Argentine Economy

[Redondo]

http://en.wikipedia.org/wiki/Argenti...sis_%282004%29

[Redondo]

Argentina could become net oil importer by 2008

01-08-06 Argentina is forecasted to become a net importer of crude by 2008/2010 if the absence of oil exploration persists according to Argentine consultants.

"By the end of this year Argentina will reach its self sufficiency capacity and by 2008 will become a net importer of oil for the first time in fifteen years", says a report from the consultant firm of Economia & Regiones, belonging to economists Rogelio Frigerio and Alejandro Caldarelli.

Daneil Montamat, a former YPF CEO and an energy consultant is not so pessimistic but admits Argentina will have to import light crude to compensate for the excess heavy crude by 2008. Economia & Recursos estimates that in 18 months Argentina will be importing 8.3 % of its current oil demand equivalent to 20 % of Neuquen production which is the largest hydrocarbons producing province of the country.

"This at current prices is equivalent to over a billion dollars and more threatening: experience shows that countries which become oil importers get used to it and loose interest in further exploration", warns Frigerio.

Although Argentina has a long history of oil importation, during the administrations of Presidents Arturo Frondizi, 1958/61, and Ricardo Alfonsin, 1988 managed self sufficiency and in 1992, under President Carlos Menem became a net exporter of oil and gas.

But with no changes in sight, "Argentina will have to import 21.5 % of its oil needs", underlines Frigerio.

Veronica Sosa an economist involved in the compilation of information for the report said that all investment and exploration plans of oil companies are "retained or delayed". But the situation could be reversed in "the mid term" with new findings and further development of existing deposits, adds Sosa who said that all Argentine oil producing provinces are forecasting an annual production drop between 3 and 5 %.

However Argentine government sources deny such a scenario, "production will increase slightly this year, and if production is up, there's no need to import crude".

Anet importer situation for Argentina could have a fulminating impact in prices of many oil industry related by products -- and inflation -- which is why the Kirchner administration is currently so insistent in keeping hydrocarbons prices under control and unlinked from international markets.

Argentina's oil peak production was in 1998, but extraction since has dropped 21 % and at the end of 2005 was back at 1994 production levels. In 1992/93 the Menem administration launched the deregulation of the hydrocarbons sector which rapidly led to Argentina becoming a net exporter of oil and gas.

"So we're back to where we started in 1993, but without the horizon of proven reserves we had then", indicates economist Sosa.

Argentina and Colombia are the only South American oil producing countries which have seen output drop, while production increased 11 % in Brazil; Ecuador 1.1 %; Peru, 11.5 %; Trinidad & Tobago 13 % and Venezuela 1.1 %.

Brazil could be a model example for Argentina argues Sosa, in 1998 Argentina extracted 5 % more oil than Brazil and was a net exporter of fuels, "but now Brazil pumps three times more oil than Argentina and is almost self sufficient, a condition Argentina is loosing".

Regarding similarities and differences between Argentina and Brazil, economist Montamat says that "both countries have oil, are not oil producing / exporting countries and have many unexplored basins". However Brazil "respected international market prices, but not Argentina, and even when Petrobras is government owned and managed it had sufficient funds to keep exploring".

Argentina's heavy taxes on oil and gas exports encourage domestic consumption but hinder investment in exploration and exploitation.

Economia & Regiones supports its arguments comparing production prices in Argentina for gas and oil. While gas at the well in Argentina receives $ 1.5 per mm Btu, in New York trading the equivalent price is $ 9.1.

Similarly with oil which has a 45 % tax in Argentina pushing the barrel price to $ 38 compared to $ 57 in Texas.

Source: www.mercopress.com

[Redondo]

Pick your article.

http://search.yahoo.com/search?p=arg...8&vc=&fp_ip=AR

[Redondo]

I wonder where did you get the idea that "there is plenty of oil and gas". During the early 90s, there was a strong belief that the "deregulation" of the oil sector would get lots of investments in prospective search. It didn't happen.

I share your guess about the measures that Cristina will take after being elected, but the debt may be paid before. Otherwise, the government wouldn't have made a move to appear on the papers.

Andres

There are still reserves, but it doesn't matter anyhow because they will never be used.

The facts remain that Argentina in 2008 is a hydro carbon net importer instead of an exporter and that in 2006 about 20% of all exports were hydrocarbons

[Andres]

Search goolgle for 'Argentina oil importing country 2008 ' That will get you some info you are looking for. If I have some time Ill try to find it.

Agentina needs to pay the paris depth and 7b is a lot for Argentina. They need to pay it out of the Central bank reserve and that's about 20% of the current reserve. The last time they took out that kind of money, the peso suffered and it will suffer again probally.

It's not that hard to predict that if Argentina does have to import more oil then they export and / or Chile buys directly from Bolivia the prices have to be raised or the fiscal surplus will be eaten up.

My guess will be that after Kristina gets elected most taxes, utility, gas and public transport rates will be raised and the Paris club will be paid.

Everything to let Kristina start with a clean sleet.

I wonder where did you get the idea that "there is plenty of oil and gas". During the early 90s, there was a strong belief that the "deregulation" of the oil sector would get lots of investments in prospective search. It didn't happen.

I share your guess about the measures that Cristina will take after being elected, but the debt may be paid before. Otherwise, the government wouldn't have made a move to appear on the papers.

Andres

[Redondo]

Oil reserve is not worth a lot by the way as there is no investment and an Argentine version of Petrobras.

[Redondo]

As far as I know, known oil reserves were good 10-15 years and about 50 years for natural gas. There may be more, but that's just an speculation. However, if you have reliable and verifiable info on that matter, I would be glad to hear about that.

The energy sector in Argentina is way much more complex that the relations among the current regional presidents. In fact, the whole subsidy frame touches several interests and factors (bus company owners, agricultural sector, middle-class, etc) not easy to disentangle. I agree that eventually domestic oil prices will match internaitonal ones.

As for the Paris club debt, I wouldn't worry very much. It's just USD 7B, and the government already paid USD 9B to cancel its debt to the IMF. It seems just firework smokes to me, something for the press to talk about.

Andres

Search google for 'Argentina oil importing country 2008 ' That will get you some info you are looking for. If I have some time Ill try to find it.

Agentina needs to pay the Paris debt and 7b is a lot for Argentina. They need to pay it out of the Central bank reserve and that's about 20% of the current reserve. The last time they took out that kind of money, the peso suffered and it will suffer again probally.

It's not that hard to predict that if Argentina does have to import more oil then they export and / or Chile buys directly from Bolivia the prices have to be raised or the fiscal surplus will be eaten up.

My guess will be that after Kristina gets elected most taxes, utility, gas and public transport rates will be raised and the Paris club will be paid.

Everything to let Kristina start with a clean sleet.

[Andres]

There is still plenty of oil and gas, there just is no investment. The investment is the real bottle neck.

It was obvious that internal comsumtion would boom as GNC / utilities is so cheap (even for Argentine standards) that it's not worthwhile to save.

Brasil faced the same problem around 2002 (after a 1999 devaluation) and they faced the problem with broad plan backed by all sectors in the country to save energy.

That will never happen in Argentina. K hides the problem and hopes Evo and Chile helps him out of this mess.

PS.

1: Chile and Bolivia are talking about a land for gas deal, if they get this worked out, Argentina gets cut out.

2: The Argentine state currently pays around 1% of GDP for subsidies (bus, train, gas, utilities, etc) and it was about 0,5% in 2005. This is no longer sustainable and prices have to be raised.

3: If Argentine indeed will be an hydrocarbon importing country prices will have to be raised or it will eat up the financial surplus.

4: Debt service will be higher in 2008 and Argentina have to strike a deal with the Paris club as well.

As far as I know, known oil reserves were good 10-15 years and about 50 years for natural gas. There may be more, but that's just an speculation. However, if you have reliable and verifiable info on that matter, I would be glad to hear about that.

The energy sector in Argentina is way much more complex that the relations among the current regional presidents. In fact, the whole subsidy frame touches several interests and factors (bus company owners, agricultural sector, middle-class, etc) not easy to disentangle. I agree that eventually domestic oil prices will match internaitonal ones.

As for the Paris club debt, I wouldn't worry very much. It's just USD 7B, and the government already paid USD 9B to cancel its debt to the IMF. It seems just firework smokes to me, something for the press to talk about.

Andres

[Redondo]

It doesn't surprise me, for 2 reasons:

1) Argentina was never a high-volume oil producer. In fact, by the mid 90s it was estimated that the by-then current reserves would last for 10-15 years.

2) Internal consumption boomed.

So, depending on your point of view, that reality may be seen as a positive or negative sign.

Andres

There is still plenty of oil and gas, there just is no investment. The investment is the real bottle neck.

It was obvious that internal comsumtion would boom as GNC / utilities is so cheap (even for Argentine standards) that it's not worthwhile to save.

Brasil faced the same problem around 2002 (after a 1999 devaluation) and they faced the problem with broad plan backed by all sectors in the country to save energy.

That will never happen in Argentina. K hides the problem and hopes Evo and Chile helps him out of this mess.

PS.

1: Chile and Bolivia are talking about a land for gas deal, if they get this worked out, Argentina gets cut out.

2: The Argentine state currently pays around 1% of GDP for subsidies (bus, train, gas, utilities, etc) and it was about 0,5% in 2005. This is no longer sustainable and prices have to be raised.

3: If Argentine indeed will be an hydrocarbon importing country prices will have to be raised or it will eat up the financial surplus.

4: Debt service will be higher in 2008 and Argentina have to strike a deal with the Paris club as well.

[Hunt99]

Andres-

I keep hearing this "Argentine gov't keeps peso at 3/1" argument and at one time I did believe it to be true. In early-mid 2005 the peso had appreciated against the dollar as far as 2.79 I believe and the Lavagna-led economic team made it a policy to buy dollars in the marketplace in order to keep the exchange around close to 3/1 in order to maintain the export led economic recovery. Some kooks even argue that now the "real value" of the peso is around 2.4/ dollar.

However, the reality in my mind is that as inflation has taken off in the past two and a half years, salaries have risen dramatically WITHOUT any increase in productivity, and the government prints more and more money to pay for their welfare state programs, the government is now actually doing all it can to keep the peso south of 3.2/ dollar. All the futures are betting that the peso will slide further than 3.2/ dollar and possibly significantly further. The way things are going the peso almost HAS to collapse to at least 4/1 and possibly 5/1. Big-time inflation, no increase in productivity, non-stop printing of currency leads to depreciated peso.

Essentially Lavagna was the architect behind the export-led economic recovery and since Kirchner scuttled him, there has been no sound economic mind guiding things, only currupt Kirchner cronies with dirty hands. Its sad really but the fact is that with Kirchner (either one) or any other Peronist in power, the economy and governmental instituitions of Argentina are so disfunctionally corrupt that there is no chance for long term improvement, just a continuous cycle of boom and bust.

Suerte,

Dirk Diggler

Yikes! With his evolution, it now seems that Dirk and I now agree about politics and economics. It warms my heart to see what happens to a guy's views when he stops being a student studying abstract theories and heads out into the real work-a-day world. Congratulations, amigo. :D

[Andres]

In 2008 Argentina will be hydrocarbon importing country instead of an exporting country.

In 2006 about 20% of all exports were hydrocarbons.

Good luck to Kristina, she will definitly need it

It doesn't surprise me, for 2 reasons:

1) Argentina was never a high-volume oil producer. In fact, by the mid 90s it was estimated that the by-then current reserves would last for 10-15 years.

2) Internal consumption boomed.

So, depending on your point of view, that reality may be seen as a positive or negative sign.

Andres

[Redondo]

In 2008 Argentina will be hydrocarbon importing country instead of an exporting country.

In 2006 about 20% of all exports were hydrocarbons.

Good luck to Kristina, she will definitly need it

[Hunt99]

About 3 million children will benefit, plus 110,000 pesioners.

Why doesn't he just order each of the three million to get 100,000 pesos a year, each from the government? Print the pesos and give them the money! An economic genius in the traditional Latin American mold!

It's been almost 10 months since my last trip to Buenos Aires, hopefully the next crisis will begin soon (and from the looks of things it will), so I can again get my unlimited supply of tight willing pussy for 20 dollars an hour and a big ribeye steak dinner for 5 bucks.

I tell you, 40 bucks an hour for pussy and 10 bucks for a ribeye like it is right now is just too damn high!;)

[Argento]

Argento,

Can you explain the 2 mutually incompatible things you stated above? If one 'loses' on average 4% per year by building how is it the only real profit? Are you saying that the hotel owners and retails owners are not profitting now?

My comments were soley in relation to the capital costs of domestic accomodation. Replacement cost returns about 5% or less on current rentals. Easy to work out. An apartment you can buy for U$75000, rents for less than a 5% yield. Ie. Arg$1200 per month plus expenses.

What I said was that the return on new accomodation is in the profit made in construction. No construction or developement profit, no new housing. There is simply no return in property to beat the interest people receive on cash on deposit. Most rental accomodation is held by people who inherited the property and prefer the income over holding other assets. The local stock market is not a real option and the money in the bank can be pinched by:

A The Government.

B The Bank.

C Circumstances such as the 'corralito' incident.

Hence property holding or off-shore accounts are the only options.

This explains why most of the rental properties are so antiquated and have not been renovated since they were built.

Commercial property is, as always, dependent apon demand and did not form any part of my post.

[BundaLover]

Return on capital for domestic housing (5%) is about half the current interest rate for deposits (9%) The only real profit available is in construction. Very few Argentinians build to rent, hence the escalating rentals now a feature of this forum, due to the shortage of rental properties.

So economic chaos is some time off!

Argento,

Can you explain the 2 mutually incompatible things you stated above? If one 'loses' on average 4% per year by building how is it the only real profit? Are you saying that the hotel owners and retails owners are not profitting now?