January 29 2008 18:53

Pan American Energy, the second largest oil and gas producer in
Argentina, has announced the country's biggest hydrocarbons discovery
in recent years and a $1bn investment programme – music to the ears of
a government grappling with serious energy and power shortages.

The company, which is 60 per cent owned by Britain's BP and 40 per
cent by Argentina's private Bridas Corp, said in a statement the
discovery near its existing Cerro Dragón field in the southern
province of Chubut, contains 100m barrels of oil equivalent.

It also said it was drilling a second well in the northern province of
Salta, "which, if successful, would confirm the existence of a very
large gas deposit", and was looking closely at gas prospects in Tierra
del Fuego and offshore.

But it still takes years to bring new discoveries into production. The
energy model championed by President Cristina Fernández and her
husband, former President Néstor Kirchner - keeping domestic energy
prices and utilities tariffs artificially low to boost an economy
recovering from a debt and devaluation crisis in 2001-2002 - looks
increasingly unsustainable.

The policy has succeeded in delivering growth rates of more than 8 per
cent, but it has been a serious disincentive to investment in new
reserves and has led to declining production.

In the power sector, that has translated into insufficient extra
capacity to keep up with runaway demand fuelled by electricity rates
that are about a quarter of international levels. Industrial clients
have come under pressure to use less energy in order to avoid
politically damaging power cuts for residents when temperatures peak.

In the fuel sector, it has meant shortages, despite refineries working
at capacity, higher export tariffs designed to guarantee domestic
supplies, and even a temporary ban on fuel exports.

Analysts say some $3bn-$3.5bn a year investment in oil, gas and
electricity is needed to keep the economy growing at 5 to 6 per cent.
But national oil production hit its lowest level in 2005 since 1998,
and gas production, which has been rising steadily, sloped off in 2005
compared with 2004, according to the latest official data.

Ms Fernández's first month and a half in office has been marred by the
spectre of regular power cuts or rationing that a timid energy saving
plan she announced last month has failed to banish.

And there is no indication yet when tariff rises expected to start
this month will actually materialise, especially against a backdrop of
mounting inflation.

This week the La Nación newspaper quoted data from Cammesa, the
electricity wholesale market regulator, showing Argentina spent $4bn
in the last four years subsidising electricity tariffs, buying fuel
oil and diesel, and importing electricity from Uruguay and Brazil –
enough to have built six 800MW power stations and to have had a net
energy surplus this year. Cammesa had no comment on the figures.

Argentina is moving ahead on plans to build a pipeline costing $1.9bn
to import 27.7m cubic metres of gas a day from Bolivia by 2010, but
Bolivia needs more investment yet in its own energy sector to meet the
ambitious goal.

--
Yoshie
<http://montages.blogspot.com/>