Argentina, the 8th-largest country in the world and the second largest in South America, has a land area approximately equal to that of the United States east of the Mississippi River. Its climate varies from subtropical in the north to subarctic in the south. Argentina shares borders with Bolivia, Brazil, and Paraguay in the north, Uruguay to the east, and Chile to the west. The southeast border is a 3,000-mile coastline on the South Atlantic Ocean. The population of almost 37 million is primarily European, mostly of Spanish and Italian descent; Spanish is the national language. There are 23 administrative regions (called 'provincias') in Argentina, plus the city of Buenos Aires which is its own autonomous administrative region; these administrative regions are shown in Figure 1. The capital city, Buenos Aires, is located on the Atlantic coast in the east central part of the country and has a population of about 11.7 million.
Argentina's currency, the peso, has an exchange rate of 2.81 pesos per U.S. dollar (as of May 2003). The gross domestic product (GDP) was estimated at $282 billion in 1999. Argentina is a member of Mercado Comun del Sur (Mercosur), a regional common market which includes Brazil, Paraguay, and Uruguay; Chile and Bolivia are associate members. Mercosur came into effect on January 1, 1995, and includes a free trade area and common external tariffs on most traded goods. Argentina is also a member of the World Trade Organization. The United States and Argentina have a close bilateral relationship, due in part to Argentina's recent efforts to open its economy and realign its foreign policy.
Since the 1990s, Argentina has been one of Latin America's most politically and economically stable countries. In 1999, Fernando de la Rua became the president, replacing Carlos Menem who had led the country for ten years. Mr. de la Rua has pledged to continue similar policies to his predecessor and has stressed attracting foreign investment. Cutting the budget deficit is a major push of his administration.
|BUE - Buenos Aires|
CAT - Catamarca
CBA - Córdoba
CHA - Chaco
CHU - Chubut
CRR - Corrientes
DOZ - Mendoza
ERI - Entre Ríos
FSA - Formosa
JUA - San Juan
JUJ - Jujuy
LAP - La Pampa
LAR - La Rioja
MNE - Misiones
NEU - Neuquén
RIN - Río Negro
SAL - Salta
SCZ - Santa Cruz
SDE - Santiago del Estero
SFE - Santa Fé
TDF - Tierra del Fuego
TUC - Tucumán
UIS - San Luis
Argentina's fuel and energy exports rose sharply following extensive energy sector privatization in the early 1990s. The domestic oil industry, which had been an inefficient supplier to the noncompetitive domestic market prior to privatization, has become a major driver of export growth. Energy exports in 1996 totaled $3.0 billion dollars, of which the majority was accounted for by crude oil (net exports of $1.8 billion). Exports to Brazil are a significant percentage of the total, and the Transandean oil pipeline supplies approximately half of Chile's oil.
The Department of Natural Resources and Human Environment (Secretaria de Recursos Naturales y Ambiente Humano) and the Department of Energy and Transport (Secretaria de Energia y Transporte) are the federal regulatory bodies responsible for the energy sector, regulating environmental compliance by industry operators. Organizations facilitating interactions between government and industry include the Argentine Petroleum and Gas Institute (Instituto Argentino del Petroleo y del Gas) and the Association of Sanitary Engineering and Environmental Sciences.
Argentina is the third largest hydrocarbon producing country in Latin America, behind Mexico and Venezuela; it has the fourth largest reserves, after Mexico, Venezuela, and Brazil. Argentina is rapidly developing into a major energy producer and exporter, accounting for approximately 14% of Latin American hydrocarbon production in 1999. As of January 2000, the country has 3.8% of Latin America’s proven reserves of oil and 10.7% of natural gas. Oil accounts for more than half (51.5%) of Argentina’s primary energy supply. Natural gas is the next largest source of energy, accounting for nearly 40%. Hydroelectric power is responsible for 7.3%, while nuclear power makes up 2.3% of the country’s total energy supply.
Brazil and Chile constitute the major export markets for Argentina, especially for natural gas. Argentina has great potential to further increase energy exports throughout the region. The four pipelines connecting Argentina and Chile are underutilized, awaiting a pickup in Chilean demand. Pipelines under development to Brazil will open the door to further exports from Argentina, as will cross-border transmission lines. Brazil is struggling to meet rapidly increasing energy demand. Likewise, Uruguay wants to diversify its energy mix (which is heavily dependent on hydroelectric power), by importing gas from Argentina. Gas imports will help Uruguay and Brazil somewhat from periodic droughts that cut hydroelectric output. In contrast to Uruguay and Brazil, Argentina derives much of its energy supply from thermal plants. Droughts in Argentina hamper electricity output from hydroelectric plants, but do not appear to significantly affect Argentina’s ability to export electricity to Brazil.
Since 1990, total energy consumption in Argentina has risen more than 40% from 1.90 quadrillion Btus (Quads) in 1990 to 2.71 Quads in 1999. Natural gas accounts for nearly 46% of Argentina’s total energy consumption, followed by oil (38.4%), hydroelectric power (9.3%), nuclear (3.0%), and coal (1.5%). An historical summary of Argentina's Total Primary Energy Production (TPEP) and Consumption (TPEC) is shown in Table 1.
Proven oil reserves in Argentina were approximately 2.8 billion barrels at the beginning of 2000. Oil production for 1999 was an average of 802,000 barrels per day (b/d). In 1999, crude oil production accounted for about 94% of all oil production. Oil consumption in 1999 averaged 500,000 b/d, while exports rose to 372,000 b/d. Production of crude oil was forecasted to grow by four to 6% per annum through the year 2000.
Argentina has identified 19 sedimentary basins containing oil, however, only five of these have seen any production. These five basins are the Neuquen Basin (Argentina’s most productive basin), Golfo San Jorge, Cyana, Austral, and Noroeste.
The Neuquen Basin is located in the central part of the country. It has estimated ultimate recoverable reserves of 3 billion barrels of oil and 21 trillion cubic feet of gas, and holds nearly 50% of the country's total remaining hydrocarbon reserves (both oil and gas). The basin has an extensive oil and gas pipeline network, with oil lines connected to export ports on the Atlantic and Pacific coasts, in addition to refineries locally and in Buenos Aires, and gas pipelines to the major domestic markets on the east coast and to Chile, Bolivia, Uruguay, and Brazil.
The offshore continental shelf, which is relatively shallow, appears to be a promising site for future oil discoveries, given its large size (larger than the North Sea). Although the area near the Falkland Islands, claimed by Argentina as the Islas Malvinas, is subject to a conflict of sovereignty with the United Kingdom, Argentina and the U.K. signed an agreement in September 1995 to share economic benefits from oil exploration in a 7,000 square mile cooperation zone to the southwest of the islands, and Argentina agreed not to obstruct a licensing round by the Falklands in areas outside the cooperation zone. Under the agreement, a joint commission will oversee exploration and revenue sharing in the cooperation area. However, the timing and pace of development remains uncertain.
An historical summary of petroleum production and consumption in Argentina is shown in Table 2.
(Crude Oil only)
The largest oil and gas producer in Argentina is Repsol-YPF, which is the union of Spain's Repsol and Argentina's Yacimientos Petroliferos Fiscales (YPF). Repsol acquired YPF in June 1999 for $13.5 billion, creating one of the largest oil and gas companies in the world.
The acquisition of YPF was a good strategic fit for Repsol. Prior to the merger, most of Repsol’s profits came from refining and marketing and the company had limited reserves. Adding YPF quadrupled the Spanish company's hydrocarbon reserves from 978 million barrels oil equivalent to 4.23 billion barrels. It strengthened Repsol's position in Latin America, a region of keen interest to the company, especially in integrated gas and electricity distribution. The company recently began generating electricity from plants served from its gas fields in Argentina.
Repsol-YPF will focus on improving its network of gas stations as well as invest in transport and distribution infrastructure, storage of natural gas, regasification plants, and electricity generation. Repsol-YPF plans to expand its oil and gas production from 1 million barrels of oil equivalent per day in 1999 to 1.5 million barrels of oil equivalent per day by 2006. Much of the increased production will come from Repsol-YPF's operations in Bolivia, and Trinidad and Tobago.
Under terms of the divestiture arrangement Repsol made with the Argentine government when acquiring YPF, the company has to reduce its share of the retail gas market. Repsol-YPF owns about 3,000 service stations in Argentina, which constitutes nearly 50% of market share. The company plans on complying with the divestiture deal by swapping some of its downstream assets in Argentina with Brazil's Petrobas for some upstream and downstream assets in Brazil. The Argentine government changed its policy on gas supply contracts and will not renew third-party contracts when they expire, forcing Repsol-YPF to reduce its share of the gas market from 60% to 44%. The company also had to dispose of crude refining capacity equivalent to 4% of its domestic capacity as of December 31, 1998, cut domestic LNG sales by four percent by 2002, and cancel no re-importation clauses on LPG export contracts.
The next two largest oil producers in Argentina are Perez Compan (100,000 b/d) and Petrolera Argentina San Jorge (80,000 b/d). Petrolera Argentina San Jorge was acquired by Chevron in 1999. Both companies plan on increasing investment in production. Other companies looking to expand their presence in the upstream oil sector include Argentina's Pluspetro, Brazil's Petrobas, Pan American, a joint venture between BP Amoco and Argentina's Bridas, Unocal, and France's TotalFinaElf.
There are 12 refineries in Argentina, with a combined capacity of 665,900 b/d. The major refineries are Repsol-YPF's La Plata (176,000 b/d), Shell's Buenos Aires plant (121,700 b/d), Repsol-YPF's Lujan de Cuyo (120,000 b/d), and Esso's Campana (88,100 b/d). These refineries produce petroleum products primarily for the domestic market. The three largest refiners are Repsol-YPF, Shell, and Esso, while the smaller EG3 consortium (consisting of Astra, Isaura, and Puma) controls 14% of the retail fuel market.
Most of these refineries have been significantly upgraded over the past several years, mostly to meet new environmental standards and streamline operations, but also to be able to produce lighter products and enhance octane as the country switches to unleaded gasoline. Repsol-YPF has retrofitted the La Plata refinery, and Astra upgraded the 24,000 b/d EG3 refinery located in Bahia Blanca; both refineries are now fully modernized and capable of producing a sophisticated combination of products. In spite of the modernization, most refineries are optimized for lighter, low-sulfur Argentine crudes and are unable to economically convert heavy crudes.
An historical summary of Argentina's refined products output is shown in Table 3.
|Refined Product||Production Rate|
|Distillate Fuel Oil||161||171||187||194||180||172||191||212||220||223||215|
|Residual Fuel Oil||85||77||81||68||56||49||42||38||52||54||47|
|Liquefied Petroleum Gases||19||22||27||25||28||29||29||26||32||33||36|
|Losses and Refinery Use||32||36||19||36||19||18||20||21||22||22||24|
Natural gas is Argentina's most important energy source, and Argentina has the second-largest proved reserves of natural gas in South America (after Venezuela). Consumption of natural gas reached 1,191 billion cubic feet (Bcf) in 1999. Based on projected economic growth, internal consumption is expected to double over the next twelve years, growing at a rate of 4.2 to 4.5% per year (growth has averaged 5.1% per year for the past decade). As of January 2000, proven gas reserves in Argentina were estimated at 24.3 trillion cubic feet (Tcf).
The natural gas industry was privatized in June of 1992. The Gas Law split state monopoly Gas del Estado into eight distributors (MetroGas, Gas Natural, Pampeana, Litoral, Sur, Centro, Cuyana, and Noroeste) and two pipeline companies (Transportadora de Gas del Sur SA (TGS) and Transportadora de Gas del Norte SA (TGN)); TGN and most of the distribution operations were sold in December 1992. TGS delivers two-thirds of the country's natural gas, serving southern Argentina and Buenos Aires. Enron and Perez Companc own 70% of the company. TGS and TGN are not permitted to sell gas and must provide open access to their pipelines. Argentina's largest gas distributor is Metrogas. Prices for natural gas are set in line with that of petroleum, but tariffs on natural gas are adjusted every six months in relation to a U.S. index and seasonal fluctuations. Privatization has resulted in lower prices, which are among the lowest in the region.
An historical summary of natural gas production and consumption in Argentina is shown in Table 4.
In the beginning of 2001, the Argentine government extended Repsol-YPF’s Loma de la Lata gas concession. The deal calls for Respol-YPF to invest $8 billion over 17 years in the concession in exchange for a 10-year extension. The arrangement is likely to serve as a blueprint for future deals. Repsol-YPF will pay the government a $300 million fee and spend $30 million on social programs in Neuquen Province, the site of the Loma de la Lata concession. The province will receive 5% of all profits after 2017. The Loma de la Lata concession produced 11 billion cubic meters of natural gas in 1999.
Coal production and usage in Argentina is very modest. Total production in 1999 was only 370,000 short tons of bituminous coal, and consumption was 1.73 million short tons, all of hard coal. Recoverable reserves of coal in Argentina are estimated at 143 million short tons. Argentina imported 324,000 short tons of coal from the United States in 1998. The average gross heat content of Argentina's coal in 1996 was approximately 10,600 Btu per pound (24,640 kilojoules per kilogram). An historical summary of coal production and consumption in Argentina is shown in Table 5.
Argentina is home to Latin America's most advanced nuclear energy program. Two nuclear plants are operational, while a third plant is 80% completed. The Atucha I plant has a generating capacity of 350 megawatts (MWe) and the Embalse plant has a generating capacity of 650 MWe. These two plants supply about 9% of Argentina's electricity. Argentina spent much of the 1990s (and $2.7 billion) constructing the Atucha II plant. The government estimates $800 million is needed to complete construction, but construction currently is halted. Eventually, the government would like to spin off the three plants to a single buyer, but as of April 2001, the government had yet to find a buyer.
Hydroelectric and Other Renewables
Argentina has developed a large amount of hydroelectric power generation because operating costs and pollution are low. Electricity from hydroelectric sources has been declining in recent years in favor of natural gas. In 1999, hydroelectric power represented just over 30% of Argentina's electricity generation. The country has a number of large hydroelectric projects planned which could require private sector investment (see Table 6).
|Project name||Location||Size (MWe)|
|Corpus Christi||Parana River||6,900|
Argentina has two binational hydroelectric generation facilities: Salto Grande, owned jointly with Uruguay, and Yacyreta, jointly owned with Paraguay. The largest plant is the 3,200 MWe Yacyreta dam, which became fully operational in July 1998. This project was completed nine years behind schedule, and has had problems with non-governmental organizations due to social disruptions associated with environmental damage and resettlement. The dam runs at just 60% of capacity as the World Bank and others have opposed raising the reservoir level and increasing generating efficiency due to environmental damage and the need to resettle indigenous people. A number of hydroelectric plants, including Yacyreta, are being privatized.
Spanish companies Endesa and Elecnor have submitted a proposal to the government to harness Argentina's wind potential. The companies have proposed building and operating three wind farms in Patagonia, the southern region of the country, which is characterized by constant strong winds. The power plants could generate 3,000 MWe, enough to meet 12% of the country's energy demands by 2010. The cost has been estimated at $2.25 billion.
Energy Transmission Infrastructure
Oil and Gas Pipelines
Three major oil pipelines begin at Puesto Hernandez in the Neuquen basin, which accounts for over one-third of Argentina's current production (see Table 7). These pipelines run to the Lujan de Cuyo refinery at Medanito; to Puerto Rosales, on the Atlantic Ocean; and to Concepcion, in Chile. The port in Chile can provide shipments to the U.S. Gulf Coast or the Pacific Rim, but exports to these markets have been small to date.
Major natural gas pipelines include Neuba I, Neuba II, and Central-Oeste, from the Neuquen Basin; San Martin, from the Austral Basin; Norte, from the Northwest Basin; and GasAndes, from the Neuquen Basin to the Metrogas distribution system at Santiago, Chile.
GasAndes, which is one of several projects targeted at Chile and Brazil, was completed in 1997; the $350 million, 290-mile, 350 million cubic feet per day (mmcf/d) pipeline has contracts with Chile's major electric power producers and other large customers. In addition to the GasAndes line, Argentina exports gas to Chile via three recently opened lines. The 330-mile Gasoducto del Pacifico line opened in November 1999. It transports 140-mmcf/day to southern Chile. Gasoducto del Pacifico is owned by a consortium of TransCanada, El Paso, Chile’s Gasco, Empresa Nacional de Petroleos, and Repsol-YPF. Work on the 133 mile, 30-inch Gasolducto Cruz del Sur (Southern Cross) pipeline is underway, which is designed to deliver gas from Buenos Aires, Argentina, to Montevideo and other Uruguayan markets. The line will connect Buenos Aires with Montevideo via a 32-mile crossing of the Rio de la Plata, and will then run 88 miles southeastward to Montevideo. Work on the river crossing began in October 2000.
In February 2000, TGS signed an agreement with Pan American Energy and British Gas to build a $20 million, 24-mile gas line extension to connect the Southern Cross with the TGS, by connecting the cities of Buchanan and Punta Lara in the Buenos Aires province. The entire Southern Cross pipeline is expected to come online in late 2001 or early 2002.
The GasAtacama and NorAndino pipelines connect northern Chile to Argentine sources. The 300 mmcf/day, 584-mile, 20-inch GasAtacama gas pipeline owned by CMS and Endesa was placed in service in July 1999. This line was extended northward to the Endesa's Paposa power plant. The 544-mile NorAndino pipeline owned by Tractabel and the Southern Company and with a capacity of 280 mmcf/day, came online in November of 1999 and runs from Salta, Argentina to Tocopilla, Chile. Its only customer is the Electroandina-Tocopilla power plant. Another pipeline to Chile was commissioned in 1997 to carry 98 mmcf/day of methane 30 miles from Tierra del Fuego to Cabo, Chile.
Work was completed in summer 2000 on the $250 million, 273-mile gas pipeline from Parana, Argentina to Uruguaiana, Brazil. The line is designed to deliver gas to a 500 MWe power plant in Uruguaiana.
Additional Argentina-Brazil pipelines are being planned. Recent natural gas discoveries in Bolivia, potential discoveries in Brazil, and the recent completion of the Brazil-Bolivia gas pipeline could preclude any further plans. The proposed Argentina-Brazil pipelines include the Trans-Iguacu and Mercosur lines, and a 528-mile extension to the Southern Cross line. The Mercosur pipeline would run from the Neuquen basin to Curitiba, Brazil, and could extend to São Paulo. The Trans-Iguacu line would cross northern Argentina’s Noroeste basin into southern Brazil.
(Oleoductos del Valle)
|Campo Duran-San Lorenzo
(Oleoductos del Valle)
|Lujan de Cuyo-Montecristo
|Lujan de Cuyo-Puesto Hernandez
(Oleoductos del Valle)
|Puesto Hernandez - Medanito
|Villa Mercedes - La Matanza
There are two pipelines running to Uruguay: the 292-mile Parana-Paysandu pipeline (88 mmcf/day) and the Buenos Aires-Montevideo pipeline (155 miles). The Argentine and Bolivian governments are discussing the possibility of building a second natural gas pipeline between the two nations. Additional domestic gas pipeline capacity is also needed, as existing pipelines are operating near capacity.
In July 2000, a 1,000 MWe transmission link connecting Argentina and Brazil was completed. A second transmission project is now underway, and that 310-mile project is scheduled for completion by mid-2002. In addition, a plant was built in Garabi, Brazil that converts the electricity from 50 hertz in Argentina to 60 hertz in Brazil.
In 1999, electricity generation in Argentina totaled about 77 billion kilowatt-hours (kWh), of which 60% came from conventional thermal sources (mostly natural gas), 31% came from hydro and 9% came from nuclear power. An historical summary of electricity generation and consumption in Argentina is shown in Table 8.
The Overseas Development Agency estimates that Argentina will add approximately 8 gigawatts (GWe) of capacity (1 GWe = 1,000 MWe) by the year 2010, which represents a $12 billion market. In August 1997, Argentina and Brazil agreed to integrate their electricity markets, with elimination of all state subsidies, guaranteed free competition among generators, and a requirement that pricing be based purely on cost.
An historical summary of installed electricity generating capacity in Argentina is shown in Table 9.
Table 10 lists the 34 large power generating units (over 100 MWe) in Argentina. In addition, there are numerous smaller generators operating in remote regions of the country to supply village power or industrial processes.
|Power Station||Technology Used||Fuel||Total Installed|
|Fossil Fuel Power Plants greater than 100 MWe|
|Costanera||GTCC||Oil and Gas||1,425|
|Luis Piedra Buena||GTSC, CTSC||Gas||695|
|Agua de Cajon||GTSC||Gas and Oil||517|
|Lujan de Cuyo||GTCC||Gas||431|
|Sorrento||GTSC, CTSC||Gas and Oil||388|
|Loma de la Lata||GTSC||Gas||369|
|General Savio Steel Mill||GTSC||Gas||180|
|Puerto Madryn Aluar||GTCC||Gas||153|
|Puerto Madryn||GTSC||Oil and Gas||153|
|Buenos Aires||GTSC||Oil and Gas||150|
|9 de Julio||GTSC, CTSC||Oil||130|
|Dock Sud Segba||GTSC||Oil||130|
|General Levalle||GTCC||Gas and Oil||127|
|Sur Oeste||GTSC||Oil and Gas||124|
|La Plata Refinery||GTSC||Gas||123|
|Nuclear Power Plants|
|Hydroelectric Power Plants|
|Piedra Del Aquila||Conventional||1,424|
|Rio Grande I||Pumped Storage||750|
|Agua Del Toro||Conventional||150|
Industry is by far the largest consumer of electric power, followed by domestic users.
Electric Industry Overview
In the early 1990s, Argentina's electric power system was experiencing severe financial and operational difficulties. There were constant problems with blackouts, which worsened during dry periods due to the large proportion of hydroelectric generation in the system, and many consumers were stealing electricity. Since 1992, the electric power sector has been privatized and deregulated. Generation, transmission, and distribution have been split into separate markets. Argentina now has open access to the wholesale electricity market guaranteed by law, and dispatch of electricity based on production costs of available generators, lowest-cost first. The market is now characterized by numerous producers in a highly competitive generation market; three transmission companies in a regulated monopoly; regional distributors; and a set of municipal utilities. Generators are free to serve any part of the country. The government agency responsible for overseeing Argentina’s electricity sector is Ente Regulador de la Energia Electricia (ENRE). ENRE also serves as mediator of industry disputes. The wholesale market is administered by CAMMESA, a non-profit institution owned equally by generators, carriers, distributors, major users, and the Energy Secretariat, which represents retail customers.
The first three federally-owned electricity companies to be privatized -- Segba, serving Buenos Aires; Ayee, serving most of the rest of the nation; and Hidronor, which oversaw hydropower in the south -- produced about 80% of the nation's electricity. Between April 1992 and June 1995, over 25 state-operated power companies were privatized, essentially becoming independent power producers; this privatization process is continuing, though at a somewhat slower pace, as the government sells off its remaining power companies and the distribution services. Thirty-year concessions were awarded for hydroelectric plants, while thermal plants were sold off. Over 2,000 MWe of natural gas-fueled power plants are being installed.
Argentina's environmental legislation is based on the "polluter pays" principle. Most environmental laws are promulgated at the provincial and municipal level. For example, Buenos Aires has statutes on industrial startups, industrial waste, and air pollution. Environmental awareness and strong environmental protection and safety standards are being promoted as a measure of sophistication. In 1996, the Secretary of Natural Resources and the Environment was upgraded to ministerial level.
Before privatization, the oil and gas industry was a major polluter. Oil wells were not shut down properly; gas flaring was common; mud pits were not treated; and leaks and spills were not cleaned up. Legislation on environmental standards passed in 1992 and 1993 required the industry to conduct environmental studies, develop plans for environmental protection, monitor activities, and restore abandoned mud pits and drilling wells. Because the National Directorate of Resources was not adequately prepared to regulate the industry when the new rules and regulations were established in 1993, the Directorate entered into a cooperative arrangement with industry in order to remedy the problems quickly. This close industry/government cooperation has continued as the Directorate emphasizes cooperation and partnership with industry operators. Results have been good; natural gas losses had been cut by 83% by the end of 1996, and a database had been established containing information on the status of all producing wells. Provincial authorities have copied federal policies, and play a role in monitoring local compliance.
At the federal level, the responsible authorities are the Department of Natural Resources and Human Environment (Secretaria de Recursos Naturales y Ambiente Humano), the Department of Energy and Transport (Secretaria de Energia y Transporte), and the Department of Works and Public Services (Secretaria de Obras y Servicios Publicos); these bodies regulate environmental compliance. Although the federal government has overall responsibility, there are regulatory bodies at the provincial level with similar functions.
Argentina's Energy and Ports Secretariat blocked approval of a joint Repsol-YPF/Unocal Corp. bid to explore for hydrocarbons on a block in the San Matias basin amid environmental concerns. The block, CAA-9, is near Valdez Peninsula, a mating ground for whales ecosystem.
An historical summary of CO2 emissions from fossil fuel use in Argentina is shown in Table 11.
|CO2 from coal||0.55||0.70||0.80||0.69||1.11||0.97||0.94||0.97||0.97||0.67||0.44||0.37|
|CO2 from natural gas||11.87||12.98||12.93||13.67||14.00||15.43||16.92||16.13||16.83||17.64||17.95||16.84|
|CO2 from petroleum||15.97||16.26||16.96||18.86||17.26||16.84||17.37||18.19||18.99||18.59||18.55||17.64|
Argentina's energy sector has been undergoing privatization since 1991. Government policy for the electric power industry, the natural gas industry, and the oil industry are targeted at encouraging investments and creating competitive markets. Most electric power companies have been privatized since 1991. The natural gas transportation network has been privatized, and an exploration plan permits bidding for existing basins on a bimonthly basis. A natural gas pipeline between Chile and Argentina is expected to boost production and export sales. Prior to 1992, the government set prices and volume production limits for oil, and foreign producers were not permitted to export crude oil. These policies were dropped in 1992 when the oil and gas industries were privatized and deregulated.
The Argentine government began deregulating the oil industry in 1989, and today has the most deregulated oil and gas industry in Latin America. Most public enterprises have been sold, and public procurement projects continue to be available as the county modernizes, rebuilds its social and transportation infrastructure, water, and sewerage systems, and cooperates with formerly state-owned corporations in the fields of electricity, oil and gas, and telecommunications. Argentine oil companies have been expanding into other Latin American markets to take advantage of opportunities there.
Reform introduced a flurry of activity in hydrocarbons. Domestic prices began to track international prices, and restrictions on international trade in oil, gas, and hydrocarbon products were lifted. The government realized almost $10 billion from the break-up and privatization of the state oil company, Yacimientos Petrolúƒeros Fiscales (YPF), and the state gas company, Gas del Estado (GdE). Three refineries and miscellaneous assets belonging to YPF were sold, and what remained was divested through international public offerings. GdE was privatized as ten independent companies (two transmission and eight distribution systems), with restrictions on vertical integration. As a result of reform, the private sector (excluding privatized YPF) controlled more than half the reserves and production of both natural gas and oil; more than 25 international oil and gas companies entered Argentina; competition was introduced into oil and gas production and the refining and distribution of oil products; and labor productivity doubled.
Despite Argentina having the region's most deregulated oil and gas industry, there is some disappointment with the lack of further efforts at reform, principally the gas industry. There is a lack of competition with Repsol-YPF controlling close to 60% of the gas supply (though this will fall to 44% as the government will not renew third party gas supply contracts it made with YPF before the Repsol-YPF merger in 1999). Repsol-YPF has the power to dictate prices and terms and exert influence over competing fuels; its market power is unlikely to be challenged by the Argentine government anytime soon as anti-trust law in the country follows the European standard which requires proof of abuse of power, rather than the U.S. standard whereby market power that is deemed excessive is itself grounds for anti-trust action.
As mentioned previously, the Argentine government has been talking about selling its two nuclear plants to a single buyer since 1998. But one of the stipulations is that the prospective buyer must pay for completion of the Atucha II plant, whose construction is about 80% complete. As of April 2001, privatization plants have been postponed.
For much of the 1990s, Argentina experienced solid economic growth that sprang from monetary, fiscal, and trade reforms, which included privatization of nearly all state-owned enterprises, and macroeconomic stability. The country experienced increased investments in new services and industry. Exports nearly doubled between 1992 and 1999 from $12 billion to $23.2 billion. Imports climbed from $15 billion to $25.5 billion over the same period.
Since the third quarter of 1998, Argentina's economy has been stalled in recession. A series of external shocks, chiefly the Asian and Russian economic crises and their spread to Brazil, led to higher interest rates, reduced foreign investment, and a general weakening in the economy. While other countries in Latin America have rebounded from the 1999 economic downturn (Latin America countries as a whole had an estimated growth of 4.8% in 2000), Argentina recorded a 3.4% drop in GDP in 1999, and a further decline of 0.5% in 2000. The country is suffering under the strain of its debt, which is near 50% of GDP. The government must make budget cuts to reach reduction targets set by the International Monetary Fund as part of a January 2001 deal covering almost $40 billion in loan and credit guarantees.
Despite the current poor performance of the economy, Argentina has many birght spots including international confidence in the stability of the political system, a growing consumer market, free capital flows, access to Mercosur, the South American Common Market, and an open investment climate.
An historical summary of GDP growth and inflation in Argentina is shown in Table 12.
|Real GDP Growth, percent||-6.2||0.1||8.9||8.7||6.0||7.4||-4.4||5.5||8.1||3.9||-3.4||0.0|
Average annual foreign direct investment has climbed steeply over the past five years, and is expected to continue to increase. Foreign direct investment exceeded $11 billion in 1999, up from more than $6 billion in 1998.
The cost of credit varies widely among sectors. Banks usually charge annual interest rates for loans of twelve percent or less, but annual rates can reach 25% for consumer overdrafts or small-and medium-sized firms that are considered high-risk. These interest rates are very high in relation to Argentina's low rate of inflation.
The 1989 Economic Emergency Law, the 1989 Reform Law, and a 1993 amendment to the Foreign Investment Law were combined in an act called Decree 1853, which removed most remaining restrictions on foreign investment. Decree 1853 allows foreigners to own 100% of most Argentine companies, and to freely repatriate profits and capital. Although the 1989 laws permitted foreign companies to invest in Argentina, the 1992 Bilateral Investment Treaty provides an additional incentive for U.S. companies by ensuring that U.S. firms can invest on terms at least as favorable as those accorded domestic investors. Foreign and domestic companies have equal access to all economic sectors, and are eligible for incentive programs and state procurements. Foreign investors do not need prior approval for investments.
Deregulation of the electric power industry has also created an opportunity for gas-fired power generation. There is strong competition among producers of cutting-edge combined-cycle power plants in the Argentine market. The market for electric power generation and transmission equipment was $1.12 billion in 2000, an eight percent increase over 1999. Total imports for electric power systems was up 12% to $449 million in 2000, of which U.S. firms captured $141 million, or 32% of total imports. While short-term trends show slower investment in the electrical energy sector, officials of the wholesale electric market administrator CAMMESA are predicting continued expansion over the long term. As reported by U.S. International Trade Administration, CAMMESA anticipates the installation of an additional 8,000 MWe by the year 2007. Assuming current costs, this represents $2 billion in investment in capacity alone, with an additional $8 billion in network upgrades. CAMMESA predicts a total of one billion dollars in new investment annually, with Argentina's current exports of 2,000 MWe reaching 5,000 MWe in the next few years. Moreover, exports to Chile could increase by 200 to 300 MWe, while exports to Brazil could increase by 1,200 MWe. This would require new generators, transmission systems, and conversion (as well as pipelines to move the gas to the generators). Some of the most promising sales opportunities recently have been single-phase 5-amp meters; circuit breakers (15.5 kV and larger); conductors and hardware; distribution transformers; electrical wires for low voltage distribution; fuses for low and medium voltage distribution (380/220 volts); switches; switchboards; and power transformers. The market for oil and gas field machinery was projected to total $1,662 million in 1998, with U.S. firms accounting for $207 million out of $372 million in total imports. The market is expected to continue growing at 10% per year. The most promising sectors include compressors and stationary engines ($8 million), control devices ($4 million), metering devices ($3 million), finishing tools ($5 million), injection equipment ($6 million), pipeline equipment ($10 million), and cementing equipment ($6 million).
Many U.S. companies are active in Argentina's energy sectors, as can be seen from Table 13.
|Oil & Gas Exploration and Production|
|LG&E Energy Corporation|
|Pioneer Natural Resources Company|
|Natural Gas Pipelines|
|El Paso International|
|Oil & Gas Service Companies|
|Baker Oil Tools|
|Hughes Tool Company|
|Parker Drilling Company|
|Electricity Generation & Transmission|
|Houston Industries, Inc.|
|Kansas Power & Light|
|LG&E Energy Corporation|
|Southwest Public Service|
|For more information,
please contact our
U.S. Department of Energy
Office of Fossil Energy
1000 Independence Avenue
Washington, D.C. 20585 USA
on May 1, 2003||Comments On
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